FLASH

Huawei Enterprise IT — From Carrier Business to

Enterprise Business
Swapna Subramani

IN THIS FLASH

This IDC Flash provides a brief summary of Huawei's Global Analyst Summit event held on April
21—23, 2015, in Shenzhen, China. It addresses the discussions that took place on future growth
opportunities, pipeline projects, and the vendor's focus on certain sectors, highlighting its vision of
the future ICT landscape and explaining how it plans to adapt to the changing dynamics of IT
spending across the Middle East and Africa (MEA). In particular, it will focus on the performance of
Huawei's Enterprise Business Group.

SITUATION OVERVIEW

On March 31, 2015, Huawei released the results of its 2014 financial performance, with a detailed
breakdown of the performance and strategic growth plans within its three key business groups:
Carrier Business Group, Enterprise Business Group, and Consumer Business Group. The overall
group revenue for 2014 totaled $46.5 billion, an increase of 20.6% from 2013, and the group's net
profit was $4.5 billion, up 32.7% year on year.

From Carrier Business to Enterprise Business

Huawei's Carrier Business Group has been very successful and is now engaged in strategic
partnerships with over 20 carriers worldwide. Over 67% of Huawei's 2014 revenue came from the
Carrier Business Group. The vendor places a high priority on partnering with telecommunications
operators to help facilitate their ICT transformation processes. Huawei offers carriers high network
and connectivity innovation and is capable of facilitating ubiquitous broadband networks that
enable business innovation.

The Enterprise Business Group has grown in importance for the vendor over the past few years
and recorded revenue growth of more than 27% year on year in 2014. Huawei has been investing
a great deal in research and development to drive innovation around hardware, software, and
services and provide an integrated solution to its customers. Huawei aims to leverage its Carrier
Business Group's successes to gain a similar foothold in the enterprise space. The vendor already
has the full range of datacenter component offerings (e.g., servers, storage, and networking). It has
also released its software-defined datacenter offering with the ultimate aim of developing into a
'one-stop' ICT infrastructure vendor with a sizeable cloud footprint. Huawei seeks to grow its
Enterprise Business Group to a $10 billion business by 2019. According to the rotating and acting
CEO, Eric Xu, "If the carrier business is our today, the enterprise business is our tomorrow." The
enthusiasm shown by Huawei's C-level executives at the summit definitely reflected a strong,
strategic growth plan for the Enterprise Business Group.

Datacenter Technologies
In line with the Enterprise Business Group's growth strategies, Huawei has witnessed rampant
growth and success in datacenter technologies. The vendor's Fusion strategy, launched in

May 2015, IDC #CEMA22806

September 2013, integrates computing, storage, networking, virtualization, and datacenter
technologies with its FusionServer, OceanStor, FusionSphere, FusionCube, and FusionCloud
portfolio solutions. The vendor has been very aggressive in IT infrastructure markets worldwide,
and the results have been promising. IDC research shows that Huawei's server revenue grew 74%
in 2014, ranking it 12th among server vendors worldwide, while its external storage revenue grew
86%, putting it in 9th place among storage vendors worldwide. Huawei is very strong in the
networking hardware market; IDC research shows it recorded 44% revenue growth in 2014 and
was among the top five vendors in the Ethernet switch and router markets.

Given these year-on-year successes in the enterprise hardware market, Huawei aims to become a
cloud and integrated infrastructure provider, powering environments that use 3rd Platform
technologies (Big Data analytics, mobility, cloud, and social media).

Enterprise Business Strategy: Partner Enablement

Over 74% of Huawei's revenue comes from its partners. The vendor places a high importance on
enhancing its partner network, believing that this is a key strategy for tapping into the enterprise
segment. The vendor has been able to grow the number and value of its worldwide partners
through strategic collaborations; the number of valued partners (contributing over $8 million)
increased from 25 in 2013 to 43 in 2014. The vendor invests heavily in its partners via a wide range
of initiatives, including market development funds, partner CxO conferences, and training
programs. Huawei also engages in several partner-led events (e.g., end-user conferences and
technical workshops) in order to provide support and enhance partner confidence. For 2015, the
vendor aims not only to increase the number of partners, but also to increase the number of valued
and certified partners.

The Region in Focus: MEA

In 2014, Huawei realized 35% of its revenue from the Europe, the Middle East, and Africa (EMEA)
region. The vendor has been very successful in partnering with key telecommunications operators
in Europe, with ongoing strategic projects helping them to transform into service providers. In the
MEA region, Huawei has enjoyed growing success in the datacenter technologies space. The
vendor has been steadily ramping up its MEA operations, resulting in market share growth in key
technologies. IDC ranks Huawei among the top 10 vendors in MEA for servers and external
storage, and the vendor is showing improvements in both its market share and its ranking position.
The vendor has been particularly successful in the region's telecommunications, banking, and
government sectors, and its goal for 2015 is to initiate strategic alliances with key carriers in the
region by leveraging its success stories with telecommunications operators in Europe. Huawei also
plans to enhance its current partner network in MEA, with a stronger focus on post-sales servicing
(including employee training) in countries that are short on skilled workers.

FUTURE OUTLOOK

Overall, through various interactions with the Huawei team in China, IDC believes that Huawei is in
a strong position, courtesy of its comprehensive range of enterprise product offerings, multiple
success stories in China and Europe, and elaborate and constantly developing partner network.
Most datacenter hardware business in the future will involve integrated systems as the main
hardware component in 2015, and Huawei is well placed in this regard with its Fusion strategy.
However, strong competition from market leaders in the enterprise technology space, coupled with
rapid saturation of enterprise accounts, may prove to be a barrier for Huawei in this particular
region.

©2015 IDC #CEMA22806 2

About IDC
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