Managing Partner Ray Mota talked to SearchTelecom.com executive editor Kate Gerwig about Huawei, the Chinese telecom equipment vendor with a long-term global domination strategy and under-the-radar enterprise networking aspirations. In part one on Huawei and the Art of War, Mota discussed Huawei in terms of Chinese business culture and the company’s long-term goals. Here Mota turns his attention to why network equipment vendors should be very aware of Huawei’s moves in the telecom service provider market and Huawei’s plan to move into enterprise networking under the radar.
Should carriers and vendors get beyond categorizing Huawei as the lowest-priced equipment vendor?
Mota: Thinking that Huawei is cheap is a mistake for carriers. In some parts of the network, Huawei gear makes a lot of sense, and in others it doesn’t. A lot of carriers are making the mistake of looking at the short-term capex investment, but they don’t understand the risk of customization and longevity.
When Huawei structures a deal, in some cases, you’ll see it come in 30% to 45% cheaper than anybody else out there. But carriers make the mistake of focusing on the initial price. Huawei does a good job on lack of transparency, so you really don’t know the true cost of certain things because everything’s bundled in. In the second and third year, you realize it’s more expensive than you thought. People make the mistake of thinking Huawei is a low-margin company, and it’s not. That’s the Art of War. Huawei is taking advantage of a certain lack of planning by a small number of carriers that don’t know where they’re going to be in two years. Huawei goes in and says, ‘Why not buy a Huawei network?’ For those guys, that advice makes a lot of sense. But in the long term, they’re getting burned because when you look at how much black-box customization is needed, that network is actually costing you more in a three-to five year cycle.
What do service providers think about Huawei?
It used to be the low-priced vendor, and there was a big technology gap in the past, but that gap is closing little by little. It has four or five LTE [Long Term Evolution] trials going on in North America alone. But it’s not penetrating in the intelligent part of routing. One of the surprises was how much optical penetration they have in North America. And because Huawei has access to capital from China Development Bank, they can offer credit terms that are outrageous. I’ve heard numbers like $500 million to billions, and that’s not folklore.