10 Sticky Questions For The Avaya Channel1:00 PM EST Wed. Nov. 14, 2012
Avaya's Americas Executive Partner Forum kicks off Wednesday in Cancun, Mexico -- a lower-key affair than the sprawling partner conferences Avaya's held in Las Vegas for the past few years. Here are the major questions CRN and Avaya partners and analysts see as pressing following a year of big changes at the company.
Avaya's financial picture is at best an unsteady one; in its most recent earnings report, in June, the company reported revenue of $1.25 billion, down 9 percent year-over-year, and a net loss of $166 million, wider than $152 million a year earlier.
The company in late September said it would look to cut an additional $135 million to $235 million in operating costs in its fiscal year, which began on Oct. 1, and it is instituting more layoffs. All that uncertainty, combined with a generally cautious macro-economic view, likely means Avaya's IPO plans -- the company filed a Form S-1 in June 2011 -- will stay shelved.
One of the big questions following Avaya's 2009 acquisition of Nortel's former enterprise business was how it would take Nortel's data networking portfolio to market. Avaya's invested heavily in its data portfolio, including in its VENA architecture for virtualized data center infrastructure, but with so much competition from bigger data center fish like Cisco and HP, it still needs to evangelize. One recent move was a program called Networking Angels, in which Avaya provides staff experts to major solution providers to help them come up with data networking sales strategies. Another was the launch of Avaya Collaboration Pods, which tie Avaya wares with EMC and VMware products in infrastructure frameworks.
Many partners aren't convinced, however.
"They're giving it away in some cases," said one Avaya partner, who requested anonymity, referencing a recent promotion that packages Avaya PoE switches with UC phone purchases. "It's just not something they've been able to make work."
Avaya's P&L is shaky, and so, it appears, is its executive team, which has seen non-stop change for roughly two years now.
Departures have included former CFO Anthony Massetti, former CIO Stephen Gold, former SVPs Alan Baratz and Mohamad Ali, and former VPs Daniel Berg, Jeremy Butt, Joe Sigrist, Isabelle Guis and Anthony Bartolo, along with Kevin Rollins, a senior advisor at TPG Capital and an Avaya director. Additions have included SVPs Marc Randall, Michael Runda and Pierre Paul-Allard, former Cisco services boss Karl Meulema and new CFO Dave Vellequette. Will Avaya's executive revolving door finally stop swinging this year?
Avaya has been perceived as slow to market with a partner-centric cloud strategy, but more elements of that strategy have come to light in the last few months.
Back in the spring, Avaya made a series of announcements around a concept it calls Collaborative Cloud, including a suite of public cloud-delivered communications services called AvayaLive. Those services include AvayaLive Connect, an all-in-one UC offering for small businesses, powered through Level 3 Communications, as well as an affiliate program for solution providers that want to refer business Avaya's way. Partners are likely to hear more about these efforts at this week's conference.
Avaya's services programs have seen several revisions in the past two years, as well as several different leaders. But the greater question might be how well Avaya is helping partners make the transition from bread-and-butter maintenance and support services to margin-rich advanced services.
"With the voice and data pieces coming together, you need to have more IT-type skills than you do telecom skills, and you can argue Avaya's channel doesn't have that," said Zeus Kerravala, founder and principal analyst at ZK Research. "When you look at VENA and Aura (pictured), both have much more of an IT bent to them and are presumed to be next-gen platforms. Are partners doing things like network design around that?"
By all accounts, yes, IP Office 8.1 is a hit -- and according to Avaya, order volumes are skyrocketing.
IP Office, Avaya's flagship UC system for small and midsize businesses, has long been a 100-percent channel business for the vendor. But earlier this year, the company upped the ante on IP Office with the release of version 8.1, which dramatically scales the system's user capacity, and according to partners, it made the system much more of a fit for the midmarket channel sweet spot.
"We've seen a strong interest in the product from what you might call everyday enterprise: customers that aren't small but aren't yet Fortune 2000-size," Chris Atha, director of business development for San Jose, Calif.-based AdvanTel Networks, told CRN at the time of IP Office 8.1's release. "This is a feature set appropriate for them."
Cisco's recently stepped-up investment in contact center technology -- and its appeals to Avaya and other vendors' contact center partners to re-engage with Cisco on that front -- has put the entire market segment on notice. Avaya is undergoing a substantial refresh of contact center platforms with its Avaya Aura Contact Center, which means things will continue to be interesting, especially with smaller, agile competitors like Interactive Intelligence also attacking the space.
"Cisco has a very well-articulated road map in place for how they're going to go after this space and try to displace Avaya," said Jon Arnold, principal of analyst firm J. Arnold & Associates. "If they can start to penetrate that, Avaya is in big trouble because that's the one market Avaya's truly owned for a long time."
Avaya's big M&A move in 2012 was its pickup of Radvision for $230 million, giving it an in-house video technology portfolio and expanding its UC purview significantly.
Radvision was a troubled company but one with strong products and platforms, particularly its Scopia video clients. Seeing as Avaya just opened the floodgates for the broader Avaya channel to sell Radvision Scopia products, attention should shift throughout the next year to whether Avaya was wise to engage this market and compete with Cisco, Polycom, LifeSize and other established videoconferencing vendors.
One significant change seen at Avaya since its 2009 acquisition of Nortel's former enterprise unit is its strategic alliances strategy. Avaya still partners with a great many third-party vendors but no longer has a "Switzerland" mentality when it comes to the market, said ZK Research's Kerravala.
"They used to be everyone's friend," Kerravala said. "But with the video, Polycom is no longer a friend. With data networking and compute, Extreme and Brocade/Foundry are no longer friends. More and more Avaya is starting to look like Cisco, with an increasingly larger pallet of stuff. Avaya hasn't yet proven it can do well doing that, though."
HP's TouchPad and Cisco's Cius are two recent examples of tablet computers that tried -- and failed -- to take enterprise market share, with both companies acknowledging the pervasive influence of Apple's iPad as they admitted defeat. Avaya is still clinging to its Avaya Desktop Video Device (ADVD), which was launched two years ago along with Avaya's Flare Experience collaboration dashboard, even as it markets mobile and UC software options for use with iPad and other tablets, as well.
"It'll be interesting to see how the messaging there shifts, if at all," said one Avaya partner, requesting anonymity. "They've embraced iPad and getting their communicators on iPad, which was important because that ADVD just isn't moving."