Last week I was in Shenzhen and Shanghai at the invitation of Huawei. Huawei, like most other large telecom vendors, organises annual meetings for analysts: the aim is to present their strategy to us and get some feedback from the analyst community.
Huawei's success is undeniable. The numbers speak for themselves: they are the #1 in volume in many markets (including FTTH), and their annual profit increased by 30% last year at a time when most vendors are struggling. Their growth is not just in China, of course, but China is an important market for them and so it made sense to go and meet them on their turf to try and get to know them better.
The first thing that struck me is the sheer scale of their organisation. Of course, again, the numbers are striking (130 000 employees worldwide), but I never really got a sense of that scale until I visited their fixed line HQ in Shenzhen. The word "offices" or even "campus" doesn't describe it. It's a city within the city...
The analyst conference itself had its share of big announcements, but two of them stand out as trhe kind of bold moves that most established players in the market no longer dare make:
- Huawei is going to start marketing its own brand devices. They are currently the 8th mobile device manufacturer worldwide (if I remember correctly), but until now they only sold white labelled models to carriers. From now on this will no longer be the case. I don't know the mobile device space well enough to assess their chances of success, but it seems to me at least that the timing, as the Nokia giant is teetering on its pedestal, is appropriate.
- Huawei is also this year launching an official enterprise business with the clear aim of eating up a chunk of Cisco's market. Just to give you a sense of the muscle Huawei can bring to bear to such an endeavour, they migrated 10 000 people (8% of the overall workforce) overnight to this new entity. Not exactly something that many players in the market can do or even would do if they could.
Will boldness pay ? I don't know. What I do know is that boldness is clearly part of their corporate culture. I was surprised, when I attended the first of their European analyst conferences three years ago at the tone of the delivery. They don't sugar coat their messages and they boast unabashedly at their achievements. The kind of message we would hear three years ago was "in this particular market, we trounced ALU and Ericsson". It still is.
While this may seem a little crass to our Western ears used to polite corporate messages and considering corporate humbleness as a virtue, it's also somewhat refreshing to hear a vendor being fairly transparent as to what their goals and achievements are. While their messaging has become more sophisticated in the last couple of years, the brashness has remained.
Which doesn't mean Huawei isn't facing a number of issues in its expansion, issues that might not be overcome by just being bold.
One of these issues was that of a corporate culture too centered on China. That's changing, with an open admission at the European analyst conference last yeat that the globalization of the employee mindset was necessary and being addressed. That's not to say that there aren't hurdles remaining in that space, but their management is clearly becoming more global and increasingly I find myself having real conversations with their executives as opposed to the one-way broadcast of their messages which used to be the case a few years ago.
Another issue, particularly in North America is the perceived affiliation with the Chinese state. This is in part rumours that through the Huawei founder, an an ex-Chinese PLA man, the Chinese army really controls all these routers being deployed all around the world. That smacks to me as guttter level conspirationism, and now seems to be actually believed only in the US (and India).
An accusation that it more difficult for Huawei to brush off is their access to effectively "free" loans from the Chinese development banks and sovereign funds. I have no real way to assess whether that's true or not (and if true it would (or at least should) probably constitute an issue with WTO rules). It's both an asset and a problem though, as vendor financing by Huawei has allowed them to win many a deal these last few years.
Huawei themselves pointed to other macro-economic issues, particularly the gradual appreciation of the Chinese Yuan which means that their cost of labour advantage from building in China is diminishing. While true, it's still far from really hampering their stride at this stage.
I don't know if Huawei will succeed at these new endeavours or even continue to be as successful on their established markets as they are today, but what I do know is that they are certainly moving with great momentum towards these stated goals. They are largely unencumbered by some of the western constraints (especially around employee management) and they are acquiring a global culture, faster than many would have anticipated.
It was worth meeting them on their turf, if only to learn that. And since China will likely be the first FTTH market worldwide within a very short period of time, knowing Huawei better is worth its weight in glass...
