'They didn't understand the market' - Channel reacts to Huawei pulling enterprise kit from UK

The Chinese vendor announced this week that it was pulling networking, server and storage kit from the UK market. CRN gauges channel sentiment on the abrupt departure and what it means for resellers

"Huawei is good but nobody uses them," said one channel figure on the news that the Chinese vendor is to pull some products from its enterprise range from UK shelves.

The networking giant will stop taking all orders on the affected products - understood to include networking, storage and server gear - by 31 December 2020, though it would continue to provide support and maintenance to existing customers for the life cycle of its products, a spokesperson told CRN.

Exertis is one of the biggest distributors of Huawei's enterprise kit in the UK, and James Ward, MD of its Enterprise unit, said that it would continue to adapt to changes like these to ensure its customers' needs are met.

"Huawei is a significant partner for Exertis and as its product strategy evolves over time, we will continue to adapt and support the brand in every way we can to continue driving growth and success for our partnership," he said in a statement to CRN.

"We are also in full communication with our customers about these changes, and are ready to adapt to the situation with replacement solutions where necessary."

Rob Quickenden, chief strategy officer at Cisco Gold partner Cisilion, told CRN that he never saw Huawei as a "big competitor" in the UK enterprise market.

Huawei's main issue is that it doesn't understand the UK or EMEA markets in the same way its rivals do, Quickenden added, noting that those large firms have established operations in countries around Europe, which allows them to understand the differences in each market.

"They just don't really understand the UK or EMEA markets, they don't have a lot of presence over here really as a business function," Quickenden elaborated.

"I don't think Huawei understands enough about how the local countries that they work with are and how they differ from others and that has a massive impact.

"Cisco and HPE and the rest do so well because although they're not UK companies, they operate properly in the UK and have UK subsidiaries, and therefore understand the channel and what the customers want."

Marc Chang, CEO of networking and infrastructure firm Block Solutions, said that he had noticed Huawei's servers and storage becoming popular in the NHS, which now presents an opportunity for its rivals and their partners to zone in on.

Ultimately, it was working in a very competitive environment as the pandemic saw many organisations of all sizes look at the cloud as an alternative to on-prem infrastructure, he said.

"Within the datacentre, they were probably swimming against the tide of the movement to hyper scale - which I think not only Huawei, but all on-premise providers will be challenged with, from Cisco to HPE to Dell," he said.

"The movement to make the cloud people's datacentres - you can see it happened significantly outside of public sector - and the flexibility and adaptability that you get from the cloud has really been proven over the last six months."

The writing on the wall

Part of the decision to pull products from the UK was due to mounting pressure from US president Donald Trump, the vendor conceded, adding that it wasn't the only factor at play.

Canalys analyst Alastair Edwards pondered over this reasoning, particularly after the Chinese vendor made so many commitments in recent years to invest in the UK.

"It's a major decision given the level of resource and investment Huawei has put into the UK, and the scale of its original ambitions, and reflects the level of political and market pressure it faces," he mused.

"Of course it has implications for some of its partners that have placed bets on Huawei, including for distributors Arrow ECS and Exertis - although I believe the level of business for Arrow ECS, in particular, is already relatively small. But it's perhaps not too surprising either."

Echoing Quickenden's comments, Edwards added that its reputation had already taken a hammering from the negative headlines alleging it was acting as a spy for the Chinese government and that this mistrust from politicians has filtered down to end users.

"We've been saying as an industry for some time now that the brand of the infrastructure becomes less important, as it becomes more about what is delivered on top of that infrastructure," he explained.

"I think Huawei sought to capitalise on that a little bit and had come in with a price-competitive proposition. But what this is showing is that brand does matter, and customers are making decisions based on the level of the perceived risk of investing with a particular brand."

What does this sudden pullout from the UK mean for Huawei partners, who had been countering these customer concerns and working hard to show that the company was worthy of their trust?

"A few years ago there was a sense of optimism that actually Huawei had something to offer, that the technology was on a par with the incumbents and the partners were investing," Edwards said.

"I can think of quite a few partners that were really keen to invest heavily with Huawei and build out that business.

"Now some of those partners have certainly scaled back their investment; they've probably seen the writing's on the wall. It's probably not a surprise to them that this is the decision, given the challenges the company faces."

The analyst is unconvinced that this marks the end of Huawei's enterprise efforts in the UK, but that it might herald a warning for its partners elsewhere in Europe.

However, Huawei still has a lot of growth opportunities outside of Western Europe, and it would make more sense for it to focus on these emerging growth markets than fighting geopolitical challenges in Europe and North America, he added.

"These things tend to go in cycles, so I'm not convinced that will this will be the end of Huawei's long term ambitions in the UK," he said.

"The question is, what will this mean for other countries? It creates even bigger issues for them. But there is still a pretty big untapped opportunity for them in the Middle East, Africa and parts of central Eastern Europe and Russia.

"That makes more sense than trying to fight against a restrictive political regime in the UK."