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Chinese tech company Huawei has established a core cloud and AI business group, signaling a focused effort by the company to hone its AI and build up its cloud business, according to Light Reading.

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Huawei Cloud is the company's fourth core business group, along with its operator, enterprise, and consumer business groups, indicating the promise it sees in the young unit. Huawei Cloud was first established as a smaller unit in 2017, but has grown quickly, creating over 180 cloud services by mid-2019. However, the company still sees room for improvement for the unit — it said its cloud business "needs to further develop its AI capabilities and hone its competitive edge in enterprise services."

Huawei can leverage its new cloud and AI business group in two ways:

The new business group can help Huawei capture a larger share of the fast-growing Chinese cloud market. The Chinese cloud market is dominated by Alibaba, which accounted for 45% of the market in Q3 2019, while Huawei's cloud group was relegated to the "other" category, meaning it accounted for less than 8%, according to Canalys. By establishing cloud and AI as a core business group, the division will likely have its own senior leadership who can better represent the unit in company meetings and advocate for more resources. These increased resources can be used to improve Huawei's cloud product as well as its sales and marketing teams. It's important that Huawei make the effort to beef up its cloud efforts now, as the currently small Chinese market has room for considerable growth — in 2018, China's cloud market was only 8% the size of the US cloud market, but it is projected to triple in size by 2023.

The creation of the cloud and AI business group could also bolster Huawei's new operating system (OS). Due to trade issues threatening Huawei's access to Google's Android OS, it was compelled to debut its alternative OS, HarmonyOS, in August 2019. This OS lacks access to Google Play Services, meaning the company must come up with a replacement, as well as a supporting cloud system, to provide the functionality consumers and developers expect. The company is already developing its own mapping service for the OS and is working with developers around the world to create apps for it. While Huawei doesn't plan to use the OS on its phones unless absolutely necessary — it has initially deployed HarmonyOS on its smart screens — the company has said the OS can be easily adapted for future phones.

By focusing its cloud ambitions on the general cloud market as well as in support of its growing smartphone OS, Huawei can follow a strategy similar to Google. Google Cloud has become a major player in the large US cloud market, on course to generate $8 billion in revenue per year as the US's third-largest cloud purveyor.

Moreover, Google leverages its cloud for devices that run on Android to provide its ecosystem of services, like Google Maps or Google Sign In, in third-party apps. To grow, Google has needed to leverage its core strengths, like its diverse ecosystem of services, and focus on a limited number of verticals, a strategy Huawei can also follow. Moving forward, Huawei could bundle its 5G offerings with its cloud platform to secure contracts that demand low-latency data transmission for mission-critical functions, like in the medical industry — China has already deployed the world's first private 5G network for a medical campus.

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