Industry Perspectives

Telco Cloud Transformation
Telco Cloud
Transformation

Huawei Rotating CEO Eric Xu
on enabling telco transformation
By Wang Feng, Chief Writer, Harvard Business Review, China

H
uawei was founded in services reaching almost every corner the company's revenue would soar
1987. In 2011, it began of the globe. In 2015, the company's to US$150 billion by the year 2020.
to expand beyond its sales revenue hit US$60.8 billion (395 While this revenue target is acting
telecom operator business billion yuan), of which 58 percent was as a new spur for increasing efforts
into the enterprise and consumer from outside of China. in Huawei, it also brings with it new
spaces. Since then it has evolved from challenges. Over the past few years,
a telecom equipment vendor into a At the National Science and the telecom industry has come under
leading global provider of information Technology Innovation Conference great pressure, as the fast-growing
and communications technology held in Beijing last May, Huawei OTT industry has chipped away at
(ICT) solutions, with its products and CEO Ren Zhengfei predicted that telecom markets. Threatened telcos

16 2016.12 ISSUE 81

Business Review China (HBR to the telecom industry. and Social. The interview concentrated on a single topic: Eric Xu: The entire telecom industry In early 2016. is under pressure to transform. models of many vertical sectors. have transformed the business installed. What is China) interviewed Eric Xu at the state of the telecom industry Second. Do-it-yourself. cloudification and digitalization. rapid iteration. Harvard and represent a significant shock still not being met. 2016. China. On-demand. services are too expensive and the operations. Its HBR China: Many Internet goal is to help its partners achieve companies born in the cloud have First.12 ISSUE 81 17 . digitalize their appeared over the past decade. These companies month or more just to get a private line All-online. bandwidth. For experience – a Huawei concept that experience and innovate through enterprise customers. which focuses on ICT pressure comes from stakeholders' infrastructure. consumers think that data digital transformation. Internet service providers use 2016. Shenzhen. This strategy positions End user satisfaction demand for a better experience. and deliver a ROADS They deliver a premium user experience is unsatisfactory. it often takes a stands for Real-time. and security are On September 28. This Cloud Strategy. and Huawei as an enabler of both the drives everything from the ecosystem. There are six intelligent world as well as enterprise aspects worth noting. / Telco Cloud Transformation are in dire need of end-to-end digital the company's headquarters in today? transformation. Their needs for connectivity. reliability. Huawei launched its All telco transformation.

The Chinese are resolved. issues. But how can telcos ensure customer everything services. HBR China: What is the key to resolving the key. In the HBR China: What is the key challenge same way. The transformation telecom industry can only become healthy when telcos themselves are healthy. or it lies down and waits for others to send it the way of the dinosaurs.12 ISSUE 81 . the industry can only complete to improving user experience at the its digital transformation once telcos have purchase stage? successfully gone digital. ROI. making payments. investors are struggling due to low first place: finding out about the services. mainly in terms of usage: how users were making phone calls. government is pushing for cheaper telecom place. customer the process of abolishing mobile roaming Once issues around customer satisfaction satisfaction charges within Europe. everything else will fall into are resolved. The EU is in Eric Xu: Customer satisfaction is the key. and so on. Other governments around the satisfaction? The key is a significant else will fall world are trying to find ways to lower prices.Telco Cloud Transformation telecom networks to serve their customers. The ability to deliver a superior Eric Xu: There are only two options: The experience when consumers buy services is industry either takes action to resolve these what sets OTT players apart from telcos. or using Fifth. ROADS: Goal of digital telcos are at the heart of the industry. purchasing. they could consign the entire telecom but they think they're paying too much for industry to the dustbin of history. But customer satisfaction because their fate is tied to that of telcos. Obviously. Once these issues? Third. telcos are having a hard time because growth and profitability across the In the past. This satisfaction is is a global problem. often also depends on their experience with gaining access to those services in the Sixth. improvement in user experience when consumers buy and use services. Fourth. after-sales service requests. The operations systems their users. The situation is urgent: Google and Facebook are trying to Eric Xu: The key challenge lies in whether build entirely new types of networks so as to telcos can engineer user-centric digital bypass telcos and deliver services directly to transformation. Customer bandwidth and data traffic throughput. into place. telecom equipment vendors are suffering the Internet. If this attempt proves successful. governments are trying to cut the issues around prices of telecom services. sending texts. of almost all telcos today serve their 18 2016. telcos focused on experience industry are in a downward spiral. Complicated HBR China: Then what is the way procedures and long waiting periods before forward? a new service is activated make customers lose interest.

between things. technology architecture. is fighting for rapid iteration and Eric Xu: Let's look back at what innovation. Their that are able to offer users a visibility into the end-to-end supply DNA. We believe Honor brand. They've been 2016. they can at least 10 percent. and they've launched systems have been digitalized. There are two long-term value. and ROADS experience throughout process. One is internal: Within to rapidly respond to user needs. experience and the best practices Based on our experience with the HBR China: Why don't Internet of Internet companies. These telcos? companies. and operations systems and launch might take some telcos between people and things. customers. You can even based. Internet companies keep Eric Xu: Ubiquitous connectivity strategies. Huawei Rotating CEO Eric Xu on enabling telco transformation / Telco Cloud Transformation own employees – sales staff and ubiquitous connectivity create for taking a long. and you can gain support Internet products. Even if they copy the way the telecom products and services. We can think deliver immediate improvements in systems are old-fashioned and of ROADS as the goal of digital profitability. This back-end systems aren't integrated. This will greatly reduce they are highly unlikely to succeed. For telcos. Your users can also directly operating models are not Internet- the process of buying and using access your systems. numerous applications to specifically but they're still called "internal IT Eric Xu: First it will help slash compete with these companies. models outdated? the Internet era. and IT HBR China: What does it take to will foster innovation in operating functions. As the company. HBR China: What value will telcos have done. With such a long other side is external connectivity: HBR China: Are telcos' existing time-to-market. where everyone partners." If telcos hope to future. hard look at Internet maintenance engineers. Barriers have transformation. technology-centric. built up between their marketing. a product that takes Internet ubiquitous connections between transformation of companies a few months to develop people. With ubiquitous performed as they hoped. I think go beyond the digitalization of connectivity. telcos can hardly The company must be fully operating models and business stay ahead of the competition in connected to its users. have streamlined their organizations sides to it. we believe ubiquitous products fit well into telcos' that once telcos can deliver the connectivity can reduce OPEX by existing operating models? ROADS experience.12 ISSUE 81 19 . your purchase order the fundamental cause is that technologies and products. will be vital to telcos' digitalization By contrast. there must be Innovation and a result. a resolve all the issues that affect 10 percent reduction in OPEX will Eric Xu: Telcos' organizations and customer satisfaction. experience model based on its own your OPEX and maximize efficiency. connect your IT systems with those Internet companies make products. operating expenditure (OPEX) and But these applications haven't proof their businesses. systems. because it represents their eyes fixed on their users. and their front-end and deliver the ROADS experience? models and business models. Telcos for a supplier will flow directly into their operating models can hardly must become digital enterprises their systems. Huawei has developed the ROADS of partners. and suppliers. ubiquitous connectivity network management. The one or two years. and is the prerequisite. Second. they must boost efficiency.

and technology our customers. the order is transmitted directly to design. to learn from Eric Xu: First. Most telcos are IT architecture to a cloud-based. Cloudification must be agile. Internet public companies. so that telcos can time. and IT systems. Digital transformation autonomous systems to replace human. is ready. An example is our Honor companies. they'll be able to make their long time. When they grow rapidly. They need to overhaul the order online. once the product operations. In users. intelligent by building big data and AI systems that support real-time decision making. and First. 20 2016. Eric Xu: Yes. and suppliers can collaborate involves changes to the organization. architecture. it's shipped directly to the customer. their CEOs get to stay in place for a long intelligent. corporate culture. and operations systems and create a robust this is very unhelpful for a long-term project ecosystem in which telco staff. more efficient. and that will take a connected. After the customer places an approaches architecture. the following three ways. efficiently and openly to share success. operating models of the telecom industry in to our production line and. CEOs are replaced frequently. and packet loss rate. like digital transformation. telcos need to evolve their closed short-term performance. customers. the future. latency. they'll no longer be internal IT Internet Eric Xu: Changing the mindset is important. architecture. But when these companies run into effectively connect their internal and external difficulties. Digitalization partners. they need to shift the focus of their Second. As telcos get better processes. from how users find out HBR China: Is the transformation of about telecom offerings to how they buy operations systems the key part of them and obtain after-sales services. necessitates changes to telcos' organization. telcos' transformation journey? Second. telcos should look to end-to-end user experience.12 ISSUE 81 . Telcos need to learn from Internet production systems. systems or support functions. user experience is often measured solely based Third. how good an operations system is on network performance indicators such as won't be judged by the telco itself. telcos need to introduce real-time. The first roadblock is the conflict between long-term transformation and the need for Third. operated systems. They'll become companies. future operations systems will be technology operations from "network experience" entirely user-oriented and fully open. processes. At present. operations. including their approaches brand: Our online store directly engages with including their to design. and more their digital journey. to "user experience". and culture.Telco Cloud Transformation HBR China: So transforming operating HBR China: What will future operations models is crucial to realizing the ROADS systems look like? Telcos need experience. but by its bandwidth. and open. Telcos face two roadblocks on operations simpler.

We're bringing together players. We don't perform by without transforming themselves. As a result. telcos need the support of efforts will focus on three areas: obstacles external enablers. big bang transformations. there CEOs must commit themselves to edge in new markets such as IoT. Our enablement Eliminating major Second. transforms itself successfully. Usually. Eric Xu: Our All Cloud Strategy. So telcos need external enablers. experience of the first mover. the top down. They started as monopolies and should telcos do? transformation. telcos can continue to get be a partner for any telco that with several telcos. We have the full set of end-to. there are only three preparing the technologies and HBR China: During this or four telcos within a country. We hope to Eric Xu: We're currently working change. expanding telecom networks to include more connections. a company takes at least five to ten they can learn from the lessons and years. and their monopoly mindset and This transformation will not only culture remain unchanged. and most of them their competitors are committed to are our customers. are very few telcos that are willing transformation. they have Eric Xu: There are two key actions to rebuild their telecom equipment. because deliver the ROADS experience. and operations. surmount the obstacles on their the industry's best minds. the development to execution. and cloud. it will also support to put their heart and soul into leadership to drive the initiative from the cloudification of networks transformation. And they become digital enterprises that can skillsets. increasing HBR China: How can telcos Huawei's carrier business has the traffic flow capacity across overcome these two major positioned itself as a driver and telecom networks. expertise that telcos will need. telcos worldwide have generally launched in early 2016. that gradually stepping up investment 2016. and HBR China: What is Huawei's use the knowledge and the pool of enablement roadmap? The second roadblock is resistance workers with new skills that the first from within the organization. needed to overcome these obstacles. and use strong video. This will First. and transforming obstacles? enabler for telcos' strategic operating models to make telcos transformations over the next more competitive against OTT Eric Xu: They'll find it hard to decade. is committed to transformation.12 ISSUE 81 21 . similar organizational structures. Huawei Rotating CEO Eric Xu on enabling telco transformation / Telco Cloud Transformation It may also mean redundancies and others will suddenly realize that they telcos need in order to transform and recruitment of employees with new need to change as well. and operations systems to make telcos more agile. specifically? is changing. networks. is essentially followed a common development HBR China: What specifically an enablement roadmap for telco path. services. from strategy improvements in specific areas. Based on the ROADS have since been split up into several experience model. This deep re-engineering of will be able to move quickly. we make ongoing adjustments and Once one telco takes action and end capabilities. what do you Even if the business environment Globally there are three to four work on. the board of directors and help telcos sharpen their competitive stifle transformation. so long as none of hundred telcos. enablement process. Thus far. we're own. we enable telcos companies. Instead. Most mover has created.

and gradually the complete demonstrable value. and they support solutions which they can simply plug in corporate goals through the adoption 22 2016. telcos can solutions emerge. In just impossible. Telcos should not expect their Fourth. and progressively pick up speed.Telco Cloud Transformation and checking our progress to ensure that and achieve instant transformation. the value and positioning of vendors to be able to immediately spit out a Chief Information Officers (CIOs) should complete set of technologies. value of transformation and close the loop We prefer to test different parts of our by creating value with each change. We don't expect to create complete. corporate culture. This is whatever we're doing is creating value. practice. limited problems. CIOs oversee information architecture. By doing so. no matter how small it is. organizational be redefined. Transformation is difficult. fully-tested solutions by Third. can bring up experience. systems is a long process. and strategic technologies and systems. Huawei is committed to helping our customers step up to the inherent challenges First. telcos should stay focused on the working with just one or two customers. It solutions with different customers. This is must be made clear to everyone that every an ongoing process of learning and building change. create Internet-based operations systems with cloud architecture to deliver a ROADS Second. Together we can use estimate that the process will take at least these solutions to pilot changes and quickly ten years.12 ISSUE 81 . It requires patience. but we scale. the transformation of operations experience. we focus on the following four key and it needs to be conducted one step at a points: time. solutions must primarily address small. adapt them as necessary.

and collaborative partnerships.12 ISSUE 81 23 . collaboration. Eric Xu: Let me explain the meaning of I . the CTO manages networks. CIOs know more production system. They're no longer the directors ecosystem? or managers of IT applications. committed HBR China: Given this change in the role to being an Redefining CIOs of the CIOs. We will be the enabler and preferred partner for enterprise cloudification The second I is Interconnection: CIOs need and digitalization. with the I representing Innovation. Huawei is Interconnection. contribute their weight within the organization. We will stay customer- to enable the interaction between the centric and help all companies and other company and its customers and partners. and the CMO manages marketing. ecosystem players contribute their unique value to a robust ecosystem for All Cloud and The third I is Information: It means CIOs must digital business. and Information. so CIOs need to take on a will Huawei create as a member of its bigger role. Based on what we've openness. what benefits these technologies will bring. their influence on structure. innovation in operating models and business companies have to build strengths within their models. After the to the cloud Why is this necessary? digital transformation. Huawei is committed to being to CIOs: They need to convince CEOs about an enabler of the intelligent world. and operations. and how the has emphasized the building of company should sell products and deliver ecosystems as well as complementary services following the Internet model. about technological changes than other seen. CTO. telcos usually start by merging the CIO collaboration. Eric Xu: The unstoppable rise of digital and even enablers of transformation and business is the key trend. But I think CIOs should become lead the cloudification of the company's IT 3 3 CI Os. and transformation. 3 streamline processes to set up a user-centric promoting The first I is Innovation. HBR China: In recent years. We expand CIOs' duties. must have the ability to help CEOs achieve promoting openness. planners. executives. Therefore. They should become the major drivers. 2016. and shared understand cloud concepts and technologies. what key value knowledge. They have ICT expertise and and CTO roles into a CTIO. how should functions be enabler of the merged? HBR China: You mention the need to intelligent redefine the role of CIOs. the CIO's role is to oversee will actively other executives and managers. This will clearly Eric Xu: Under telcos' existing organizational world. This change poses new challenges ecosystems. Huawei Rotating CEO Eric Xu on enabling telco transformation / Telco Cloud Transformation of IT. and CMO will need to collaborate closely and ecosystem. Huawei success. and they actively contribute to the cloud ecosystem. We will the need for transformation. shared success. architecture. the CIO. Over the CEOs don't necessarily have this level of next five to ten years. what the Internet model is.