Huawei's managed network services strategy

Mark Giles/Ovum
Ovum
In November 2010, Ovum attended Huawei’s annual European analyst event in London. While its messaging and top-line strategy has changed little over the last 12 months, Huawei has made significant strides in implementing its plans and achieving growth. Its success has been driven by continued investment in R&D and aligning its R&D processes to better serve its customers’ needs. In addition, Huawei has focused on building end-to-end solutions, and a key area of investment and development for the company over the last year has been its services business. As of 2Q10, its services business accounted for 11.8% of the company’s overall revenues.
 
Huawei growing its European services business
 
Our recent comment, Ericsson’s services business continues to expand, examined the continual strides that network equipment providers (NEPs) are making in managed network services. Ericsson has seen strong growth in its services business in the last two years, with the economic downturn being a key driver of this trend.
 
While North America remains a difficult region for Huawei to crack due to political pressure, the company’s European operations have been extremely successful in the past few years. Ovum’s survey of a number of tier-1 European operators indicates that Huawei is now a strategic supplier in many technology areas.
 
While it has entered the managed services market at a later stage than other NEPs, Huawei’s hardware sales growth and the effort it has put into cultivating its relationships with European telcos has helped it to quickly ramp up its services business. Huawei saw professional service sales increase by 46% in 2009 to reach $277m, and the company estimates that revenues in 2010 will be double this figure.
 
While Huawei may still lie behind market leader Ericsson in terms of the percentage of revenues attributed to services (Ericsson’s services sales accounted for 12.5% of its overall revenues in 2Q10), should it achieve its ambitious growth targets it will strongly challenge Ericsson for leadership in the market.
 

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