U.S. vs. China heavyweight fight not ending soon
As we endure the ongoing U.S. vs. China trade talks, it has become increasing clear that the U.S. administration’s on-again off-again relationship with China is not going to change. The U.S. is seeking a reset in its relationship with China including better protections for American IP, and Huawei has become a victim of this reset.
This ongoing instability has resulted in having the Five Eyes’ (United States, Britain, Canada, New Zealand and Australia) decision not to use technology from Huawei in the “sensitive” parts of their telecoms networks. The U.S. told allies not to use Huawei for fear of Chinese spying through the back doors of the equipment.
The key to share shift is 5G
Now let’s look at the U.S. vs. China spat through the lens of wireless system integrators. Ericsson and Nokia have long been dominant players in world since 2G. Huawei made significant share increases in APAC with LTE deployments and to a lesser extent in Latin America, Africa and Eastern Europe. Now LTE deployments (first national deployments begun in 2009) are largely complete.
The networks are built, the vendors are selected, and their services are up and running. Global market share is set, for now. Now enter the 5G major deployments for 2020. New 5G vendors are performing acceptance testing on initial deployments imminently at this very moment, and this represents the biggest chance in 10 years for any of the major vendors (Ericsson, Nokia, Huawei, Samsung, Cisco) to gain share.
Enterprise fears and China leers
Once we accept that Huawei’s position in the cross hairs of the U. S. administration isn’t changing, there are two aspects we must consider. First, though Huawei’s executives have made multiple statements saying there are no back doors to their equipment, two Chinese laws- the 2017 National Intelligence Law and the 2014 Counter Espionage Law -remain very problematic for the company. Some of the most troubling language is content like Article 22 which states:
“When the state security organ investigates and understands the situation of espionage and collects relevant evidence, the relevant organizations and individuals shall provide it truthfully and may not refuse.”
Legal experts have interpreted this as a legal basis upon which the Chinese government could compel any Chinese company including Huawei to share any and all customer data from equipment deployed both inside China and throughout the rest of the world.
With the understanding that Huawei may have a legal obligation to share customer data with the intelligence wing of the Chinese government, non-Chinese vendors gain a distinct advantage. Because enterprises believe they can be and are being penetrated (Radware research found that 67% of C-Suite executives believe their networks can be penetrated by hackers). Cisco, Nokia, Ericsson and others can differentiate themselves by developing a superior security offering. And they can make a statement to Service Providers that Huawei never can: “We will never share any customer data with any foreign governments and have ZERO legal obligation to do so.”
Once Cisco, Ericsson, Nokia and others embrace this statement, Service Providers will clearly understand they can build superior, high quality, agile security services with Western vendors.
Thousands of security instances, when and where you need them
As Service Providers build out their new 5G core networks, many will build out thousands of Mobile Edge Compute (MEC) nodes across the network. These MECs give the Service Providers a service edge that is geographically very close to tens of thousands of enterprises, and that sees all the applications flowing in and out of the enterprise. This becomes an ideal point to insert a security instance at the network, or application layer (or both) to inspect traffic in real-time as it enters and exits the enterprise. When the security instance sees any anomaly, it can signal to the orchestration layer to spin up an enforcement instance to clean the traffic and block the offending IP address (or whatever action is required by the pre-programmed security policy).
In addition, the MEC nodes are effectively distributed private cloud instances. As such, they enable Service Providers to deploy this highly valuable security service as a completely software-based cloud solution. This results in a significantly lower cost service with new business models in which enterprises could pay for a monitoring only service that increases to an additional enforcement service just for the actual minutes spent thwarting an attack. This opens new avenues for revenue to businesses that see themselves as vulnerable, but can only afford a small amount per month to monitor their applications.
Increase growth 30X? Yes please
Managed Security Services are going through a period of explosive growth. For example, Akamai saw 29% growth YoY in its most recent quarter.
In an environment where large Service Providers are growing overall revenues in the low single digits, a high value, high margin service growing almost 30X faster than the overall company is very attractive.
Cisco, Ericsson, Nokia and other non-Chinese vendors have a unique opportunity to lead with security in their 5G MEC applications. This will enable them to differentiate against Huawei with the superiority of their offerings and the ability to provide peace of mind from foreign government hacking that clouds Huawei networks. It truly is a great opportunity for Western network equipment vendors to:
- Gain 5G share
- Help Service Providers build a superior high value security service
- Differentiate themselves as the pro security, pro privacy vendors for Service providers in an environment where most enterprises see themselves as vulnerable.