On May 11, network and communications vendor 3Com outlined its strategy to re-enter the larger enterprise market. This is a story that we've heard before from 3Com as it has tried a couple of times before to get back into what appears to be a lucrative market that's ripe for the picking from market leader Cisco. 3Com's most recent attempt was two or three years ago now, when it tried unsuccessfully to position itself as the logical alternative for Cisco through its "Exercise Choice" and "Cisco Plus" campaigns.3Com's current strategy is to create three sub brands that are focused on different market segments. The "3Com" brand will remain and be the main brand that 3Com uses for the SMB segment. Tipping Point, which already has a strong enterprise brand in the security market, will remain and be solely focused on security. Lastly, 3Com will extend the H3C brand to be its main enterprise brand. Three markets, three brands with 3Com being the overall corporate brand.
So, will this be successful this time? I think H3C has a legitimate shot at success here for the following reasons:
* The economy. Because of our continued crumbling economy, organizations are scrutinizing every purchase. Over the past year or so there has been greater awareness raised regarding the "Cisco Premium," which gives value oriented network providers a legitimate shot at stealing share from Cisco with cost minded buyers.
* The H3C brand. I'm not totally sure that large enterprise will embrace H3C as a corporate brand. I am totally sure though that they wouldn't embrace 3Com. For those who weren't around in the late 90s, 3Com was actually one of the premier network brands in the industry. The firm I worked for had almost all 3Com equipment and it worked great. Then, for some reason, 3Com made the inexplicable decision to exit the high margin enterprise business and take their brand down market, leaving many customers stuck. There are still many, many CIOs and CTOs who remember that and will not buy 3Com products. Some, who understand that H3C is a combination of Huawei and 3Com may still dismiss the brand but overall, it's a positive for them to have a separate corporate brand. Building the H3C brand will be much easier than repairing the 3Com brand.
* Breadth of product. One can argue whether the JV with Huawei was successful or not but there's no arguing that the JV helped 3Com build an incredibly broad product line to launch H3C. Pretty much the entire network product line has been revamped over the past couple of years. The products also span lower end, small business network devices up through the Switch 8800 which rivals the performance numbers from vendors such as Foundry and Force10 that are known for performance and speed.
* China as a home market. The JV gave 3Com a broad product line but also a big home market in China. Currently the revenue coming out of China is at least as big as the rest of the company and the only part of the business that is currently growing. 3Com is the market leader in China and should be able to leverage that market as its home market to test equipment, mature it and come to the rest of the world with product that works, plus a huge list of reference accounts. This is similar to the strategy Cisco uses with the US as its home market and should be a significant advantage for H3C.
Above I listed the factors that could lead to 3Com success, here are some of the issues that will be an inhibitor for 3Com as it tries to execute on its strategy.
* Lack of a systems integrator partner. If you're going to sell to large enterprise, especially in North America, you need to have an SI or two in your corner to do much of the integration work. HP and EDS work with Cisco (for now) and Procurve. IBM has created partnerships with Brocade and IBM's services arm, and most of the other players are tied to Cisco. If H3C can land even one SI, that may give it the legitimacy it needs to go into the North American enterprise market.
* Lack of enterprise channel. When 3Com bailed on the enterprise market, many of its channel partners left them and went to companies like HP Procurve. H3C needs to now spend the time rebuilding the channel. Nortel's collapse does give H3C a pool of channel partners to approach, though, that may be looking for a new partner to work with. In Europe, H3C will need to focus on building up the Euro telcos as possible channel partners and could have success, as the cost conscious buyers may force the telcos to carry an alternative to Cisco.
* Change in focus from VoIP/UC to networking. A few years ago, 3Com's VCX and NBX products were among the best VoIP platforms in the industry, causing the company to focus almost solely on this as its go-to-market. The current strategy from H3C appears to be network oriented, which may move H3C down the value chain from Cisco, who sells network equipment to support its UC initiatives which have more immediate business value.
* Everyone else wants to be #2 also. While it's great that H3C recognizes that customers have paid a fat premium for Cisco gear for years and there's room in the market for a #2 vendor, other vendors recognize that too. HP Procurve is the current #2 vendor, Juniper has eyes on it and has rolled out a bunch of new product and Brocade's "Extraordinary Networks" campaign positions them as the logical number 2.
Regionally, expect H3C to have its best likelihood of success in China first, Latin America second where the buyers tend to be a little more cost conscious, and Europe third where the 3Com and Huawei brands are not as tarnished as they are in North America. The North American market will remain H3C's biggest challenge where the 3Com brand does carry some baggage still as does the Huawei brand. The other regions though are much more accepting of an alternate vendor and that's where I would expect to see the early wins.
To me, the keys that I'll be looking for over the next year or so to understand whether H3C is successful is whether they can secure an SI partnership, growth in enterprise channel partners (this includes technology partners), telco relationships in Europe and large, lighthouse wins where H3C can showcase its technology.
Is this a slam dunk for 3Com and H3C? Of course not. However, it's the best shot the company has had in years. The good news is, even a small amount of success moves the needle for 3Com outside China.
