| Round Table |  |
| Enter The Channel |
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| John Baldwin | | Chris O'Dell | |
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| John Skelton | Rory Sweet | Steve Harris |
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| Round Table |
| (SH) Steve Harris, Sales Director, Huawei |
| (CO) Chris O'Dell, Head of Channel & Distribution Business |
| (JB) John Baldwin, Product Management, Data Services, COLT |
| (RS) Rory Sweet, CEO, Zycko |
| (IH) Ian Hunter, Comms Business Magazine |
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With Huawei set to enter the channel with a range of datacoms products we examine their strategy and ask: will their service and support structures support a disruptive pricing strategy and make Huawei a serious challenger to incumbents?
Huawei is expanding rapidly in the UK, having already outgrown their sizeable HQ in Basingstoke and with an aggressive recruitment plan extending in to 2006, are ready to launch a range of products in to the channel. So what exactly is Huawei's strategy?
SH. We've been in the UK for three years and until recently had focussed on building business with carriers. Now Huawei's supply chain capabilities have been successfully implemented, we were able to re-evaluate strategy and target the enterprise data market. We see a number of challenges with the current supply chain: Nortel and Cisco are cannibalising margin with distributors and support packages are inflexible. The market is characterised by ‘me too' bids by resellers and SI's with business margins being almost at ‘walk away' levels.
Huawei has sought to build a platform
from which we can change this model. We have proved the technology in the testing labs at BT Exact and addressed the supply chain issues that currently have resellers and their customers waiting weeks for delivery from our competitors. We have set up stocks in both the UK and Europe and have supply SLA's in place. Training and accreditation is also in place so with the technology proved and good margins for both the reseller and the distributor we feel Huawei has built the right platform to deliver an enterprise offering.
JS. This is a lot of what one would expect as you are setting out to challenge an incumbent in the market. There are no surprises here and it is difficult to see what specifically is different. Have Huawei talked to resellers to see what they want?
SH. Resellers commented that they are seeing vendor sales people in the channel and that as a result many are losing control of the customer. Often they are only brought in to the sales process at the end of the sales cycle to provide the fulfilment. We looked at the option of employing 150 high touch sales people ourselves but the economics just don't add up. We aim to touch end users in the UK only on a technology level - some 48% of the 30,000 staff at Huawei are in R&D. We do however plan to improve our marketing messages to end users.
JS. Margin erosion is a difficult issue and it is a buyers' market. As regards to current vendor support packages, they are inflexible but more importantly, vendors are not delivering on their SLAs and nor are they listening. Vendors need to focus on customers who need to be certain that solutions are going to work and should they break down then the service element is in place.
JB. We use Huawei products as CPE in managed services applications. They achieved excellent results in lab tests and it is not often that you introduce new products in to run rate services, but their products showed maturity. For enterprises undertaking DIY services, the cost points are good but managed services are not presently under the same price and margin pressures. COLT has some exciting projects in IP over Ethernet and the Huawei architecture delivers the best cost per Mbit. It's exciting because essentially we have a CPE solution being delivered as a managed service. From a service perspective it has been refreshing to see a vendor respond to additional feature requests; Huawei was forthcoming and delivered the new features on time.
RS. From a distribution perspective Huawei represents an exciting opportunity. Resellers are crying out for an alternative to Cisco and the competition is as enormous as the opportunity, however, to make the channel work we need a meaningful accreditation scheme. Whilst at Comstor in the late 90's we helped Cisco build their channel and it was very slick. Today you get the plaque to go on the wall and that seems to be the end point. Resellers need to be shown how to sell properly and support themselves.
JS Doing our own support is crucial for us and the whole supply cycle; resellers can't afford to keep going back to the vendor all the time for help the customer will ask where the resellers value is.
SH. We need a self sufficient channel to make it all work.
IH. What will Zycko be doing to build channel for Huawei?
RS. We have been looking for a complete product range to compete with Cisco and to make the proposition work those new products have to become your main area of focus. We'll have a complete program that will include subsidised training for resellers and a lead generation scheme developed with Huawei. Zycko will be a very focussed distributor for these products and applications.
CO. Huawei is taking a fresh approach to the enterprise market with no historical bias to processes. Huawei's forward thinking and customer alignment enable Huawei to follow customer requirements and develop new policies and procedures to enable more effective routes to market. The main reasons we have chosen to work with Zycko is that they do have focus and are flexible with their reseller offerings and approach to the market. Product leads times will typically be a week from date of order.
SH. Distributors tend to know resellers far better than vendors and we wanted to work with people that understand all elements of the supply chain.
JB. COLT undertakes many pan-European and global VPN projects and lead times to us are highly critical. We have MANs in 32 European cities, with dozens more cities connected to our network and need to have a consistency when it comes to logistical support.
IH. What about Huawei's credibility in the market place?
SH. The recent BT announcement regarding their choice of suppliers for their 21CN project has underpinned our credentials in the market. (Fujitsu and Huawei were chosen in the access domain which will link BT's existing access network with the new 21CN. Ciena and Huawei were chosen in the transmission domain to supply the optical electronics that will convert the signals carried at high capacity over the cables connecting the metro and core nodes.) We now need to go head to head with our competitors. Can we offer a viable alternative to both Cisco and Nortel? Most definitely yes.
JS. Huawei needs to be seen as an attractive alternative. I see a need to differentiate and display an empathy with the customer and what their needs are. It is going to be difficult to break the mould. In many ways it is easy to see why COLT has made the change as carriers are under immense pressure to reduce costs.
JB. I mentioned earlier that managed services are under less pressure however to achieve a 30-40% reduction in CAPEX has been very impressive. We connect thousands of sites each year and are increasing our addressable market via DSL and working outside of our own footprint. We are also introducing a convergence proposition for the SME market this autumn, an integrated package of voice and internet services called COLT Total. We are using Huawei routers plus a voice card and firewall for this new service.
IH. Tell me about your accreditation plans.
CO. The objective of our accreditation scheme is to enable partners to go to market professionally and not create a money making machine for Huawei. A range of accreditation levels will be available from courses run in Basingstoke and this activity will ramp up in the next two quarters. We'll run in house training and courses via selected training partners though Huawei will own the accreditation.
RS. The accreditation process will be core to the Zycko distribution strategy and will be provided to resellers free of charge. We will have teams of technicians to support resellers on network design and will hold their hands throughout the sales process as required. Why will we be providing the courses free? Well we have to be selling product to be viable and we expect the telesales lead generation campaign planned with Huawei will deliver results.
IH. One final question, how will Huawei monitor pricing across the regions?
SH. We have one pricing strategy that is applied across Europe and have the mechanics in place to police it.