Monthly Archives: December 2011

Dell’s Bid for Data-Center Distinction

Since Dell’s acquisition of Force10 Networks, many of us have wondered how Dell’s networking business, under the leadership of former Cisco Systems executive Dario Zamarian, would chart a course of distinction in data-center networking.

While Zamarian has talked about adding Layer 4-7 network services, presumably through acquisition, what about the bigger picture? We’ve pondered that question, and some have asked it, including one gentleman who posed the query on the blog of Brad Hedlund, another former Ciscoite now at Dell.

Data Center’s Big Picture

The question surfaced in a string of comments that followed Hedlund’s perceptive analysis of Embrane’s recent Heleos unveiling. Specifically, the commenter asked Hedlund to elucidate Dell’s strategic vision in data-center networking. He wanted Hedlund to provide an exposition on how Dell intended to differentiate itself from the likes of Cisco’s UCS/Nexus, Juniper’s QFabric, and Brocade’s VCS.

I quote Hedlund’s response:

 “This may not be the answer you are looking for right now, but .. Consider for a moment that the examples you cite; Cisco UCS/Nexus; Juniper QFabric; Brocade VCS — all are either network only or network centric strategies. Think about that for a second. Take your network hat off for just a minute and consider the data center as a whole. Is the network at the center of the data center universe? Or is network the piece that facilitates the convergence of compute and storage? Is the physical data center network trending toward a feature/performance discussion, or price/performance?

Yes, Dell now has a Tier 1 data center network offering with Force10. And with Force10, Dell can (and will) win in network only conversations. Now consider for a moment what Dell represents as a whole .. a total IT solutions provider of Compute, Storage, Network, Services, and Software. And now consider Dell’s heritage ofproviding solutions that are open, capable, and affordable.”

Compare and Contrast

It’s a fair enough answer. By reframing the relevant context to encompass the data center in its entirety, rather than just the network infrastructure, Dell can offer an expansive value-based, one-stop narrative that its rivals — at least those cited by the questioner —  cannot match on their own.

Let’s consider Cisco. For all its work with EMC/VMware and NetApp on Vblocks and FlexPods, respectively, Cisco does not provide its own storage technologies for converged infrastructure. Juniper and Brocade are pure networking vendors, dependent on partners for storage, compute, and complementary software and services.

HP, though not cited by the commenter in his question, is one Dell rival that can offer the same pitch. Like Dell, HP offers data-center compute, storage, networking, software, and services. It’s true, though, that HP also resells networking gear, notably Brocade’s Fibre Channel storage-networking switches. The same, of course, applies to Dell, which also continues to resell Brocade’s Fibre Channel switches and maintains — at least for now — a nominal relationship with Juniper.

IBM also warrants mention. Its home-grown networking portfolio is restricted to the range of products it obtained through its acquisition of Blade Network Technologies last year. Like HP, but to a greater degree, IBM resells and OEMs networking gear from other vendors, including Brocade and Juniper. It also OEMs some of its storage portfolio from NetApp, but it also has a growing stable of orchestration and management software, and it definitely has a prodigious services army.

Full-Course Fare 

Caveats aside, Dell can tell a reasonably credible story about its ability to address the full range of data-center requirements. Dell’s success with that strategy will depend not only its sales execution, but also on its capacity to continually deliver high-quality solutions across the gamut of compute, storage, networking, software, and services. Offering a moderately tasty data-center repast won’t be good enough.  If Dell wants customers to patronize it and return for more, it must deliver a savory menu spanning every course of the meal.

To his credit, Hedlund acknowledges that Dell must be “capable.” He also notes that Dell must  be open and affordable. To be sure, Dell doesn’t have the data-center brand equity to extract the proprietary entitlements derived from vendor lock-in, certainly not in the networking sphere, where even Cisco is finding that game to be harder work these days.

Dell, HP, and IBM each might be able to craft a single-vendor narrative that spans the entire data center, but the cogency of those pitches are only as credible as the solutions the vendors deliver. For many customers, a multivendor infrastructure, especially in a truly interoperable standards-based world, might be preferable to a soup-to-nuts solution from a single vendor. That’s particularly true if the single-vendor alternative has glaring deficiencies and weaknesses, or if it comes with perpetual proprietary overhead and constraints.

Still Early

I think the real differentiation isn’t so much in whether data-center solutions are delivered by a single vendor or by multiple vendors. I suspect the meaningful differentiation will be delivered in how those environments are further virtualized, automated, orchestrated, and managed as coherent unified entities.

Dell has bought itself a seat at the table where that high-stakes game will unfold. But it isn’t alone, and the big cards have yet to be played.

Reflecting on the Big Acquisition Cisco Didn’t Make

It has been nearly eight years since EMC acquired VMware. The acquisition announcement went over the newswires on December 15, 2003. EMC paid approximately $635 million for VMware, and Joe Tucci, EMC’s president and CEO, had this to say about the deal:

“Customers want help simplifying the management of their IT infrastructures. This is more than a storage challenge. Until now, server and storage virtualization have existed as disparate entities. Today, EMC is accelerating the convergence of these two worlds .“

“We’ve been working with the talented VMware team for some time now, and we understand why they are considered one of the hottest technology companies anywhere. With the resources and commitment of EMC behind VMware’s leading server virtualization technologies and the partnerships that help bring these technologies to market, we look forward to a prosperous future together.”

Virtualization Goldmine

Oh, the future was prosperous . . . and then some. It’s a deal that worked out hugely in EMC’s favor. Even though the storage behemoth has spun out VMware in the interim, allowing it to go public, EMC still retains more than 80 percent ownership of its virtualization goldmine.

Consider that EMC paid just $635 million in 2003 to buy the server-virtualization market leader. VMware’s current market capitalization is more than $38 billion. That means EMC’s stake in VMware is worth more than $30 billion, not including the gains it reaped when it took VMware public. I don’t think it’s hyperbolic to suggest that EMC’s purchase of VMware will be remembered as Tucci’s defining moment as EMC chieftain.

Now, let’s consider another vendor that had an opportunity to acquire VMware back in 2003.

Massive Market Cap, Industry Dominance

A few years earlier, at the pinnacle of the dot-com boom in March 2000, Cisco was the most valuable company in the world, sporting a market capitalization of more than US$500 billion.  It was a networking colossus that bestrode the globe, dominating its realm of the industry as much as any other technology company during any other period. (Its only peers in that regard were IBM in the mainframe era and Microsoft and Intel in the client-server epoch.)

Although Juniper Networks brought its first router to market in the fall of 1998 and began to challenge Cisco for routing patronage at many carriers early in the first decade of the new millennium, Cisco remained relatively unscathed in enterprise networking, where its Catalyst switches grew into a multibillion-dollar franchise after it saw off competitive challenges in the late 90s from companies such as 3Com, Cabletron, Nortel, and others.

As was its wont since its first acquisition, involving Crescendo Communications in 1993, Cisco remained an active buyer of technology companies. It bought companies to inorganically fortify its technological innovation, and to preclude competitors from gaining footholds among its expanding installed base of customers.

Non-Buyer’s Remorse?

It’s true that the post-boom dot-com bust cooled Cisco’s acquisitive ardor. Nonetheless, the networking giant made nine acquisitions from May 2002 through to the end of 2003. The companies Cisco acquired in that span included Hammerhead Networks, Navarro Networks, AYR Networks, Andiamo Systems, Psionic Software, Okena, SignalWorks, Linksys, and Latitude Communications.

The biggest acquisition in that period involved spin-in play Andiamo Systems, which provided the technological foundation for Cisco’s subsequent push to dominate storage networking. Cisco was at risk of paying as much as $2.5 billion for Andiamo, but the actual price tag for that convoluted spin-in transaction was closer to $750 million by the time it finally closed in 2004. The next-biggest Cisco acquisition during that period involved home-networking vendor Linksys, for which Cisco paid about $500 million.

Cisco announced the acquisitions of Hammerhead Networks and Navarro Networks in a single press release. Hammerhead, for which Cisco exchanged common stock valued at up to $173 million, developed software that accelerated the delivery of IP-based billing, security, and QoS; the company was folded into the Cable Business Unit in Cisco’s Network Edge and Aggregation Routing Group. Navarro Networks, for which Cisco exchanged common stock valued at up to $85 million, designed ASIC components for Ethernet switching.

To acquire AYR Networks, a vendor of “high-performance distributed networking services and highly scalable routing software technologies,” Cisco parted with about $113 million in common stock. AYR’s technology was intended to augment Cisco’s IOS software.

Andiamo Factor

Although the facts probably are familiar to many readers, Cisco’s acquisition of Andiamo was noteworthy for several reasons.  It was a spin-in acquisition, in which Cisco funded the company to go off and develop technology on its own, only later to be brought back in-house through acquisition. Andiamo was led by its CEO Buck Gee, and it included a core group of engineers who also were at Cresendo Communications.  The concept and execution of the spin-in move at Cisco was highly controversial within the company, seen as operationally and strategically innovative by many senior executives even though others claimed it engendered envy, invidious, and resentment among rank-and-file employees.

No matter, Andiamo was meant to provide market leadership for Cisco in the IP-based storage networking and to give Cisco a means of battering Brocade in Fibre Channel. That plan hasn’t come to fruition, with Brocade still leading in a tenacious Fibre Channel market and Cisco banking on Fibre Channel over Ethernet (FCoE) to go from the edge to the core. (The future of storage networking, including the often entertaining Fiber Channel-versus-FCoE debates, are another matter, and not within the purview of this post.)

While we’re on the topic of Andiamo, its former engineers continue to make news. Just this week, former Andiamo engineers Dante Malagrinò and Marco Di Benedetto officially launched Embrane, a company that is committed to delivering a platform for virtualized L4-7 network services at large cloud service providers. Those two gentlemen also were involved in Cisco last big spin-in move, Nuova Systems, which provided the foundation for Cisco’s Unified Computing Systems (UCS).

As for Cisco’s post-Andiamo acquisition announcements in 2002, Okena and Psionic both were involved in intrusion-detection technology. Of the two, Okena represented the larger transaction, valued at about $154 million in stock.

Interestingly, not much is available publicly these days regarding Cisco’s announced acquisition of SignalWorks in March of 2003. If you visit the CrunchBase profile for SignalWorks and click on a link that is supposed to take you to a Cisco press release announcing the deal, you’ll get a “Not Found” message. A search of the Cisco website turns up two press releases — relating to financial results in Cisco’s third and fourth quarters of fiscal year 2003, respectively — that obliquely mention the SignalWorks acquisition. The purchase price of the IP-audio company was about $16 million. CNet also covered the acquisition when it first came to light.

Other Strategic Priorities

Cisco’s last announced acquisitions in that timeframe involved home-networking player Linksys, part of Cisco’s ultimately underachieving bid to become a major player in the consumer space, and web-conferencing vendor Latitude Communications.

And now we get the crux of this post. Cisco announced a number of acquisitions in 2002 and 2003, but it was one they didn’t make that reverberates to this day. It was a watershed acquisition, a strategic masterstroke, but it was made by EMC, not by Cisco. As I said, the implications resound through to this day and probably will continue to ramify for years to come.

Some might contend that Cisco perhaps didn’t grasp the long-term significance of virtualization. Apparently, though, some at Cisco were clamoring for the company to buy VMware.  The missed opportunity wasn’t attributable to Cisco failing to see the importance of virtualization — some at Cisco had the prescience to see where the technology would lead — but because an acquisition of VMware wasn’t considered as high a priority as the spin-in of Andiamo for storage networking and the acquisition of Linksys for home networking.

Cisco placed its bets elsewhere, perhaps thinking that it had more time to develop a coherent and comprehensive strategy for virtualization. Then EMC made its move.

Missed the Big Chance

To this day, in my view, Cisco is paying an exorbitant opportunity cost for failing to take VMware off the market, leaving it for EMC and ultimately allowing the storage leader, yeas later, to gain the upper hand in the Virtual Computing Environment (VCE) Company joint venture that delivers UCS-encompassing VBlocks. There’s a rich irony there, too, when one considers that Cisco’s UCS contribution to the VBlock package is represented by technology derived from spin-in Nuova.

But forget about VCE and VBlocks. What about the bigger picture? Although Cisco likes to talk itself up as a leader in virtualization, it’s not nearly as prominent or dominant as it might have been. Is there anybody who would argue that Cisco, if it had acquired and then integrated and assimilated VMware as half as well as it digested Crescendo, wouldn’t have absolutely thrashed all comers in converged data-center infrastructure and cloud infrastructure?

Cisco belatedly recognized its error of omission, but it was too late. By 2009, EMC was not interested in selling its majority stake in VMware to Cisco, and Cisco was in no position to try to obtain it through an acquisition of EMC. In that regard, Cisco’s position has only worsened.

Although EMC’s ownership stake in VMware amounts to about 80 percent (or perhaps even just north of that amount), its has 98 percent of the voting shares in the company, which effectively means EMC steers the ship, regardless of public pronouncements VMware executives might issue regarding their firm being an autonomous corporate entity.

Keeping Cisco Interested but Contained 

Conversely, Cisco owns approximately five percent of VMware’s Class A shares, but none of its Class B shares, and it held just one percent of voting power as of March 2011.  As of that same date, EMC owned all of VMware’s 330,000,000 Class B Shares and 33,066,050 of its 118,462,369 shares of Class A common shares. Cisco has a stake in VMware, but it’s a small one and it has it at the pleasure of EMC, whose objective is to keep Cisco sufficiently interested so as not to pursue other strategic options in data-center virtualization and cloud infrastructure.

The EMC gambit has worked, up to the point. But Cisco, which missed its big chance  in 2003, has been trying ever since then to reassert its authority. Nuova, and all that flowed from it, was Cisco’s first attempt to regain lost ground, and now it is partnering, to varying degrees, with VMware and EMC competitors such as NetApp, Citrix, and Microsoft. It also has gotten involved involved with OpenStack and the oVirt Project in a bid to hedge its virtualization bets.

Yes, some of those moves are indicative of coopetition, and Cisco retains its occasionally strained VCE joint venture with EMC and VMware, but Cisco clearly is playing for time, looking for a way to redefine the rules of the game.

What Cisco is trying to do is break an impasse of its own making, a result of strategic choices it made nearly a decade ago.

Embrane Emerges from Stealth, Brings Heleos to Light

I had planned to write about something else today — and I still might get around to it — but then Embrane came out of stealth mode. I feel compelled to comment, partly because I have written about the company previously, but also because what Embrane is doing deserves notice.

Embrane’s Heleos

With regard to aforementioned previous post, which dealt with Dell acquisition candidates in Layer 4-7 network services, I am now persuaded that Dell is more likely to pull the trigger on a deal for an A10 Networks, let’s say, than it is to take a more forward-looking leap at venture-funded Embrane. That’s because I now know about Embrane’s technology, product positioning, and strategic direction, and also because I strongly suspect that Dell is looking for a purchase that will provide more immediate payback within its installed base and current strategic orientation.

Still, let’s put Dell aside for now and focus exclusively on Embrane.

The company’s founders, former Andiamo-Cisco lads Dante Malagrinò and Marco Di Benedetto, have taken their company out of the shadows and into the light with their announcement of Heleos, which Embrane calls “the industry’s first distributed software platform for virtualizing layer 4-7 network services.” What that means, according to Embrane, is that cloud service providers (CSPs) and enterprises can use Heleos to build more agile networks to deliver cloud-based infrastructure as a service (IaaS). I can perhaps see the qualified utility of Heleos for the former, but I think the applicability and value for the latter constituency is more tenuous.

Three Wise Men

But I am getting ahead of myself, putting the proverbial cart before the horse. So let’s take a step back and consult some learned minds (including  an”ethereal” one) on what Heleos is, how it works, what it does, and where and how it might confer value.

Since the Embrane announcement hit the newswires, I have read expositions on the company and its new product from The 451 Group’s Eric Hanselman, from rock-climbing Ivan Pepelnjak (technical director at NIL Data Communications), and from EtherealMind’s Greg Ferro.  Each has provided valuable insight and analysis. If you’re interested in learning about Embrane and Heleos, I encourage you to read what they’ve written on the subject. (Only one of Hanselman’s two The 451 Group pieces is available publicly online at no charge).

Pepelnjak provides an exemplary technical description and overview of Heleos. He sets out the problem it’s trying to solve, considers the pros and cons of the alternative solutions (hardware appliances and virtual appliances), expertly explores Embrane’s architecture, examines use cases, and concludes with a tidy summary. He ultimately takes a positive view of Heleos, depicting Embrane’s architecture as “one of the best proposed solutions” he’s seen hitherto for scalable virtual appliances in public and private cloud environments.

Limited Upside

Ferro reaches a different conclusion, but not before setting the context and providing a compelling description of what Embrane does. After considering Heleos, Ferro ascertains that its management of IP flows equates to “flow balancing as a form of load balancing.” From all that I’ve read and heard, it seems an apt classification. He also notes that Embrane, while using flow management, is not an “OpenFlow/SDN business. Although I see conceptual similarities between what Embrane is doing and what OpenFlow does, I agree with Ferro, if only because, as I understand it, OpenFlow reaches no higher than the network layer. I suppose the same is true for SDN, but this is where ambiguity enters the frame.

Even as I wrote this piece, there was a kerfuffle on Twitter as to whether or to what extent Embrane’s Heleos can be categorized as the latest manifestation of SDN. (Hours later, at post time, this vigorous exchange of views continues.)

That’s an interesting debate — and I’m sure it will continue — but I’m most intrigued by the business and market implications of what Embrane has delivered. On that score, Ferro sees Embrane’s platform play as having limited upside, restricted to large cloud-service providers with commensurately large data centers. He concludes there’s not much here for enterprises, a view with which I concur.

Competitive Considerations

Hanselman covers some of the same ground that Ferro and Pepelnjak traverse, but he also expends some effort examining the competitive landscape that Embrane is entering. In that Embrane is delivering a virtualization platform for network services, that it will be up against Layer 4-7 stalwarts such as F5 Networks, A10 Networks, Riverbed/Zeus, Radware, Brocade, Citrix, Cisco, among others. F5, the market leader, already recognizes and is acting upon some of the market and technology drivers that doubtless inspired the team that brought Heleos to fruition.

With that in mind, I wish to consider Embrane’s business prospects.

Embrane closed a Series B round of $18 million in August. It was lead by New Enterprise Associates and included the involvement of Lightspeed Venture Partners and North Bridge Venture Partners, both of whom participated in a $9-million series A round in March 2010.

To determine whether Embrane is a good horse to back (hmm, what’s with the horse metaphors today?), one has to consider the applicability of its technology to its addressable market — very large cloud-service providers — and then also project its likelihood of providing a solution that is preferable and superior to alternative approaches and competitors.

Counting the Caveats

While I tend to agree with those who believe Embrane will find favor with at least some large cloud-service providers, I wonder how much favor there is to find. There are three compelling caveats to Embrane’s commercial success:

  1. L4-7 network services, while vitally important cloud service providers and large enterprises, represent a much smaller market than L2-L3 networking, virtualized or otherwise. Just as a benchmark, Dell’Oro reported earlier this year that the L2-3 Ethernet Switch market would be worth approximately $25 billion in 2015, with the L4-7 application delivery controller (ADC) market expected to reach more than $1.5 billion, though the virtual-appliance segment is expected show most growth in that space. Some will say, accurately, that L4-7 network services are growing faster than L2-3 networking. Even so, the gap is size remains notable, which is why SDN and OpenFlow have been drawing so much attention in an increasingly virtualized and “cloudified” world.
  2. Embrane’s focus on large-scale cloud service providers, and not on enterprises (despite what’s stated in the press release), while rational and perfectly understandable, further circumscribes its addressable market.
  3. F5 Networks is a tough competitor, more agile and focused than a Cisco Systems, and will not easily concede customers or market share to a newcomer. Embrane might have to pick up scraps that fall to the floor rather than feasting at the head table. At this point, I don’t think F5 is concerned about Embrane, though that could change if Embrane can use NaviSite — its first customer, now owned by TimeWarner Cable — as a reference account and validator for further business among cloud service providers.

Notwithstanding those reservations, I look forward to seeing more of Embrane as we head into 2012. The company has brought a creative approach and innovation platform architecture to market, a higher-layer counterpart and analog to what’s happening further down the stack with SDN and OpenFlow.

BMC Still Likelier to Buy than to be Bought

After reading a recent Network Computing piece on BMC Software, it struck me that the management-software purveyor finds itself in a Darwinian dilemma: acquire or be acquired.

If it chooses to acquire, something to which it has not been averse previously, BMC might wish to make a play in enterprise mobility management (EMM) or mobile device management (MDM). As the article at Network Computing explains, that is a current area of need for BMC.  There’s no shortage of fish in that pond, and BMC is likely to find one at the right price.

Conversely, BMC might decide that it can’t compete in the long run with much bigger systems-management rivals such as IBM, HP, Microsoft, and Oracle. Even as BMC continues its transition toward defining itself as a multiplatform, hardware-neutral cloud-management vendor, it might conclude that the odds and resources stacked against are too great to overcome.

Dell Could Come Knocking

That, though, is by no means inevitable. The company has been independent for a long time — about 31 years, if we’re counting — and it has been subject to almost as many takeover rumors in the last few years as has F5 Networks. Still, like F5, it remains an independent company, and it might continue to do so indefinitely.

Nonetheless, if BMC finally chose to entertain a buyer, Dell might be at the front of the queue. Yes, we know that Dell is shopping for other goods — Dario Zamarian, Dell’s networking GM and SVP, has suggested that a purchase in L4-L7 network services might be forthcoming — and BMC’s price tag might be a bit steep (its market capitalization is about $6 billion).

Then again, Dell sees itself as an up-and-coming player in converged data-center infrastructure, and BMC offers management-software capabilities that Dell might need if it is to weave a compelling cloud-management narrative.

Intangibles and Existing Partnership

As for intangibles, Dell and BMC are very familiar with one another. The companies have partnered since 2002, working to accelerate IT deployment and configuration in a growing number of data centers. Dell has been a BMC customer for many years, too. Last and least, they’re both Texas-based companies.

The current arrangement between the two companies involves integration of Dell’s Advanced Infrastructure Manager (AIM) with BMC’s Atrium Orchestrator. It also encompasses BMC Asset Management as well as integration between BMC Server Automation (part of the BMC BladeLogic Automation Suite) and the Dell Lifecycle Controller.

If Dell were to acquire BMC, it obviously would want to squeeze more from the marriage. One possible scenario would involve Dell recreating and expanding upon the sort of engagement BMC has with Cisco pertaining to the latter’s Unified Computing System (UCS).

Congruent Messages

In this case, though, BMC’s software would be wedded to Dell’s evolving Virtual Integrated System (VIS). A lot of the marketing language Dell uses on its website is uncannily similar to the sort of pitch BMC makes for its cloud-management software. Both companies talk about automating and simplifying data-center environments, they both emphasize management of physical and virtual infrastructure, and they both stress the openness of their respective architectures, especially the ability to manage multiplatform (and multivendor) hardware and software.

In selling itself to Dell, though, BMC would be walking away from its relationship with Cisco, and its partnerships with some others, too. What’s more, Dell would assume ownership of some parts of the BMC business, such as mainframe-management software, that might not seem a great fit, at least at first glance.  Still, a Dell-BMC combination seems more plausible than fanciful.

If I were to wager on whether BMC will buy or be bought, though, it’s probably easier to imagine it buying an EMM or MDM vendor than to envision it getting scooped up at a potentially considerable premium by Dell (or another vendor). Even so, either outcome is within the realm of rational deduction.

U.S. National-Security Concerns Cast Pall over Huawei

As 2011 draws to a close, Huawei faces some difficult questions about its business prospects in the United States.  The company is expanding worldwide into enterprise networking and mobile devices, such as smartphones and tablets, even as it continues to grow its global telecommunications-equipment franchise.

Huawei is a company that generated 2010 revenue of about $28 billion, and it has an enviable growth profile for a firm of its size. But a dark cloud of suspicion continues to hang over it in the U.S. market, where it has not made headway commensurate with its success in other parts of the world. (As its Wikipedia entry states, Huawei’s products and services have been deployed in more than 140 countries, and it serves 45 of the world’s 50 largest telcos. None of those telcos are in the U.S.)

History of Suspicion

The reason it has not prospered in the U.S. is at primarily attributable to persistent government concerns about Huawei’s alleged involvement in cyber espionage as a reputed proxy for China. At this point, I will point out that none of the charges has been proven, and that any evidence against the company has been kept classified by U.S. intelligence agencies.

Nonetheless, innuendo and suspicions persist, and they inhibit Huawei’s ability to serve customers and grow revenue in the U.S. market. In the recent past, the U.S. government has admonished American carriers, including Sprint Nextel, not to buy Huawei’s telecommunications equipment on national-security concerns. On the same grounds, U.S. government agencies prevented Huawei from acquiring ownership stakes in U.S.-based companies such as 3Com, subsequently acquired by HP, and 3Leaf Systems. Moreover, Huawei was barred recently from participating in a nationwide emergency network, again for reasons of national security.

Through it all, Huawei has asserted that it has nothing to hide, that it operates no differently from its competitors and peers in the marketplace, and that it has no intelligence-gathering remit from the China or any other national government. Huawei even has welcomed an investigation by US authorities, saying that it wants to put the espionage charges behind it once and for all.

Investigation Welcomed

Well, it appears Huawei, among others, will be formally investigated, but it also seems the imbroglio with the U.S. authorities might continue for some time. We learned in November that the U.S. House Permanent Select Committee on Intelligence would investigate potential security threats posed by some foreign companies, Huawei included.

In making the announcement relating to the investigation, U.S. Representative Mike Rogers, a Michigan Republican and the committee’s chairman, said China has increased its cyber espionage in the United States. He cited connections between Huawei’s president, Ren Zhengfei, and the People’s Liberation Army, to which the Huawei chieftain once belonged.

For its part, as previously mentioned, Huawei says it welcomes an investigation. Here’s a direct quote from William Plummer, a Huawei spokesman, excerpted from a recent Bloomberg article:

“Huawei conducts its businesses according to normal business practices just like everybody in this industry. Huawei is an independent company that is not directed, owned or influenced by any government, including the Chinese government.”

Unwanted Attention from Washington

The same Bloomberg article containing that quote also discloses that the U.S. government has invoked  Cold War-era national-security powers to compel telecommunication companies, including AT&T Inc. and Verizon Communications Inc., to disclose confidential information about the components and composition of their networks in a hunt for evidence of Chinese electronic malfeasance.

Specifically, the U.S. Commerce Department this past spring requested a detailed accounting of foreign-made hardware and software on carrier networks, according to the Bloomberg article. It also asked the telcos and other companies about security-related incidents, such as the discovery of “unauthorized electronic hardware” or suspicious equipment capable of duplicating or redirecting data.

Brand Ambitions at Risk

The concerns aren’t necessarily exclusive to alleged Chinese cyber espionage, and Huawei is not the only company whose gear will come under scrutiny. Still, Huawei clearly is drawing a lot of unwanted attention in Washington.

While Huawei would like this matter to be resolved expeditiously in its favor, the investigations probably will continue for some time before definitive verdicts are rendered publicly. In the meantime, Huawei’s U.S. aspirations are stuck in arrested development.

To be sure, the damage might not be restricted entirely to the United States. As this ominous saga plays out, Huawei is trying to develop its brand in Europe, Asia, South America, Africa, and Australia. It’s making concerted advertising and marketing pushes for its smartphones in the U.K., among other jurisdictions, and it probably doesn’t want consumers there or elsewhere to be inundated with persistent reports about U.S. investigations into its alleged involvement with cyber espionage and spyware.

Indulge me for a moment as I channel my inner screenwriter.

Scenario: U.K. electronics retailer. Two blokes survey the mobile phones on offer. Bloke One picks up a Huawei smartphone. 

Bloke One: “I quite fancy this Android handset from Huawei. The price is right, too.”

Bloke Two: “Huawei? Isn’t that the dodgy Chinese company being investigated by the Yanks for spyware?

Bloke One puts down the handset and considers another option.

Serious Implications

Dark humor aside, there are serious implications for Huawei as it remains under this cloud of suspicion. Those implications conceivably stretch well beyond the shores of the United States.

Some have suggested that the U.S. government’s charges against Huawei are prompted more by protectionism than by legitimate concerns about national security. With the existing evidence against Huawei classified, there’s no way for the public, in the U.S. or elsewhere, to make an informed judgment.