Huawei enterprise focus crucial to future success: Forrester
But US mistrust is forcing the company to pursue a channel strategy
Chinese networking company Huawei expects to grow its enterprise infrastructure business to $15 billion by 2015, to offset the slowdown in its carrier business, according to a new report by analyst firm Forrester.
Huawei’s sales revenues from its carrier business grew just 3% in 2011, with global revenue growth slipping below 12% in 2011, compared with 25% in 2010. This was largely attributed to the increasing saturation of the carrier infrastructure market.
Meanwhile, Huawei’s enterprise business revenue came to nearly $1.5 billion in 2011, with year-on-year growth of 57%. Although the enterprise segment currently only accounts for 4.5% of Huawei’s total revenue, this is seen as one of the firm’s primary growth engines.
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The firm offers solutions for enterprise networking, cloud and data centre infrastructure, unified communications and collaboration, enterprise wireless and security.
Huawei's decision to follow other telecom equipment vendors like Alcatel-Lucent and Ericsson into the enterprise market will be crucial to its profitability over the next 10 years, according to Forrester. The company expects its global enterprise revenue to reach $15 billion and account for 20% of its total revenues by 2015.
However, Huawei's rumoured ties with the Chinese government and army mean that the US government still considers it a security threat – potentially hampering enterprise adoption in North America.
In the government market, Huawei works closely with local agencies to develop eGovernment and cloud computing solutions. It also manufactures custom servers for the data centres of China-based Internet companies like Alibaba, Baidu, and Tencent.
“Huawei has developed a realistic strategy: Rather than focusing on large enterprises in the US market, it has instead recruited distributors and value-added partners (VAPs) and relies on their networks to cover small and medium-size businesses in North America,” writes Forrester Research vice president and principal analyst Bryan Wang.
Wang added that Huawei is still at the very early stages of developing a global channel network, and it will take the firm more time to penetrate public sector organisations and large enterprises in “less trusting” countries and regions such as Australia, Japan, the US, and Western Europe.
Furthermore, it lacks the experience to work with global partners in a way that is competitive with global leaders that have developed their channel programs over decades.
Huawei’s global enterprise success will therefore hinge on its ability to build up a strong ecosystem of channel partners and telecom operators to engage enough global enterprise customers to meet its targets.
Back in May, it was reported that the European Commission is launching a major trade investigation into Chinese networking companies Huawei and ZTE, after it emerged that they may have benefited from illegal state subsidies.
Huawei has denied the accusations and China's commerce ministry also described them as “groundless and unreasonable”.