Huawei Cloud Offers a Differentiated Partner for Telco Transformation, but Geographic Boundaries Remain Challenging

Over the past couple of years, telco operators have recognized the need to pursue more effective strategies to commercialize their underlying network infrastructure. An important part of this is moving from providing infrastructure to delivering value-add Over-the-Top (OTT) services through a process of “digital transformation.” However, achieving this is easier said than done; it requires widespread overhaul of their infrastructure and deploying Cloud Network Functions (CNFs). CNFs provide the technological foundation to deploy services based on 4G/5G network infrastructure by disaggregating the hardware and software of traditional networks. This eliminates the need for having dedicated hardware for each network function, enabling a service that performs network duties in software, resulting in enhanced agility and scalability, which translates into accelerated service deployment for network operators. Partnering with public cloud providers will be an essential step for operators as they can:

• Effectively deploy and manage CNFs to support network service commercialization, e.g., network slicing.
• Drive back-office efficiencies, especially with Operations Support System (OSS)/Business Support System (BSS) operations. Cloud deployment improves the effective management of legacy Information Technology (IT) infrastructure, especially through integrated network automation and continuous integration/development of new software.
• Improve network performance by shifting traffic away from the network backbone.
• Lower service deployment time to market and cost in new regions/markets.
• Reimagine customer engagement through more effective and accessible platforms.
• Bridge internal cloud skill gaps and overcome widespread recruitment challenges.

Telcos are already seeing enormous operational value from deploying CNFs on public cloud platforms. These partnerships are currently dominated by U.S. heavyweights—Amazon Web Services (AWS) with AWS Outpost, Microsoft Azure with Azure Cloud Stack, and Google Cloud Platform (GCP) with Anthos for Operators. However, often overlooked is a fourth player in certain markets (outside of the United States)—Huawei Cloud. ABI Research expects that, moving forward, Huawei Cloud’s value proposition will increasingly resonate with telcos, driven by geographic dominance in emerging regions and deep telecoms expertise.

AWS, Azure, and GCP offer similar (if slightly differentiated) solutions for telcos, but Huawei Cloud offers a strongly differentiated option:

• Networking Expertise: Huawei has a strong foundation in the telecoms industry with core competency in providing telco equipment. The expertise means that Huawei understands “what telcos want from digital transformation” and helps them immediately bridge the large gap between cloud services and telcos. Given the importance of OTT network services in digital transformation, understanding telco network services, as well as their internal legacy infrastructure (OSS/BSS) will be a key differential for Huawei Cloud. It will ensure that platforms, services, technology, and important post-deployment support will be better tailored to telco requirements.
• Differentiated Geographic Presence: Although U.S.-based cloud players are expanding globally, Huawei Cloud already has a mature presence (2,800+ Content Delivery Network (CDN) nodes and 75 availability zones across 29 regions) in emerging (Middle East, Africa, and Asia-Pacific) and developed (Europe and China) regions. Huawei Cloud has dominant position in Africa and Asia-Pacific, as well as a strong position in Europe and Middle East. This will be appealing to regional telcos looking to transform, as well as large European-based players (i.e., Vodafone, Orange Business Services, and Deutsche Telekom) that are looking to expand their customer base across geographic frontiers.
• Service Optionality through Hybrid Cloud Offering: Huawei Cloud provides services to support hybrid cloud (private and public) deployment. Using Cloud Stack, Huawei can support on-premises deployment for mission-critical use cases requiring reliable and fast connectivity. In conjunction, it can deploy back-office applications on its public cloud, which optimizes management costs and improves operational efficiencies. With hybrid cloud deployment and orchestration becoming critically important to telco compliance and performance optimization, Huawei Cloud’s offering will become increasingly valuable, especially in Europe due to data sovereignty laws.

The short answer is: ‘it depends.” Huawei Cloud offers a strongly differentiated value proposition, but it may not be for everyone. The question that all operators need to ask themselves is: “which cloud provider’s infrastructure, service, and (importantly) investment plan aligns most closely with our own?”

The Huawei Cloud and Orange Business Services partnership highlights the importance of strategy alignment between partners. These two partnered to deliver a range of multi-domain services (including public cloud engine, private cloud storage, connectivity, and video conferencing). Huawei Cloud’s mature infrastructure and strong relations in the Middle East & Africa, as well as planned investment in further regional cloud infrastructure, aligned closely with Orange Business Services’ strategy to increase investment in providing digital services across these regions.

However, Huawei Cloud may not be for everyone, as its challenging relationship with the West (led by the United States) will undermine its proposition for certain operators. For one, it is stopping Huawei from deploying cloud infrastructure in certain locations, limiting support for certain geographies. Moreover, this sour relationship impedes access to best-in-class infrastructure (e.g., processors from U.S. fabless firms)—this is becoming increasingly important given the necessity for accelerator deployment to support heterogenous workloads. Lastly, choosing Huawei Cloud for core network deployment remains highly contested due to security concerns. For this reason, Huawei Cloud has failed to gain much traction outside of China for core transformation.

Huawei Cloud may not be for everyone, but it offers a very strong and, importantly, differentiated value proposition versus the U.S. heavyweights, especially for digital services and back-office (OSS/BSS) cloud deployments. ABI Research recommends that operators in and around emerging regions looking to deploy digital services should not “brush aside” Huawei Cloud, as its networking expertise, mature infrastructure, and service optionality could be a significant value driver.