Journey to the West: Will Huawei make its services ambitions stick?

As network hardware supplier Huawei enters the services game, we consider if the West is ready to buy IT services from China

Although his famous catchphrase “to get rich is glorious” may have been apocryphal, in the late 1970s, Chinese leader Deng Xiaoping unleashed a tidal wave of capitalist fervour, sweeping away the dark years of famine and brutality that had, in the eyes of the west, characterised communist China up to then.

Nearly 40 years on, China has “got rich”, as a walk around Huawei’s home city of Shenzhen makes abundantly clear.

In 1985, Shenzhen was a small, down-on-its-luck town, clinging to the closed-off border with Hong Kong, in those days still a remnant of the British Empire.

In 2015, Shenzhen is a city of 20 million that dwarves its neighbour to the south in size, if not yet in spending power. Nevertheless, in Shenzhen, China’s economic miracle is clear to see. Italian supercars prowl the streets and the second tallest building in the world is nearing completion.

But although China is still booming – relative to many liberal democracies at least – it is still known first and foremost as a nation of factory workers, churning out the consumer goods the rest of the world craves. 

Of course, this is not the case, as China has banking and insurance and a thriving services sector. But it has not been exported and so it has not really been noticed either.

And so it has been with Huawei, which up to now has typified the rip-it-off, pile-it-high, sell-it-cheap stereotype that so many people still hold of China – a stereotype that vanishes into thin air the moment one steps onto Huawei’s campus (pictured) on the outskirts of Shenzhen.

Read more about Huawei

Huawei’s main campus stretches for miles, with acres of research and development (R&D) facilities, including one that, perhaps in a sly nod to the national security concerns of the Americans, resembles a passable replica of the White House. At lunchtime, its canteen serves more than 50,000 meals in the space of 30 minutes, and they are excellent. 

If ever you wanted a sense of the awesome potential of China, you could do much worse than visit.

A change of course

Huawei, whose executives are undoubtedly more awake to the stereotypes than they have ever let on, are steering the company away from the old models and into a world of services.

At its 2015 Global Analyst Summit, which Computer Weekly attended in Shenzhen, it laid out its ambitions to become not just a supplier of hardware, but a full-service Information and communications technology (ICT) company.

It will redefine its business from a product-driven plus support services strategy to a product plus services-driven strategy, said rotating CEO Eric Xu at the summit.

“In the future, products and services will be the driver, not just products, to fulfil carrier business development so we can help them pursue their ambition to transform the network, IT architecture and customer experience,” he explained.

Huawei believes that changes in user behaviour and demand are driving “explosive growth” in network traffic.

This has led communications service providers (CSPs), Huawei’s bread-and-butter hardware customers, to invest more in dynamic, customisable, real-time network services; mobility, LTE and fixed broadband; and cloud computing, software-defined networking (SDN) and network functions virtualisation (NFV) technology as they try to keep ahead of what their own customers want.

Naturally this will be a challenge for CSPs, said Leroy Blimegger, Huawei global president of assurance and managed services, hence the need to start supplying services, an area where Huawei plans to invest over $350m per annum in the coming years.

“Therefore, services become key to helping customers address transformation and in achieving Huawei’s sustainable growth,” he said.

“It is too bold to say we are an ICT services provider, but we will be. In the past IT was an island, it was about support for the communications network. The future is a big IT organisation with a bit of networking. It’s going to be an IT world and that’s going to upset a lot of the communications guys.

“We don’t want to be PwC or Accenture, we want to take the best bits of them to help our customers,” said Blimegger.

Services strategy

Huawei’s objectives in moving towards a services-driven model are to improve network owner return on investment (ROI) and optimise how they use their assets, support their overall ICT transformation, achieve customer experience management monetisation and smoothly evolve to a future-proof network.

To do this, Huawei will pump money into its professional services organisation and invest in service platforms and tools and joint innovation initiatives, in collaboration with both communications service providers and channel partners.

Huawei’s objectives in moving towards a services-driven model are to improve network owner ROI and optimise how they use their assets

In a high-level document, it committed to participating in building a more open and collaborative innovation chain with CSPs, upping investments in IT transformation capabilities and integrating its existing services resources better to enhance its end-to-end consultancy and systems integration business, although it remained quiet on specifics.

Nevertheless, it has already begun work on constructing a number of worldwide centres of expertise, including the opening of a network functions virtualisation (NFV) and software-defined networking (SDN) lab, a customer experience transformation centre in China, over 20 service operations centres in various locations and a service provider operations lab in Ireland.

Journey to the west

The famous 16th century Chinese novel, Journey to the West – famously adapted for television in the 1970s and shown on the BBC as cult TV show Monkey – contains at its heart a simple allegory: a group of people can only achieve enlightenment if they work together, with each member helping all the others.

Huawei has put collaboration at the heart of its evolving strategy, calling for the industry to pull together to drive a new wave of networking innovation.

“In the better connected world, there will be tens of millions of industry-specific applications,” said Huawei chief products and solutions officer Ryan Ding.

“Openness and innovation will be the way forward. Huawei will focus on network infrastructure, IT infrastructure and digital infrastructure, and will partner with industry players to develop highly competitive solutions,” said Ding. 

But a question still remains, given the cultural gulf between China and the West, and lingering worries over the security of Huawei’s portfolio: How effective can it truly be?

Whether or not this collaborative services strategy sticks depends very much on how Huawei now acts, both internally and externally, and its cohort of Europeans and Americans will have a big part to play here.

In the past Huawei has been accused of operating something of a revolving door policy when it came to western executives, with a number of top figures in its enterprise business, including executives lured across from key roles at the likes of Cisco and HP, departing mere months into their tenures.

Often these high-profile departures came amid allegations of a culture clash between the West and China, with some making claims that Huawei did not understand how to adequately support them in their goal of establishing a creditable supplier in Europe.

This will be something Huawei is keen to address. Speaking to some of the western staffers at Huawei in Shenzhen, indications are that the business does seem to be turning a corner.

According to one high-profile Shenzhen-based westerner, Brits joining the firm – especially those who look likely to move to Shenzhen – are now given a thorough grounding in how the company expects them to work and behave. Brits are also given the opportunity to consult with those who have already made the move to China, on matters such as renting an apartment or setting up a mobile phone contract, which are daunting tasks to anyone without a thorough grounding in the language.

Openness and innovation will be the way forward

Ryan Ding, Huawei

This has led, the Shenzhen-based westerner told Computer Weekly, to higher retention rates of western staff and a sense of continuity that equals better and more productive relations within the company, which bodes well for the future. The more Huawei’s leadership is exposed to western ways of thinking, and the more westerners understand China, the lesser the potential for misunderstandings and the greater the potential for growth.

When it comes to security, the questions that many had over Huawei’s intentions are beginning to die down for a number of reasons, not least the 2014 revelations that the US National Security Agency (NSA) had not only tapped into Cisco equipment and used it as part of its spying programme, but had infiltrated Huawei's own networks, which helped Huawei’s cause no end.

Although it is reasonably certain there have been state-sponsored cyber attacks originating from China, Huawei has repeatedly shown its willingness to open up to scrutiny.

A few short years ago journalists asking such questions of its executives tended to be shut down or fobbed off with meaningless answers, but Huawei has now realised that this does not work and its executives have duly become more open.

Its employment of well-known industry figures, such as former government CIO John Suffolk, now global president of cyber security and privacy, also heralds a more open approach.

The UK’s oversight project, the Huawei Cyber Security Evaluation Centre (HCSEC), is another tick in the right box for Huawei.

In March 2015, the oversight board published a report that said the technical assurance provided by Huawei was “of sufficient scope and quality” to meet its obligations. The report also said it was clear HCSEC was working independently of Huawei and any risk to security from Huawei’s involvement in the UK had been “sufficiently mitigated”.

If it were to emerge that Huawei was knowingly playing a part in spying on Britain for the Chinese government, the loss of face would be extremely damaging to the business, and to its existing partners, such as BT.

This is not to say that CIOs should march boldly into a brave new world arm-in-arm with Huawei, and it is probably wise to err on the side of caution in some respects.

However, if Huawei continues its commitment to transparency, and both sides make efforts to try to understand each other properly, there should be no reason why Huawei cannot become a credible services player in the UK.

Read more on Telecoms networks and broadband communications