Huawei – IBM, not Cisco is the Goal


A lot of industry watchers consider the rivalry between US based Cisco and Chinese based Huawei to be one of the fundamental political and business turf wars in technology today.

The competitive environment between the historically based, but evolving network equipment providers has strong political implications globally, in the US a house committee reported that Huawei is a threat to national security, and in markets such as Australia, Huawei has been blocked from involvement in the National Broadband Network (NBN) on national security grounds.

The reality is that the “battle” between Huawei and Cisco is a prelude to the real game in town. Can Huawei evolve over time to overshadow IBM as the leading enterprise IT company globally? That is a fully integrated IT solutions provider with a strong commitment to R&D, customer outcomes and industry building.

Clearly, targeting IBM is simple enough. Overtaking IBM isn’t. One of the real strengths of IBM is the ability to develop its strategy and change its customer engagement model. Simply Huawei needs to be targeting and benchmarking itself against the IBM of 2017, not 2012.

The first candidate to do this, Fujitsu, failed to grasp the opportunity outside of Japan and perhaps ANZ. Frankly, it is impossible to see them reaching their potential. Huawei needs to learn from some of the difficulties that Fujitsu both faces in the market, and more importantly, created for itself.

Of course it is firstly doing this in China. The relationship it has with the Chinese government is of course incredibly important if not lacking in transparency. Investments in IP of a non-networking nature are increasingly common to see from Huawei. It has invested in local Chinese services providers, and helped facilitated their rise to increase their service delivery capabilities.

This is the wedge. It will not be content with just winning in China. China is the first step. capioIT expects a flurry of capital investment over the next ten years as it builds and buys a portfolio. This will follow Chinese investment globally, but if the US gets more difficult, it will be able to leverage EU reliance upon Chinese economic support, and the growth of Asia and emerging markets to drive it forward.

As a result IBM is most vulnerable for the non US based markets. Ironically, the growth market business unit for IBM is centred in Shanghai. A case of know your enemy in clear focus.

Whilst IBM is the clear bench mark and business model clearly every IT service provider is under the risk of disruption from Huawei and other emerging Chinese IT providers. HP and Fujitsu are perhaps the most vulnerable, the likes of Steria and Atos, arguably some of the strongest potential acquisition targets, outside of China, if Huawei was to flow a broader geographic approach to capital outlays.

This leaves Cisco in a position that significantly challenges the significant corporate ego. Whilst they are battling to adjust when competing with Huawei for global primacy, the reality is that Huawei is just testing the skills to become much more than a network legacy provider. Cisco is not used to being a stepping stone on a bigger pathway for a vendor. Expect recent acquisitions to be accelerated for Cisco in order for it to be maintain front runner status for as long as possible.

Bottom line Huawei aspires to being more than a rival to IBM, just as China aspires to being more than the second tier global economy to the USA. No one will sit back so it will be insightful to watch how all parties look to innovate their businesses.

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
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