May 2, 2017
In April 2017, Huawei hosted its annual Analyst Summit in Shenzhen, China. Huawei’s financial year 2016 was remarkable as the group grew revenues by 32% to US$ 75 billion, making Huawei the largest global network solutions vendor by revenues, way ahead of its traditional competitors Cisco, Nokia, and Ericsson. This calls for some reflections about Huawei’s journey, its past achievements, and its current focus areas. This will help us to understand where Huawei might be heading in the future.
I have been following Huawei for over 10 years. Over this short timeframe, I have seen Huawei grow into the largest global telco network infrastructure vendor, becoming a leading global smartphone manufacturer, migrating from a low-cost hardware manufacturer toward an innovative product developer, ramping up its service capabilities, moving into delivering products and services to the enterprise segment, and pushing into software development.
These achievements underline that Huawei has achieved an awful lot since rising from its humble beginnings as a producer of phone switches in Shenzhen in 1987. For years, its core competitors have underestimated the capabilities and determination of Huawei to succeed. At the Huawei Analyst Summit 2017, I picked up three key focus areas for Huawei in 2017:
- Digital transformation support for telcos. Telco themes remain in the DNA of Huawei. At its Summit, Huawei built on this theme by outlining its support for telcos to deliver network-centric services like cloud computing and IoT offerings. In addition to providing telcos with hardware and software offerings to “cloudify” their telco network infrastructure, Huawei is helping telcos to transform internally by offering consulting services. Huawei is strengthening its consulting offering to assist telcos in their digital transformation endeavors and their customer engagement initiatives — often in cooperation with its partners IBM and Accenture as well as through its ROADS initiative. This is a relatively new space for Huawei, and much will depend on Huawei’s ability to go through its transformation process.
- IoT infrastructure. Huawei is a provider of IoT components and network products, including gateways, connectivity services, chips, and modules. Huawei does not offer end-to-end IoT integration services, industry-specific devices, nor does it resell IoT devices. Central to its IoT strategy is Huawei’s OceanConnect IoT platform for enterprise and telco customers. OceanConnect provides open APIs to implement seamless connection with upstream and downstream IoT products. The IoT platform also provides secure connectivity management for SIM and non-SIM cards, including fixed and wireless access across many IoT devices. To manage IoT data traffic more effectively, OceanConnect provides intelligent analysis tools such as rule-based engines. Huawei’s active participation in the multi-access edge computing space is an additional asset in its IoT portfolio.
- Enterprise cloud offerings. Huawei’s traditional enterprise portfolio focuses on cloud services, including operating systems, servers, and storage solutions; devices, including eLTE terminals, video, and unified communication services; and pipe products, including LAN switches, LTE and WLAN products, DC switches, security services, and routers. At its Summit, Huawei emphasized that its cloud offering is moving center stage, backed by the newly formed Cloud Business Unit. Huawei’s cloud pitch addresses three key concerns regarding the migration toward cloud computing. Namely, can you trust the cloud with respect to security, reputation, reliability, privacy, certificates, and data ownership? Is the cloud open in terms of open standards, ecosystems, scalability, APIs, migration, hybrid clouds, and cloud integration? What is the local service capability of the cloud around local support, experiences, context awareness, partner ecosystems, local laws, and regulation? Moreover, its Enterprise offering is supported by an increasingly sophisticated set of platform offerings. Huawei operates several complementary platforms, including FusionStage, a platform for app developers, FusionInsight, for big data analysis, FusionCloud, an OpenStack-based platform of unified network and IT architecture for its cloud partners Deutsche Telekom, Orange, Telefonica, and China Telecom.
The next big tasks, as defined by Huawei during its Analyst Summit 2017, are the need to boost its data capabilities and ramp up its platform solution delivery capabilities. However, the areas that I feel will be most critical for Huawei’s future success relate to Huawei’s own internal digital transformation as well as its artificial intelligence (AI) strategy. I consider both issues as two sides of the same coin, as:
- Huawei’s stance regarding AI leaves it exposed to faster AI players. Huawei does not plan to develop a stand-alone AI offering. Huawei views AI as an enabling technology. Huawei intents to apply AI in its products to provide customer value and to improve internal efficiency. In my opinion, AI is not about product enhancements, but about helping customers to achieve beneficial business outcomes as part of their own customer interactions. In the years to come, AI will need to become a key to Huawei’s differentiation efforts and to keep commoditization at bay.
- Huawei’s customer engagement model needs to change from push to pull. Huawei’s customers are defining what they want and no longer just accept what Huawei is “pushing” to them. Huawei will need to move beyond merely focusing on producing and selling products toward continuously engaging with clients around their desired business outcomes based on product and service usage. To map their customers’ journey, Huawei must be able to deliver mass customization and target customer expectations at each stage of the customer life cycle.
Huawei’s own transformation will be all about embracing a true customer-centric, outside-in perspective. Agile product development, ongoing open innovation, and customer feedback loops will become table stakes. This shift requires even better ecosystem management skills, further breaking down of silos between departments, better multi stakeholder go to market capabilities, sector specific process expertise as well as a hyper-collaborative work culture, both inside and with customers and partners. These challenges can be overcome as Huawei has a strong basis as outlined in my blog last year. But getting there, constitutes Huawei’s biggest challenge to date in my opinion.