Chinese tech giant ZTE has partnered with local company Nextgen Distribution in the first phase of a major assault on the Australian enterprise market for networking and video conferencing.
Largely slipping under the radar since launching in Australia in 2005, ZTE last year turned over $200 million, money earned chiefly through direct contracts with the likes of Telstra, Optus and Vodafone for the supply of telecommunications equipment.
Like its compatriot rival Huawei, ZTE is now looking to translate its success in the carrier space to the enterprise, where it is engaging the channel for the first time in a bid to go head-to-head with market leader Cisco and other datacom vendors.
The agreement with NextGen will see the local distributor provide exclusive access to ZTE’s switching, routing and video conferencing products to its 250 local resellers. But with Cisco’s entrenched position in the market, ZTE concedes it has its work cut out for it.
“Obviously we have significant competition,” said Alain Saaroni, executive director with ZTE A/NZ. “We understand we may have some brand challenges”.
But he stressed the company well understood how to differentiate itself from the competition, deciding among other things to offer a five year warranty.
Recently seconded from head office in Shenzen, Leo Zhenyu, ZTE’s Australian managing director stressed the company was seeing strong demand for converged solutions in Australia.
“Demand is surging for solutions converging IT and communications,” he said, adding ZTE was pursuing a number of promising prospects along these lines in the mining sector.
ZTE also intends to exploit its lower cost base, in particular its access to cheaper engineering skills in China, to go after smaller businesses in Australia. Despite turning over $200 million last year in Australia, ZTE employs less than 50 staff here.
“We understand the barriers faced by customers with limited budgets and are trying to help businesses achieve faster adoption,” Saaroni said. He went onto explain that ZTE decided on a “channel only” model for datacoms products in A/NZ market, hence the appointment and partnership with NextGen.
Asked whether he was worried perceived security risks associated with Chinese companies could hamper ZTE’s commercial ambitions in Australia - especially in the light of Chinese rival Huawei being banned from the NBN - Saaroni said the fact ZTE is listed on both the Hong Kong and Shenzen stock exchanges meant it was seen as a more transparent organisation.
Saarani said ZTE conducted “plenty” of conversations with Australian state and federal government agencies - including ASIO - and has been assured “ZTE is welcome in Australia”.
Unlike Huawei, ZTE was invited to bid for the NBN build - ultimately won by Alcatel Lucent - but is yet to win any business. ZTE’s invitation to tender for the NBN while its rival Huawei was banned occurred despite each being made the subject of a US senate inquiry into security concerns last year, which concluded both companies made equipment that could be exploited to create security back doors.
ZTE is just a few months away from completing its first R&D facility in Australia, bringing to 19 its total number of facilities worldwide. Opening in the Sydney CBD in September, it will focus on networking and video conferencing. Saarani confirmed it would not conduct security testing, in contrast to the testing facility called for last year by Huawei.
Employing 80,000 staff - 40 percent of which are in R&D - ZTE currently generates annual sales in excess of $15 billion and is one of the world’s top five manufacturers of telecom equipment, servicing most of the 50 biggest carriers. It is also the fourth largest manufacturer of mobile handsets.
In Australia the company has sold handsets branded Telstra and other carriers but declined to provide further details as to its plans for expanding this part of the business locally.
NextGen founder and managing director John Walters said ZTE was selected following an exhaustive process of research and due diligence. The fact ZTE is bound by the stringent laws of listed companies - unlike privately held rival Huawei - meant that process was relatively straight forward, Walters said.
One of the newest distributors in the Australian market, NextGen has committed to aligning itself with so-called challenger brands to differentiate itself from bigger rivals.“There was a fit there [with ZTE] from an enterprise class and challenger brand standpoint," Walters said.
He also pointed to specific opportunities for ZTE to gain a strong foothold in the area of unified communications, which he said was now heavily commoditised and ready for new challengers.