THE BLOG
10/10/2011 11:55 am ET Updated Dec 10, 2011

The 'Extraordinary Patience' of Huawei

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Some people who are not 'technology people' might ask, "who or what is a Huawei?"

In Chinese, 华为, Huáwéi means "splendid" or "magnificent." It can also be translated as "China is able."

China is able, indeed.

For a decade or more, American economists, politicians, businesspeople and all Americans, really, have been worrying and sweating out China's new ascendancy in the global marketplace. Some foreshadowed economic disaster for the U. S.; others heralded great economic gains for all nations as a result of China's growth and participation in the world economy. Who's right? Who knows.

What Huawei (pronounced "wa way") is to people who know global technology is a gigantic Chinese corporation increasingly establishing itself in America, and one of the world's largest networking and telecommunications equipment companies. Huawei is also second in the world in sales of mobile telecommunications equipment behind only Ericsson.

Some other intriguing Huawei facts:

**A privately held corporation owned by its employees;

**It has more than 110,000 employees worldwide;

**Approximately 46 percent of its staff are involved in R&D;

**Has 20 R&D institutes around the world;

**Posted $28 billion in 2010 revenue;

**Counts 45 of the top 50 world's largest telecoms as its customers.

Started in 1987 by Ren Zhengfei, a retired major in the People's Liberation Army who joined the Communist Party in 1978, Huawei has always been looked upon suspiciously by the West and even neighbor, India, who refused Huawei's efforts to expand there over "security concerns."

Interestingly, Zhengfei, who's listed by Forbes as the 190th richest person in China -- he should be first -- only owns a measly 1.42 percent of Huawei shares. It is perhaps because of Communist Party mechanics that he only owns this small portion of a company he founded when, theoretically, he should have wealth approaching that of a Gates, Ellison, Buffet or Kamprad. This is what I would call a twisted irony.

However, this dynamic does allow Huawei to operate with a lot of independence (whatever 'independence' can exist in China) as an 'employee-owned company.'

Whatever the history and structuring of Huawei, it is a company that has emerged out of virtually nowhere to threaten giants Ericsson, Nortel, Alcatel and Siemens. Smaller fish like Avaya, Extreme, (Dell) Force 10 wouldn't seem to stand a chance.

Now we go into the 'extraordinary patience' of Huawei and its people. Founded in 1987, Huawei took its sweet time in building and growing that global power and dominance which it wields now. It took more than 10 years until it got its first overseas contract. That takes us to 1997; a short 14 years ago. This period, from 1987 to 1997 is what I would call the 'first growth spurt' and the second is still in full swing.

In the 24 years since Huawei was founded it has exercised extraordinary patience much like Sun Tzu in The Art of War. Adopting the 'laying in wait' mindset of Tzu, Huawei takes their time and methodically waits out market, customer and competitor opportunities. Like a Sphinx resting on its hind legs yet still ready to spring at the slightest movement by prey, Huawei has built its business quietly and whilst doing their research thoroughly before acting.

In 2003, I gave a keynote speech at IDG's CIO conference in Shenzen, China, and, coincidentally, Huawei's world headquarters. The speech I gave excoriated the state of the world's telecommunications industry, a message I'd been trumpeting for several years. The audience, comprised mainly of technology and telecoms executives, was not particularly happy with me and, consequently, didn't rush up to congratulate me after my lambasting of their business.

Only one small group approached me... Huawei executives. I wondered what nastiness they were going to inflict upon me for deriding their customers' industry.

To my utter surprise, they congratulated me and began asking a series of seemingly well calculated questions about my statements that day. These weren't just curious execs interested in a little more information; they were on an 'information mission' related to their business and involving a market they were committed to cracking: America.

As this article asks: "Will Huawei ever break into the U. S. market?"

The answer: They already are.

According to John Roese, Huawei's SVP & GM of Enterprise Business Group, "Huawei has an insatiable interest in learning from their customers." Roese, who was the former Global CTO for Nortel Networks, talks about Huawei as I imagine early Apple employees talked about their technology mission.

When he starts talking about Huawei's 'Single Cloud' product line his eyes light up and he gets animated, "'Single Cloud' is really an obligation Huawei feels to make the carriers stronger. It's hard for them to improve the service, but Huawei helps them cut costs and reduce their pricing to customers. We're in the Cloud business to arm the carriers to build an ICT network."

As far as the U. S. market and their penetration is concerned, Roese says, "We've recently gone into the American consumer handset market where everybody's fighting for the high-end of the market, you know, 'the iPhone killer,' and we already have $1 billion in American handset sales. Total global handset revenue is $5 to 6 billion." One wonders how Huawei is having so much success in a market not only dominated by the iconic iPhone but also, increasingly, the Android phones made most successfully by another Chinese upstart, HTC. They do their homework and are exceptionally patient, that's how.

But Roese has more. "We just went into the U.S. enterprise market two years ago," said Roese. "Last year, in a business that didn't exist for us two years ago, we announced $2 billion in revenue and I project $4 billion next year and $7 billion the following year."

In addition to selling the hardware and infrastructure for the 'Cloud Carriers' which Huawei sees as a central strategic positioning for itself and its varied products moving forward, Roese also spoke of Huawei's strong moves into the 'Smart Grid;' Internet TV, set-top boxes and Internet cars.

Man, these people don't mess around.

When asked about American and other business' worries about the Chinese handling of others' IP, Roese doesn't miss a beat. "Huawei has really invested heavily in our own R&D. We're the 3rd largest producer of IP in the world. We have 20 R&D centers globally which we call 'FutureWay.' We've made a strong commitment at Huawei to learn about and develop our own technologies, functionalities and R&D."

All in all, I'd say Cisco Systems should be afraid. Very afraid.