Avaya CEO On How The Company Is ‘Roaring Back’ With A Focus On Hybrid UC, Collaboration

'The message that I want everyone to come away with is Avaya is roaring back … the uniqueness of the strategy: Innovation without disruption, so, prem[ise] gives way to cloud over time, or voice gives way to digital, and you can happily move those interactions intra-Avaya without ever having disruption, the UC behemoth’s CEO Alan Masarek tells CRN ahead of Avaya ENGAGE 2024.

Avaya Holdings Corp., a longtime player in the unified communications and collaboration (UC&C) space, spent the last year reimagining its strategy with a unique approach to the crowded market, the company’s CEO Alan Masarek told CRN.

The UC behemoth at the beginning of 2023 filed for Chapter 11 bankruptcy protection following Avaya’s 2022 cloud subscription accounting problems that led to substantial earnings and revenue target misses. By May 2023, the company had emerged with a new balance sheet and capital structure. One year later, the company has moved on from its financial transformation, as well as a strategic transformation in which Avaya embraced the opportunity it had in front of it with some of the largest enterprise customers in the world. Unlike its competition in the congested UC&C space, Avaya couldn’t – and shouldn’t – try to shift all of its customers into the cloud. Rather, the company and its partners must meet the needs of its customer base. Masarek, upon joining Avaya in 2022, noticed that the needs of an SMB are very different than that of a large, global enterprise with a huge deployment of premise-based infrastructure that’s been custom-built into their environments. That’s where “innovation without disruption” comes into play.

That slogan refers to Avaya offering premise-based, private cloud, public cloud, or some blend of all of the above – hybrid cloud – UC&C to customers. It’s helping enterprises and government agencies avoid the dreaded rip and replace strategy, while still giving these businesses access to modernized assets – like AI-based capabilities and omnichannel functionality.

Masarek sat down with CRN ahead of the company’s annual event, Avaya ENGAGE, kicking off this week. He spoke about the company’s strategic transformation, how it stands apart from its peers, and the new integrations that Avaya has with some of its largest competitors.

Here are excerpts from the conversation.

Tell us what Avaya has been working on in the last year in terms of emerging from the financial restructuring and the company’s new strategy?

We have made extraordinary progress over the course of the year. Last June, we had just emerged from the financial transformation. That was a super positive event. We got fully de-levered, fully recapitalized with $650 million of incremental cash, and along the way, we made a series of operational changes in the business, restoring historical levels of profitability and free cash flow. So, you have a business that has modest gross debt, very little net debt, and is building cash from a cash flow perspective. So, the way I characterize the transformation is you have a financial transformation, you have a strategic transformation, and you have an operational transformation. The financial is long since done, the strategic is done as well, meaning that we reset the strategy which we were using a year ago around “innovation without disruption.”

At the Engage event last year, we relaunched the brand around the notion of the value prop: Choose Your Journey. And we now have since created a great deal of segmentation focus within our customer set around the largest of the large. We skew towards gigantic businesses and governmental enterprises throughout the world. And it’s where this value prop, “innovation without disruption,” and where they need to choose their journey resonates extraordinarily well. The way I describe it is if you’re a 50-person SMB and you want to modernize, you’re going to maybe jump to the cloud and there might be a little change management, but you’re only a 50-person company, it’s not that big a deal. If you’re a 50,000-person company, which is really the nature of our types of customers, it’s a very big deal. It’s not just change management, it’s fundamental business risk. So, everything about “innovation without disruption” says, you can keep your existing solutions from us that you’ve had for a long, long time - typically voice - and it can stay on-prem[ise] and you can augment them with all sorts of modernized capabilities - omnichannel, all sorts of digital channels, a whole slew of AI utilities - and in effect, have a hybrid solution where you never have to rip and replace what you’ve had from us for a long time. Contact centers often talk about moving to a world of AI and digital, and we all are. But still, on average, contact centers are probably 85 percent voice relative to the number of interactions from their customers. So, what we are saying to customers that is resonating extraordinarily well is: “Why would you rip out the 85 percent to get to the 15 percent? Just get to the 15 and leave the 85 where it is. Leave that on-prem but bring in all the digital channels from bots, all the AI utilities from us, other third parties as well, and pair it with your voice.” And then, as the market evolves over some period of time, voice gives way to more digital. So, that 85 percent goes down to 65 percent [and] you’re able to do that seamlessly, without disruption, intra-Avaya, always avoiding that rip and replace. Then, the mirror image of that is choose your journey, which is if you want to go if you want to go fully to the cloud, like all my competitors, the problem is you got to rip everything out in order to go get cloud voice and cloud digital and cloud AI. We’re saying that’s kind of silly. Why do that?

What will you be talking to partners and customers about at Avaya Engage this year?

The key thing compared to a year ago is innovation promised, innovation delivered. We’re going to be very, very tangible on the innovation delivered and all-around outcomes. The message that I want everyone to come away with is: Avaya is roaring back. Everything that we’re seeing in the market tells us that. Renewals, retention, ahead of plan. Contract duration, dramatically ahead of plan. The notion of people being concerned about the financial mess from a year and a half ago is zero. The uniqueness of the strategy “innovation without disruption,” so, prem[ise] gives way to cloud over time, or voice gives way to digital, and you can happily move those interactions intra-Avaya without ever having disruption. We’re going to be rinsing and repeating that in a big way.

We’re also talking about a big focus on our theaters geographically. We’ve created the Americas theater for North and South America and hired Peter Brant [Avaya’s senior vice president of Americas sales] to be the head of the Americas theater. Because so many of those large customers are in that in the Western Hemisphere, we’re putting a renewed focus on that, and there’s so much going on with partners across the board in that area, the SPs, VARs and agents.

How important are integrations and technology partnerships to Avaya’s hybrid UC&C strategy?

We relaunched [our] UC&C suite. This is the Zoom announcement we made at Enterprise Connect. Basically, the way we play in the telephony space in the UC&C space is just like the contact center world. You can go prem[ise], private or public. Those are your deployment options. What we introduced with Zoom is simply a hybrid collaboration solution. We’ve created the ability for this set of collaboration SKUs to integrate our prem[ise] telephony into your collaboration solution. Businesses all over the world are making a decision on who they’re going to use. Are they a Teams shop, a Zoom shop, a Google Meet shop, [or] a Webex shop? Those are the big [players]. What businesses want is a common user interface because we live inside these video collaboration solutions all day long. So now, you’ll be able to access our prem[ise] telephony from within that cloud collaboration solution.

The beauty of that, again, is it’s very consistent with Innovation without Disruption. I want fewer screens, fewer user interfaces. Let’s say I’m living in Teams all day long. If I want to call out, you can access [Avaya] from within teams and the beauty of that is you get a single UI. From within [Zoom] you can access the prem[ise] telephony. You want to innovate, you want to have a single cloud UI, which is the collaboration tools that you’re using, but you don’t want to rip the stuff out. You don’t want to rip out our telephony that’s integrated into your workflows and everything else. but you want to cloudify, so you get that hybrid [approach], where you cloudify without having to rip out. Again, this was all done in reaction to customer research. And it’s a perfect opportunity for the partners as well to sell that upgrade and then have an ongoing relationship with those businesses.

How is Avaya today differentiating from the competition?

It’s very straightforward. The biggest differentiation is the fact that we support a customer’s journey irrespective of deployment. You can be premise-based on one extreme, you could be fully public cloud on the other extreme, or you could be private cloud in between, or some combination. What is so, so different is, the competition is all public cloud. Virtually all the competition is in this public cloud, and so you’re sitting back and saying: “I’m a customer. And I want to, let’s say, modernize my big hospital system.” That hospital system might be a couple of critical care hospitals and it could be 1,000 doctor offices in the community. If you wanted to go to one of my competitors, they want to take everything to the cloud, because that’s what they offer, whether it’s contact center going to CCaaS or unified communications going to UCaaS. We’re saying that: “It may not work for you, customer. You may want to keep your critical care hospitals on-prem. You’ve got a bunch of analog phones at the nurse’s stations and all sorts of bespoke integrations that have been there that are necessary in that 24/7 critical care situation. But you may want to move your doctors out in suburbia to the cloud. You can do both.” With my competitors, you’re only going to move everything to the cloud, which means you have to rip out all the premise stuff that came before. What we’re saying is: “It’s your journey and we’re here to support you, whether it is fully public, private cloud, on-prem, or some combination thereof. Whether that is your [contact center] solutions or your UC solutions, it doesn’t matter. That’s very, very unique. We’re unique because often we’re the incumbent. It’s Avaya gear that’s been there for a long, long time and the last thing you want to do is rip out that infrastructure.

I’m from within the industry, so when I was with Vonage for six years, if the world would reduce the message on a bumper sticker several years ago, it was: “Prem is bad and cloud is good.” Everybody was sort of conforming to that. It might have been the accepted narrative, but it’s not accurate. So, when I got [to Avaya], we were certainly going to the cloud, but what I realized was, the needs of these gigantic institutions are different than your SMB companies. They’re massively different. These big companies, of course, they want to move beyond voice-centric solutions into other channels, [like] chat and social, and AI has huge implications in our market, so you want all that stuff. But by the same token, you don’t want to rip out what you have in order to get to that good stuff. What we’re saying is, leave those existing investments in place and get all the new stuff, AI and all the different omnichannels from us from the cloud and it’s hybrid. So, prem[ise] is coexisting with cloud with a common user interface, common analytics, common reporting, and a common orchestration engine, so whether the interaction comes as voice through your premise infrastructure, or comes through digital through your cloud infrastructure, it all gets reported on and analyzed as if it was just coming from the same stream. It’s very, very powerful. Don’t rip out what you have. Go directly to the good stuff and have immediate time to value without going through this long, painful deficit in functionality. So often we see this and it’s not just in the communications market, it’s in every enterprise software market. No gigantic business does a hard cut over to anything successfully because it’s just too complex. They have to go gradually. And so, what we’re all we’re saying is, you can go gradually with us, minimizing risk along the way.

How crucial is the channel in helping Avaya further its “innovation without disruption” strategy?

We continue to be about 70 plus percent channel-led throughout the world and we are continuing that. The channel for us is sort of every flavor - VARs, distys, service providers and agents - and the value prop for these customers resonates really well with the channel. We just announced a rebranding and taxonomy for our product names that are really built around a platform. So, all those CX, customer experience solutions are all now under the umbrella of the Avaya Experience Platform (AXP). The whole idea is, and what we’re saying to customers is: “Whether you want to be prem[ise]-based, public cloud, private cloud, or some hybrid blend - which is where most of them are ending up - you can stay intra-Avaya and we can support you through that journey. We’re not going to force you. It’s your journey. We’re not going to force you to the public cloud if it doesn’t make sense for your business.” For the partner community that is music to their ears because they are able to do their job and bring other solutions into this hybrid world, they’re able to provide professional services in this hybrid world; There’s a whole raft of things that our partners are able to do. This whole strategy was developed in response to customers. As long as we are focused on what the customer is asking for, both us and the partner is going to be fine.