Recently, China Telecom announced the results of the “Centralized Procurement of Server Virtualization Software Related to China Telecom Cloud Computing (2016)” project. In this procurement, both Huawei and H3C were awarded contracts, with Huawei leading in market share closely followed by H3C.
This procurement has several notable characteristics. First, it is large in scale; this is the first large-scale centralized procurement of virtualization software by China Telecom Group since 2014, with an estimated scale of 8000 CPU licenses, significantly larger than in 2014.
Secondly, there is a very high entry threshold. China Telecom has set higher requirements for virtualization software, evaluating it based on various criteria including virtualization functionality, performance, stability, and database capacity. Additionally, to align with the strategic goal of network intelligence reconstruction, China Telecom has explicitly required that the virtualization software must be capable of interfacing with SDN/NFV and telecom cloud platforms.
Thirdly, there is a comprehensive rise of domestic manufacturers. The emergence of Huawei and H3C in the virtualization field has begun to exert significant pressure on companies like VMware, Microsoft, Red Hat, and Citrix. For example, China Telecom started its cloud computing initiatives early on, but initially, it was not a group-wide procurement; instead, each provincial operating unit managed its own. At that time, many of China Telecom’s cloud platforms chose VMware because VMware’s vSphere was the most mature option available. Moreover, there were not many alternatives at that time.
However, it is well-known that VMware products have significant characteristics: they are not open-source, expensive, and have peculiar pricing models, with poor customization capabilities for specific needs. VMware’s product characteristics are acceptable in the enterprise market, which is not very sensitive to costs, but they become inadequate when facing the rapidly expanding telecom-grade cloud platforms, primarily due to their high costs and inability to meet the specific needs of operators. The issues faced by VMware are also present with other foreign manufacturers, many of whom are technically inferior to VMware.
For China Telecom, the original partners were not effective, and its own R&D capabilities were limited, necessitating the search for new partners who are capable, willing, and responsible. At this time, Huawei and H3C stepped up, with their respective FusionSphere and CAS beginning to replace vSphere as the preferred virtualization software platform for operators.
In fact, not only at China Telecom, but also in the entire domestic server virtualization market, Huawei and H3C are experiencing rapid growth, while the market share of foreign manufacturers represented by VMware is rapidly declining. According to a report by CCID Consulting, VMware’s market share has dropped to 47.8%, down from an astonishing 80% at its peak. This raises the question of why Huawei and H3C have risen during this process instead of traditional server or software manufacturers, a question worth pondering in the industry.
