Huawei does not have the kind of history nor legacy in the telecommunications industry that Ericsson or Alcatel-Lucent, with its Bell Labs organization for example, can boast of.
While the telecommunications industry is a segment that looks forward more so than backward, legacy and tenure offer invaluable perspective and context that can help an organization anticipate the changes and disruptions ahead. Ultimately, it can help to build vision. For Huawei, the challenge this creates is shown in the technical, rather than strategic, focus of its solutions and the still nascent services portfolio.
To be sure, these areas define the key next steps for the firm as it strives for global leadership. From a geographic standpoint, weakness persists in North America. The region, though mature, remains sizable and is an important stronghold for Huawei's top competitors. The leadership position the United States has taken in the large-scale adoption of LTE technology has also made it an important battleground for next- generation wireless technology supply.
Opportunities The ongoing explosion in mobile data traffic represents the fundamental opportunity for telecommunications equipment vendors. The need for network infrastructure that delivers greater capacity and bandwidth, at the lowest possible cost per bit, will drive investments in the next-generation technologies and products offered by vendors such as Huawei. Their opportunities do not reside only in the buildout of new networks but also in the transformation of legacy systems toward a communications infrastructure defined by IP and mobility.
Huawei's internationalization effort has yielded strong dividends in the key emerging regions of Asia, the Americas, Africa, and the Middle East. These areas are poised to continue to grow in the coming years — unlike the more mature markets of North America and Western Europe. Threats A key threat facing Huawei is the recent consolidation of its competition.
Consolidation has been the strategic option of choice, especially for vendors seeking to build economies of scale, fill technology portfolio gaps, and enhance market footprints. Nokia Siemens is pursuing a similar strategy via the acquisition of Motorola's wireless portfolio.
IDC views these efforts as a direct response to and defense against the rapid rise of Huawei. They are effective and certainly complicate Huawei's effort to build traction in the North American market. Another element raising the competitive pressure on Huawei is the growing service provider—related operations of traditional IT vendors such as HP and IBM. These organizations see significant opportunities in the telecommunications sector and, in particular, within the areas of professional and managed services.
These are important growth areas for the traditional telecommunications equipment vendors. For Huawei, who is working especially hard to build further competencies in the services area, the addition of the deep-pocketed IT players into the mix adds another layer to the challenges it must overcome.
Finally, there is the enduring threat that within the increasingly intertwined global economy companies must operate in, geopolitical issues will arise and inevitably complicate the business development process. These can span a wide gamut of issues, ranging from anxiety over national security to concerns encompassing competitiveness and fair trade.
Warranted or not, equipment vendors — whether it is Huawei or any other vendor — will have to face and overcome these issues. The speed with which Huawei adopted green was impressive and offered an early point of differentiation for the company. While some competitors were still debating the merits of a sustainability based go-to-market strategy, Huawei chose to simply move forward with it. For example, the world's largest mobile operator, China Mobile, launched a revised equipment purchasing program in with sustainability featured at the center of it.
Similar efforts are proliferating across the globe. Vodafone, part owner of Verizon Wireless, has long-standing and varied initiatives across its global footprint of mobile networks to reduce overall energy consumption and environmental impact. There is a practical sensibility to green as it speaks to improved network economics and efficient operations.
By packaging their product around green however, vendors are able to demonstrate an understanding of their customers that goes beyond simply delivering the lowest-cost equipment. In this sense, a green campaign is part of the transformative process for a vendor seeking to become more than just a supplier of low-cost equipment — it is part of the transformative process for a vendor seeking to become a strategic partner to its customer.
A fundamental strength of Huawei's green effort is attributable to a product portfolio that was quickly tuned to address sustainability-related issues. Priorities included addressing power consumption and footprint-related elements. Huawei basestations are, for example, designed to be among the most power- efficient, flexible, and space-saving systems in the industry.
These have an immediate and positive impact on capital and operating expenditures — which naturally make Huawei solutions more attractive to customers. The company has also initiated programs to examine internal operations from operational issues to supply chain management in an effort to reduce its own environmental impact — an effort that is in direct response to customer and market needs, as well as commentary from earlier IDC analysis please see the Related Research section at the end of this document.
These products and corporate-level green initiatives help create a more holistic green strategy. Beyond product and corporate attributes, there is the evolving vision of how to enable society's transformation toward a more sustainable future. Communications technologies will play a significant role in this.
As Huawei evolves products and solutions to further meet customer requirements for green, the process of working with customers to create a broader vision for a more sustainable society how communications technology can enable such will be an important next step. It will demonstrate another step in building increasingly strategic partnerships with them.
Greater engagement with external organizations involved in green advocacy groups as well as entities seeking to develop consistent measures and standards for sustainability efforts will also help facilitate this.
To be fair, Huawei has indicated that engagements with external green organizations have been initiated, though the company admits to having been so far very quiet about these activities.
It is self-evident that the practicalities of green will mean that customer requirements will continue to move in this direction. The need for the communications network to become more efficient and consume fewer resources will persist. The role communications will have in enabling a more sustainable world will add another driver to the network's proliferation, scale, and importance to society the machine-to-machine communications opportunity is in part driven by the need for sustainability-related solutions.
The long-term outlook for the sustainability movement is strong. While some of the competition may have been slow to adopt a green go-to-market strategy initially, it has now become an important point of messaging across all of Huawei's competitors. Consolidation also arms the competition with greater resources and scale with which to develop green competencies. Thus, while Huawei was quick to respond, the challenge in the coming years will be on how to move quickly and effectively enough to stay ahead.
Economic conditions of the past two years have also not been conducive to the overall sustainability movement. It has stalled public policymakers from implementing some of the more stringent policy mechanisms that could have further driven the opportunity for green technologies forward. For corporate organizations, the economic crisis has been a mixed blessing for green. While it amplified the need for efficiencies that speak to green, the resources and support available to it have faced significant cost-cutting pressures as well.
In sum, the SWOT analysis speaks to the practicality of Huawei's green effort as well as its nascence.
The company has developed a message that speaks well to the fundamental value of green — that of delivering equipment that has minimum environmental impact while at the same time delivering economic benefit. It is a dual- pronged value proposition that resonates well with customers and has thus helped the company build market share in recent years. This is an important foundation as the important next step for Huawei is to develop a broader vision that applies its technologies to a more sustainable world — a broader vision that it should develop in collaboration with customers.
Ultimately, what is most unique about Huawei is the speed and effectiveness with which it was able to adapt to market developments and requirements. Huawei's embrace of green demonstrates its responsiveness to customers and eagerness to please. It gave the company an early and unique message to go to market with — while others were still deciding how to "package" their green message.
Huawei has leveraged its low-cost base and made the investments to transform itself into a vendor with a capable product portfolio and strong technology value proposition. The technology value proposition has been enhanced by a customer-centric leap into green.
While certain geographies may remain untapped, the markets where a strong presence has been established, specifically emerging markets, constitute areas where most of the growth in networking equipment demand is expected to come from in the years ahead. The end result is rapid revenue growth and increasing market share. For a company that was only founded in , Huawei is moving very fast. It has taken a tremendous amount of focus and commitment to accomplish this. Staying at the top, however, will require greater effort.
Huawei must strengthen the four key pillars that have contributed to its growth so far. It must invest further in critical go-to-market strategies, such as the green initiative, as these demonstrate to customers that it can deliver much more than just low-cost equipment. Huawei must continue to develop service competencies and a stronger and more cohesive vision for the telecommunications industry as a whole.
These are critical priorities. For Huawei's competition, priorities reside in the defense of key geographic markets such as North America and the relentless pursuit of operational efficiencies to drive costs down.
Huawei must continue to develop its services leadership as well as push the envelope in terms of a broader and more cohesive vision for the telecommunications industry.
Companies such as Ericsson and Alcatel-Lucent have the advantage of their long tenure in the communications industry. These ideas will be essential to their maintaining a position among the leaders. At the end of the day, the end goal for any network equipment vendor is to derive a relationship defined by a strategic partnership with their service provider customer — rather than simply be a supplier of equipment.
This strategic partnership cannot be accomplished by only delivering low-cost equipment or even by offering great technology. Offer does not apply to e-Collections and exclusions of select titles may apply.
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