Jarich: Huawei + Nokia + Ericsson/Cisco = Who's left to drive network transformation?

peter jarich

Peter Jarich

This week, I'm in China for Huawei's annual Analyst Summit along with folks from nearly every other analyst firm on the planet. Like clockwork, Huawei released its annual report not long before we all headed off the Shenzhen. If you haven't seen it, it's worth a read.

After I caught the highlights, a few things came to mind. How is it possible for a relatively mature telecom and IT vendor to register 33 percent growth? Will Huawei ever go public, putting its books under the type of scrutiny that will convince people this growth is possible?  Maybe this is just a sign of the value of end-to-end solutions that have driven recent telecom acquisitions and partnerships? If so, what does it say for other vendors?

Okay, that's a lot of questions in short order. Regardless, you get the idea. Over the past few years, we've repeatedly heard about the value of scale in the telecom vendor space. It's been the rationale for large acquisitions (Alcatel-Lucent + Nokia). It's been the rationale for smaller acquisitions (Ericsson + Telcordia + Metratech + Microsoft Mediadoom + Envivio + various other vendors and system integrators). It's been the rationale for a relentless focus on organic growth (Huawei). And, against this backdrop, it questions how other firms without similar scale will go on.

Next week, you'll probably see lots of recaps from analysts with new insights into Huawei's products and strategies. If you don't, you should probably question the value you're getting out of the analyst firms with whom you have relationships. In the meantime, I'd like to take a moment to think about the other vendors – at least in the wireless space – that might not have the scale of the top three telecom vendors, but will still be responsible for network transformation and network vendor diversity.

With everyone focused on the top three telecom vendors and the success of Huawei suggesting the value of end-to-end solutions, it's worthwhile thinking about the Other Guys. And when you're done thinking about that great 2010 Ferrell-Wahlberg comedy, it's worth recognizing that it will take more than three vendors to deliver network solutions and innovation.

  • ZTE. Despite an ability to deliver end-to-end solutions (including device, telecom and IT gear) and a respectable set of customers, one thing has dominated recent media attention around ZTE: a U.S. trade ban based on the violation of American sanctions against Iran. The ban's been (temporarily) lifted. What does this all tell us? Well, it seems like the company is important enough that its trade issues actually mattered enough to suppliers and customers around the world. And, while its 2015 revenues ($15.5B) can't match those of its Shenzhen neighbor Huawei ($60.8B), if scale is important to financing R&D, a solid number four position in telco means it can't be ignored or dismissed.
  • Samsung. I've had multiple conversations questioning why Samsung decided to make telecom network infrastructure a strategic push a few years back. Why, after all, would any sane company try to move into a space already dominated by a handful of entrenched vendors, many of which were facing limited or no growth? This, naturally, leads to questions about how long Samsung will remain committed to the market. In the here and now, however, its commitment is clear. It's launched new base stations. It's launched a new distributed indoor small cell solution. It's made a push on LTE Public Safety – the top "Beyond 4G" use case for SPs per our own survey work – leveraging momentum in Korea. It's made a push on ramping up its professional services business in order to better support solution delivery and deployment. 
  • IT Industrial Complex. We all know IT is moving deeper into telecom especially as the RAN and core get virtualized. We've been seeing it for years and we continue to see signs of it daily. Think Oracle's acquisition of Tekelec and ACME Packet years ago. Think HPE's strategic push on NFV. Think the Cisco and Ericsson partnership. Think Brocade's acquisition of Connectem last year and its planned acquisition of Ruckus. As Service Providers continue their push to "move up the stack" with IoT, we'll see additional opportunities for IT vendors to wield influence in the telecom value chain. At some point, of course, this means that we'll need to rethink how we talk about "telecom" vs. "IT" gear.
  • Start-up Land. Start-ups make the world go round. Ok, that may be a bit of an exaggeration, but if we believe the Innovators' Dilemma, we know the value small firms bring in terms of driving new technologies in ways larger firms can't. And, at least in the wireless network, the focus on scale doesn't seem to have dampened start-up activity. Whether we're talking about the core (Affirmed, Benu, Core Network Dynamics), RAN (Altiostar, ASOCS, Dali Dali, Kumu, Phluido, SpiderCloud), or some combo of both (Luminate, Parallel Wireless), it's not hard to name firms betting on technology and innovation vs. scale. They won't all be around forever, but they're here today and driving new thinking, new solutions, new competition.

This list isn't exhaustive. It doesn't include, for example, vendors like Juniper which simply don't fit that neatly into the categories I set out. And, if you've been following the market (you know, reading things like Fierce), not much of this will be a surprise. But, if you've been following the market, you've also seen the focus on scale and what that means for the market's top vendors. This could all be very depressing if you think it telegraphs a market controlled/dominated by a few big (entrenched) vendors. It's nice to remember that there's more to the story.

Peter Jarich is the VP of Consumer and Infrastructure at Current Analysis. Follow him on Twitter: @pnjarich.

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