Huawei Invests More in Software for Telecom Operators

Huawei may be best known for its telecommunications equipment, but to stay competitive the company is investing more in software and services for telecom operators.

Huawei unveiled its latest initiative on Monday, an apps store that is offered as a hosted service to operators who don't want to invest the time and money to build their own. Called the Digital Shopping Mall, it offers a library of videos, music, e-books and 80,000 mobile applications, the company says.

Telecom companies are battling declining profits as they upgrade their networks to handle greater volumes of traffic, said Ron Raffensperger, Huawei's director of core network marketing. To reverse the trend, telecom operators need to offset those costs and find ways to generate more revenue from their users.

"We can't expect the technology to save us. We are going to have to get more creative," he said. "We believe the operators need to build a new business model."

When it comes to business models, app stores are one of the hottest bets among carriers today for future money makers. With Huawei's new store, the carriers will get 30 percent of the profits, the company said.

The Digital Shopping Mall is meant to be delivered under the carrier's brand and comes in the form of a downloadable mobile app, as well as an Internet site. It features social-networking functions and users can sync the app with their Facebook or MySpace account, as well as blog and send emails.

Telecom operators realize the importance of app stores, said Duncan Clark, chairman at Beijing-based technology consultancy BDA. Either they embrace the idea or risk missing out on a potential revenue stream, he said.

But Huawei's Digital Shopping Mall comes as other app stores, like Apple's iTunes and the Android Market, have exploded in popularity. In Huawei's home market, China Mobile, the country's largest carrier with 554 million users, has its own app store, which it launched last year.

While the Digital Shopping Mall's technology is impressive, it's questionable if telecom operators will want to sign up for the platform, said Dimitris Mavrakis, a senior analyst with Informa Telecoms & Media. Major operators may prefer to focus on their own platforms.

Huawei has said the Digital Shopping Mall is intended to complement, rather than compete with, other app stores already on the market.

"Huawei is joining a growing party," which will give app developers one more new platform to work with, said David Wolf, CEO of Wolf Group Asia, a Beijing-based technology consultancy. But even as Huawei invests more in its software division, the company is still "fundamentally a hardware company," Wolf said.

"I think their momentum globally is with hardware," he said. "For software services, it's a long road. Domestically, they have to dominate before they can see more significant progress in software services."

Huawei, however, is confident its software solutions will take off.

"We are less an expert on computing techniques," Raffensperger said. "That's one of the challenges that is part of the learning curve."

But Huawei believes it has its advantages as well. The company benefits from providing lower cost solutions through its economies of scale. Raffensperger also noted that Huawei works to customize products that include the software for each carrier

Currently Huawei has 95,000 employees, and has already created software products and services for 426 operators across the world, the company says.

"The software part of Huawei has been growing very quickly," Raffensperger said. "We feel like we can provide the operators with the kind of quality, the kind of security, and the kinds of services they can use to help differentiate themselves from other top operators."

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