Network supplier 3Com has struck a joint venture marketing
deal with Chinese network equipment maker Huawei, which analysts
have said could spark a price war with Cisco.
Analysts are advising IT directors to seriously consider looking at
3Com/Huawei hardware when the time for network upgrades comes
around. Cisco has been accused of reaping margins of up to 70% on
sales.
The $160m (£108m) agreement will enable 3Com to add Huawei's
enterprise-class equipment to its product range, readdressing a
niche that 3Com pulled out of three years ago. Under the agreement,
Huawei products will be branded 3Com in areas outside China and
Japan.
Asked about 3Com's pricing strategy, area sales director Buddie
Ceronie said, "We aim to be a tier-one enterprise networking
company and offer a differentiation on cost of acquisition and
ownership."
He would not be drawn on planned pricing, but analysts expect
savings to be substantial as Huawei benefits from cheap labour and
research and development costs in China and India.
Jim Slaby, an analyst at Forrester, said, "Cisco has been
exploiting its dominance and its margins of up to 70% are a bit
rich. This looks like the latest supplier combination to target the
Cisco-installed base and it will ultimately force Cisco to respond
with aggressive discounting.
"IT directors need to invite 3Com/Huawei in next time they are
going for [a request for information] and ensure that Cisco knows
about it."
However, Slaby added a number of caveats. IT directors should be
aware that cut-price equipment may not deliver the functionality
and reliability needed for high-end applications such as voice over
IP, he said. And sourcing equipment from multiple suppliers could
reduce discounts and may add complexity to training and handling
management interfaces.
One network manager, George Farquhar, assistant director of IT at
the University of Strathclyde, said, "We would need to trust the
manufacturer and the channel partner, but if the equipment you want
costs £20,000 and someone comes along with the same for £5,000, you
would look at it."
Cisco has been engaged in legal battles with Huawei in the US about
alleged copyright infringements. Ceronie said products offered
through the joint venture would not include those affected by these
actions.