When Gartner came out with its Magic Quadrant for Unified Communications in North America last month, probably the most surprising name was Huawei’s. But the Chinese tech giant is indeed looking to crack the North American market in UC, and we got a sense of the plan from senior VP and GM John Roese, whose previous gig in the industry was as CTO at the doomed Nortel—Roese being one of the few people to crawl from that wreckage relatively unscathed. He's also held similar posts at networking companies like Enterasys, and is recognized as one of the more creative thinkers in networking. His keynote address at Interop New York last week drew rave reviews, and served as Huawei's opening volley in its attempt to make a serious run at Cisco as an end-to-end strategic networking vendor in North America. (Note: Corrected from an earlier version that gave Roese's Huawei title as CTO.
We’ll get to the details of Huawei's plan in UC, but first a story, courtesy of John Roese, who I spoke with the week before Interop. It turns out that company founder Ren Zhengfei started the firm as a PBX reseller back in 1987. Its target market was rural China, and the products, John Roese told me, "had interesting characteristics--like being rat-proof," which was important in that time and place.
Huawei, of course, has come a long way from the days of peddling rat-proof PBXs in the Chinese hinterland. The company had $28 billion in sales last year and grew 10%, according to Roese. Most of that was carrier revenue—just $5 billion-$6 billion was in consumer sales, and $2 billion was enterprise. Huawei’s goal is to be a $100 billion company, which necessitates pursuing the enterprise.
This is not Huawei's first bid for enterprise business, nor its first attempt to address the North American market. The company had a joint venture with 3Com that operated mainly http://www.nojitter.com/post/225400287/3com-buyout-in-questionhttp://URL HERE">tried unsuccessfully to acquire 3Com in an attempt to get into the U.S. market; that deal was stopped by U.S. officials on purported national security grounds.
This time around, Huawei is entering the market on its own. The company moved 10,000 people into an enterprise group that will be dual-headquartered in China and in Santa Clara, CA. Huawei will be introducing new switch, router, Wi-Fi and UC products, while also building on existing products. The latter include access routers and also telepresence, for which Huawei claims to have 18% of the worldwide market already, according to Roese, who said that Huawei has focused on codec bandwidth efficiency and will use this as a key differentiator against video competitors. The consumer business of tablets, smartphones and data terminals is already the fifth-largest in the world and will be expanded upon as well.
Another interesting area where Huawei plans to differentiate itself is with a focus on 4G wireless Long-term Evolution (LTE) interfaces on many of its edge products, according to Roese. He called LTE a "piece of the enterprise connectivity paradigm," offering better resiliency options via path diversity, especially for smaller locations.
This speaks to the big picture that Roese has been talking about in connection with Huawei’s move into North America. Roese says the industry is at a point where carrier, enterprise, and consumer technologies are converging, and given its broad scope and size, Huawei is well positioned to take advantage of this convergence, he argues.
Roese concedes that with the Enterprise group less than a year old, "We have lots of work to do to fully operationalize." In the specific case of Unified Communications, telepresence will be the first entry, since that product is available now. Huawei manufactures a full suite of UC products for the Chinese and other non-North American markets, but Roese said work still needs to be done to have these products’ language support and GUIs fully ready for the North American market. He expects that over the next year or so, Huawei will be gearing up for broader product launches.
One thing Roese has been stressing is his view that the networking market in general is ready for a major new challenger; Juniper is the last major new challenger to Cisco, and even VMWare is more than 10 years old now. When discussing the UC market in particular, Roese noted that Huawei has an opportunity to support things like survivable telephony in the cloud, and he called out the similar move that Siemens Enterprise Communications made when it took the HiPath 8000 from a carrier softswitch to an enterprise datacenter offering. (It should be noted that this was a pretty high-level comparison; Roese wasn’t drawing a broad or very specific comparison between Huawei and Siemens, though both do share a common carrier heritage.)
However, from a perspective of UC industry trends, what Huawei’s doing is, in many respects, swimming against the tide, which has been toward separating enterprise units from carrier-focused divisions. This trend started all the way back with Avaya's detachment from Lucent, extended through SEN's spinoff from Siemens, and continues with the expected sale of Alcatel-Lucent's enterprise division from the parent company.
Indeed, from the start, ALU has struggled to grow its North American UC market share, and SEN is still fighting its way back from the hit it took as a result of two years of uncertainty while the division was on the block. Industry observers reflexively say that the UC market in North America is consolidating, not fragmenting; Cisco is back to growing its market share lead, Avaya is hanging in there, and then there's Microsoft. You could argue that the last thing this market needs is yet another competitor with yet another product portfolio.
Huawei's UC play, most likely, will be as the anti-Cisco--using the same end-to-end strategy that Cisco uses; i.e., We're you're switch/router company, so give us the rest of the network too. We'll sweeten the deal and it'll all work together better than a best-of-breed solution. If Huawei makes a dent in Cisco’s position in the network here in North America--and that’s a huge "if"--then its UC proposition will probably be compelling. It’s hard to envision a huge enterprise going to Huawei just for UC, at least in the near term; they’re much more likely to see Avaya as the play if they're opting against Cisco UC. And of course, there's the other factor, Microsoft Lync. Companies pursuing an Exchange-rooted Lync migration strategy may wind up taking an approach that pulls them away from all the network-based players, in favor of the desktop software platform.
But it's hard to ignore a company of Huawei’s size and scale. As John Roese said, "When we enter, we're noticeable." Cisco and other incumbent vendors will certainly notice.
