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Big Wave Riding Embracing Hyperscale Innovation

Jane Li COO Huawei Enterprise USA

Private Sector IT ASSEMBLY 2014

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Waves are Driven by the Wind The bigger the wind, the bigger the wave.

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First Movers

Net Worth Mark Zuckerberg $33B Larry Page $32B Jeff Bezos $30B Sergey Brin $30B Jack Ma $26B Ma Huatang $15B Robin Li $15B

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Late Movers

Cost Cutting

Traditional Enterprise Infrastructure PC Client Computing

Mergers & Acquisitions

Stock Buybacks

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Before the Big Bang Slow Rate of Change

Proprietary Technology Expensive Hardware, Software & Service

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Why Data Center IT Changed Slowly

Core Business

IT

100%

0%

Spending

Impact of IT savings on overall P&L is small. And if IT continuity has a big impact on the core business, organizations take the lowest risk approach.

Industry

IT

Spending

as a % of

Revenue

Software Publishing & Internet Services 6.7%

Banking & Financial Services 6.3%

Media & Entertainment 5.0%

Education 4.7%

Professional Services 4.2%

Healthcare Providers 4.2%

Telecommunications 3.8%

Insurance 3.2%

Pharmaceuticals, Life Sciences & Medical Products 3.2%

Utilities 2.8%

Transportation 2.6%

Industrial Electronics and Electrical Equipment 2.5%

Consumer Products 1.9%

Industrial Manufacturing 1.7%

Retail & Wholesale 1.5%

Chemicals 1.3%

Food & Beverage Processing 1.3%

Energy 1.1%

Construction, Materials and Natural Resources 1.0%

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The Big Bang

Hyperscale

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Hyperscale IT Spend Model

100%

0%

Q1 2014 Revenue

AWS - $1.2B

Non-AWS

13.8B Non-AWS and AWS

$1.59B

100%

0%

Q1 2014 Spending on Technology

AWS - $1B (est.)

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Why Data Center IT is Emerging at the Speed of Light

100%

0%

Spending

IT

(Core Business)

Other

Amazon operating income in Q1 was $146M. A 40% savings in IaaS spending due to use of open-source technology = $400M or $1.6B/yr.

Facebook revenue was $10.8B and net income was $1.07B in 3 years 2010-2012. During that period they reported savings of $1.2B by doing their own designs

Profitability is dependent on hyperscale-driven innovation and savings.

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Hyperscale has Taken the Wind out of Traditional Enterprise IT

2010 2011 2012 2013 2014 (est.)

Cisco 40.0 43.2 46.1 48.6 49.0

Dell 52.9 61.5 62.1 56.9

EMC 17.0 20.0 21.7 23.2 24.0

HP 126.0 127.2 120.4 112.3 112.0

IBM 99.9 106.9 104.5 99.8 97.0

0

20

40

60

80

100

120

140Annual Revenue ($B)

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It all came together in 2014

1980 1985 1990 1995 2000 2005 2010 2015 2020

Contract Manufacturer

Original Design Manufacturer & Open Source Hardware

Original Equipment Manufacturer

Enterprise IT

Hyperscale driven innovation

New class of OEMs

Integration of mobile and wireless

Webscale IT

Open-Source Software

Commercial Versions of Open-Source Cloud Platform

Hyperscale Computing

Wired/Wireless Carrier ICT & Smartphone Manufacturer

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Vendors are at a Crossroads

Smart Phones & Tablet Client Computing

Global Wired and Wireless Networking

Cloud OS, Servers, Storage, Networking & Apps

Data Center as a Service

Research & Development

PC Client Computing

Traditional Enterprise Infrastructure

Cost Cutting

Stock Buybacks

Mergers & Acquisitions

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Vendors Going in Surprising New Directions

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Last Year’s Weather Report for Enterprise IT OEMs

“Not a cloud in the sky”

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In 2014 the Enterprise IT OEM Clouds Rolled In

15

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IBM is Ahead in the Race to Pass the Hardware Baton

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1985 Vertical Integration

Sell

Mfg.

Design

US RoW

2005 Original Design Manufacturer

Sell

US RoW

2015 Original Equipment Manufacturer

US RoW

1995 Contract Manufacturer

Sell

US RoW

Design

A New Group of HW OEMs are Ready to Carry the Baton

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Same Servers, New Perspective

89%

12%

36% 36%

IBM Lenovo

Software GM%

x86 Server GM%

x86 Server GM%

PC GM%

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Client Computing Tectonics

Thin Clients 1.5M in 2015

PCs 278M in 2014

Smartphones & Tablets 2.35B in 2014

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Information and Communications Technology (ICT)

Communications Building Blocks

Cell Networks WiFi Networks

Optical Fiber Networks Cell Phones

Tablets Video Surveillance

Video Conferencing VoIP

IT Building Blocks

Servers Storage

Networks Virtualization

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Coming Soon An Epic Land Rush for the Wide Open Software Defined Data Center

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You won’t have to buy the whole album to get one app

Network Software Suite

Network OS

Network OS QOS Load Balancing Firewall Network Monitoring IPv6 Encryption FCoE NVGRE VXLAN Network OS Network OS

Network Services

Eagles Justin Timberlake Pit Bull MC Hammer U2 Marvin Gaye Mariah Carey Rolling Stones Rolling Stones Usher Miley Cyrus Bruce Springsteen

OpenStack Apps

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Data Center App Innovation will Explode

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New Growth in the Data Center Ecosystem

Amazon

HP

Client Computing

Data Center Computing

Cloud Computing

Carrier Infrastructure

Cisco

Samsung

Google Microsoft

Huawei

Ericsson

Huawei Apple

IBM Huawei

Lenovo

Cisco

Cloud OS Apps

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IT Inflection Point Business goes on the new heights

10x change in an element of the business. What worked before doesn’t work now. The executives are the last to know.

3 Dimensional Strategy Hyperscale Driven Technology

Global Partnerships

Pick Winners of the Future

Source: Only the Paranoid Survive, by Andy Grove

Traditional Enterprise IT

Business declines

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Data Center Strategy is 3-Dimensional Chess

Hyperscale Innovation

Partnerships

Cloud

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We Must Leap into Hyperscale Driven Innovation Flash Storage ● Object Storage ● Scale-Out Storage ● Converged Systems ● Software Defined Networking ● Network Function Virtualization ● NoSQL ● In Memory Computing ● Software Defined Storage

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Partnering with Innovation Leaders is Global

Storage Samsung’s New

Bright Spot - WSJ

Processors ARM Snags 95 Percent Of Smartphone Market - CRN

Servers Lenovo Agrees

to Buy IBM Server Business

- Dealb%k

Networking China Telecom and

Huawei deploy world's first SDN - Light Reading

Personal Computers Apple is Driving Computer

Sales in the Workplace - WSJ

Software SAP Solidifies

Market Leadership - Forbes

Most people are familiar with calculations such as “if you invested $10,000 in Microsoft stock in 1986 when it went public, your stock would now be worth more than $1.8M.”

The challenge for investors has always been to identify potential super performers of tomorrow before their stock becomes highly valued in the marketplace.

The strategy is to look for areas of hyper-growth. Find the dominant players (Gorillas) in these spaces, and gradually concentrate on a few.

The Gorilla Game: Picking Winners in High Technology Book by Geoffrey Moore, Tom Kippola, and Paul Johnson

The challenge for IT has always been to identify:

Discontinuous innovation—breakthrough trends which offer such compelling benefits that new standards and operating models are quickly developed to help the trend succeed.

Companies that provide new products or services that can bring about a sea-change in how IT does business, where new supply chains and new efficiencies can bloom quickly and create enormous economic value.

The Gorilla Game for IT: Picking Winning OEMs

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Companies bringing about sea change. Discontinuous innovation. The creation of enormous economic value for you.

What it Takes to Ride the New IT Wave

Introducing

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1938 The birthplace

of Silicon Valley

Palo Alto

1979 China’s first Special

Economic Zone

Shenzhen

Page 34 34

150,000 employees. Products deployed in over 140 countries, serving more than one third of the world's population.

A Global Company

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First China Brand in Top 100

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Arsenal, English Premier League A.C. Milan, Serie A

Paris Saint Germaine, France Ligue Atletico Madrid, La Liga

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45 of 50 Carriers Who Connect the Clouds are powered by Huawei

A Vast Portfolio of Enterprise, Carrier & Consumer Products

Enterprise Product Portfolio

UC&C

Security

Unified Management Bring Your

Own Device

Software Defined

Network

Cloud

Data Center

Conferencing Telepresence IVS UC Contact Center

Data Center

Infrastructure Server Storage VDI Networking Power

Enterprise Network &

Enterprise Wireless

DC Network OTN/Microwave IP Network GSM-R/LTE

Creating Value for Customers

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World’s Fastest Growing Storage Manufacturer

Oracle

Quantum Dell

HP IBM

NetApp

EMC

HDS Fujitsu NEC

Huawei

-30%

-20%

-10%

0%

10%

20%

30%

2013 Storage Revenue Year-to-Year Change Leaders

Source: 2013 TBR Computing Data Center Benchmark Report

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#2 Fastest Growing x86 Server Manufacturer

Oracle Fujitsu

Bull HP IBM Unisys

NEC Dell

Huawei Cisco

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2013 Revenue Year-to-Year Change Leaders

Source: 2013 TBR Computing Data Center Benchmark Report

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World’s Fastest Growing Tier-1 ICT OEM

Annual Revenue (Billions)

$0

$5

$10

$15

$20

$25

$30

$35

$40

2008 2009 2010 2011 2012 2013

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What Huawei Brings to IT Organizations

Traditional Enterprise IT Enterprise-Class Expensive HW Expensive SW

Expensive Service Technology Follower

Enterprise ICT Enterprise-Class Affordable HW Affordable SW

Affordable Service Technology Leader

Hyperscale Commodity

Affordable HW Affordable SW

Affordable Service Technology Leader

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Positioned to Help You Build on the 3rd Platform

90% of Growth in the Next 10 Years Will Come From the 3rd Platform

LAN/Internet Client/Server

Mainframe Terminal

3rd Platform

2nd Platform

1st Platform

Cloud

Mobile

Big Data Analytics

Social Business

Emerging Markets

Innovative Industry Solutions

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A Leader in the Red Hot China Market

2012

Spending

2012

Growth

2013

Spending

2013

Growth

2014

Spending

2014

Growth

Devices 627 2.9% 666 6.3% 694 4.2%

Data Center

Systems 141 2.3% 147 4.5% 154 4.2%

Enterprise

Software 278 3.3% 296 6.4% 316 6.8%

IT Services 881 1.8% 927 5.2% 974 5.1%

Telecom

Services 1,661 -0.1% 1,701 2.4% 1,742 2.4%

Overall IT 3,588 1.2% 3,737 4.2% 3,881 3.8%

Worldwide IT Spending Forecast

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

China GDP Growth

Leading the transition to Software Defined Data Centers with carriers and cloud service providers

#1 Telecommunications

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www.wocloud.cn

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Data Center 1 of 2

Langfang #4 World’s Largest

6,673,624 Square Feet. $USD 1 Billion

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Hohhot #5 World’s Biggest

6,436,818 Square Feet. $USD 1.97 Billion

Data Center 2 of 2

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Wo Cloud Data Centers Under Construction

Langfang

Harbin

Zhengzhou Wuxi

Chongqing

Dongguan

Hong Kong

Guinan Xi’an

Hohhot

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Wo Cloud Architecture

VxLAN

TOR

VxLAN

Gateway

FW Exit router

server

VxLAN

TOR

VxLAN

Gateway

FW Exit router

server server

DC 1 DC 2

DCI

PCE+

vSwitch

TOR

vSwitch

server

TOR

SCiON

FusionSphere Openstack vCenter System Center

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FusionSphere Cloud OS

VxLAN

TOR

VxLAN

Gateway

FW Exit router

server

VxLAN

TOR

VxLAN

Gateway

FW Exit router

server server

DC 1 DC 2

DCI

PCE+

vSwitch

TOR

vSwitch

server

TOR

SCiON

FusionSphere Openstack vCenter System Center

FusionManager

FusionCompute

OpenStack

FusionStorage FusionNetwork

Cloud Boot & Provisioning Service

Nova Cinder Neutron

KeyStone Glance

Swift Heat

Ceilometer

KVM Storage Hypervisor

Cinder volume driver Nova-compute driver Neutron plugin

DSware

HA Framework

Auto Deployment

Smooth Upgrade

Log & Monitoring

API Proxy

Portal Multi-DC

Mgmt Account &

Billing Application Automation

Backup

SCiON Controller

Virtual and Physical Network Elements

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Wo Cloud Delivering Value Added Services (VAS) on Demand

Virtual Networking Pool

VM VM VM VM VM VM

Huawei SDN

Controller

Virtual Server Pool

Network Devices

VM VM VM VM VM VM

Virtual Server Pool

Value Added Services

Services Tethered to Static Tunnels Services Provisioned When and Where Needed

#3 Smart Phone Supplier

Huawei Ascend P6 - The world’s thinnest smart phone

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4G LTE Mobile Computing

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2012 2013 2014 2015 2016 2017 2018

Global Subscriber Forecast

Huawei Ericsson Nokia Alcatel-Lucent Others

2014 Equipment Market Share Leader

Base Stations Smartphones Gateways Core Network Security Antennas Management

Supplier to #1 Largest eCommerce Site

Hyperscale Infrastructure

2012 Gross Merchandize Value ($B)

Alibaba 171.2

Amazon 87.8

eBay 67.8

Fastest Growing Tier-1 Enterprise OEM

Scale-out Servers, Storage & Networking

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SAP HANA Appliance for Large Enterprises

FusionCube

Hypervisor

Hardware installation Software installation Configuration Test Service Support

A Turn-Key Converged System Solution

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Advanced Converged System Architecture

FusionCube

Converged System Outside Scale-Out Computing & Storage Inside

Storage Server 1

CPU Memory

DB DB

CPU Memory

Database Server 1

DB DB

CPU Memory

Database Server 2

Storage Server 2

CPU Memory

DB DB

CPU Memory

Database Server N

Storage Server N

CPU Memory

56Gb Cluster Network

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Effect of Increased Convergence Levels on IT Costs, Uptime, and Speed of Deployment

0.9982

0.9984

0.9986

0.9988

0.9990

0.9992

0.9994

0.9996

0.9998

1.0000

-

5

10

15

20

25

30

1. Traditional 2. Standardized 3. Optimized 4. Automated 5. Adaptively Sourced

Availability

Mean Time to Deploy New Services (Days)

Annual IT Costs (000) per Gbps Workload Throughput

Convergence Level

Discrete Servers

Virtualized Servers

Annual Costs (000) or Days

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A Global Innovation Leader

Discontinuous Innovation

Incremental Change Exploitive

Incremental Change

Existing Products New Products

Exis

tin

g M

arke

ts

New

Mar

kets

Traditional Enterprise

HW, SW & Service

Private Clouds

Converged Systems

Big Data

Cloud Apps

Mobile Clients Enterprise ICT

Enterprise IT Servers, Storage, Networking

SW Defined

Datacenter

Web Apps

Cloud Providers

SSD

Hyperscale

Discontinuous Innovation: the radical advances that profoundly alter the basis for competition in the industry.

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Leading a Sea Change to Enterprise ICT

1970 1980 1990 2000 2010 2020

$ B

illio

ns

The Freedom to…

Air Travel

Fly Drive

Autos

Global Innovation, Higher Quality and Lower Price

Cell Phones

Talk

ICT

Compute

Page 63

Join us in Mastering The Big Waves Hyperscale-driven Technology, ICT, and Global Innovation

Thank You