We attended the Huawei Analyst Summit 2018 in Shenzhen, China last week and reported mainly on service provider trends. This week, we highlight some of our observations about Huawei's Enterprise business, specifically, the enterprise business.
The Enterprise Services revenue grew 33% Y/Y in 2017, driven by 56% Y/Y growth in China. The company said it does more enterprise services revenue outside of China, but that China is its largest region. Additionally, the revenue growth seems to be tracking with its overall growth in CSPs (it's services partners), which grew in number by 34% in 2017. The company said that it has historically worked with regional services partners, but it found that in engaging with larger multinational companies, it needed to expand its partner base to include companies that had a presence in all major regions of the world, so in 2017, it signed up with OVS, Arrow and an Asia Pacific company.
The Enterprise Services group plans to increase its subscription services, which today is mainly its SmartNOS offering, which was made available 1-2 years ago. In pursuing this plan, the company is developing automated systems. The company has recently been pursuing expertise in vertical industries and has been selling solutions, instead of just products, it says. In recent years, we have observed this solution selling strategy by Huawei, and it appears to be allowing the company to take share from more product-oriented sales strategies of other vendors in the Europe, Middle East & African geographic theatre.
By and large, the revenue in 2017 from Enterprise services is derived almost exclusively from maintenance revenue on hardware sales, plus SmartNOS, so the company's goals represent a significant pivot from the current way of doing business. This signals a significant change in the way Huawei's Enterprise business plans to approach the market, in our view.