Nortel Concerns Cast Long Shadow Over Avaya's Channel Ambitions

Avaya spent much of this week's 2010 Avaya Americas Partner Conference in Nashville trying to convince attendees that it's serious about being a channel powerhouse.

From a new global channel program -- Avaya Connect -- to updated services offerings, Avaya hopes it finally has the tools to counter long-held criticism that Avaya's channel programs are cumbersomely constructed and its certifications and training are difficult to navigate.

Avaya also wants to change its reputation for not doing enough to manage channel conflict with its direct sales force.

But if there were a lingering feeling in Nashville this week, it was that the biggest Avaya-related news of 2009 -- that Avaya was the winning bidder for Nortel Networks' enterprise business for $915 million -- is upstaging, if not outright stealing, the spotlight from Avaya's channel revamp.

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A number of partners told during the conference that until a product and portfolio road map is established and clearly articulated to partners, all bets on Avaya's channel success going forward are off.

They haven't seen enough yet, in other words, to convince them that Avaya will embrace the channel and make the integration of Nortel's portfolio as smooth as possible, and that the ball is in Avaya's court to make it smooth as soon as the Nortel acquisition passes muster with Canadian regulators.

"What's Plan B if this all blows up in their face?" asked Sammy Seo, president of NetSpeed Solutions, a San Francisco-based solution provider. "I mean, if they're too focused on making it work with Nortel, do we go to Shoretel? It's hard to say. We don't know anything right now."

Seo's concerns were the same as a number of other partners. With no Avaya-Nortel product road map to go on yet, it's hard to be confident the transition will be smooth.

And Avaya needs things to be as smooth as possible if Avaya Connect and the company's pledge to be serious about its channel business -- a goal of 85 percent indirect sales by 2012, said President and CEO Kevin Kennedy -- are to be successful.

"What they rolled out was very 30,000-foot level," said Jeff Hiebert, president and CEO of ROI Networks, a San Juan Capistrano, Calif.-based solution provider. "I think they're going to hurt some partners because a lot of the rewards seem very skewed to the platinum-level partners. I think they're going to see a lot of harsh criticism. Long term, it's the right thing to do -- it's just painful because it's all going to happen at once."

Avaya Connect, which Avaya announced this week but will launch as of Feb. 1, 2010, seeks to simplify the way Avaya rewards its partner tiers, the way it trains and certifies partners, and the way its price lists are structured. Among other changes, Avaya has dramatically cut down the levels of certification and number of training courses, and plans to ramp up the financial incentives for its top partners.

Avaya partners -- classified as Platinum, Gold, Silver and Authorized -- will also be able to see rebates processed much more quickly as it moves from a system of postsales rebates to point-of-sale credits when VARs buy through distribution.

Vice President of Worldwide Channels Jeremy Butt used his Wednesday keynote to describe how Avaya had failed its channel in the past and hopes to chart a course for better channel engagement going forward. Part of that was the confusion the programs themselves created.

"We knew we had to rework our program around the world. We had a fragmented program," said Butt. "You can be a platinum in the SME [small and medium business] program and a platinum in the enterprise program. We had some of you who were extremely creative and put out press releases announcing yourselves as double platinum."

That line brought a few chuckles, but Butt's suggestion that Avaya is simplifying its channel program seemed to resound -- especially when Butt addressed the long-held perception of Avaya as a disaster in how it manages conflict between its direct and indirect businesses.

"Given that we can't get much harder to do business with, I think we'll make improvements on that," he said. "It is not the job of any Avaya salesperson to give your price to the end user. We need to make sure our people are out of that. It's your deal, you give the price, not us."

Next: Avaya's Channel Vows

According to Avaya, the percentage of Avaya sales that go through indirect channels is increasing, especially in the Caribbean and Latin American markets, where indirect sales have increased 42 percent year-over-year (North America, by comparison, grew 11 percent).

Those gains come as Avaya continues to bring in new blood, including Butt himself, to Avaya's executive ranks, especially on the channel side.

President and CEO Kevin Kennedy assumed the top role in January, and both Butt and two of Avaya's other key channel executives -- Vice President of North American Channel Sales Carol Giles Neslund and Senior Director of Channel Strategy and Development Eileen Corrigan -- came to Avaya within the past year-and-a-half -- in Corrigan's case, within the past three months.

All three have deep channel resumes, and all reiterated in individual interviews with that the 85 percent level was not an unrealistic goal. When Butt transitioned to Avaya in June 2008 -- following years as channel chief at Motorola -- he found enough that was strong about Avaya's programs that it wasn't necessary to throw them all out.

"What struck me right away was there's a lot of good stuff in the programs already," Butt said. "Every program needs to evolve, and in this case it was so different around the world."

Each executive also said Avaya would continue to craft its product portfolio around jewels like Avaya Aura, the SIP-based UC suite Avaya unveiled in May and that Avaya is now offering in a version tailored to SMBs.

"Aura is a fabulous product and has huge value for channel partners," Corrigan said. "And the company, well, I would not have come here if I didn't think it was for real. This has been one of the worst years ever, and when you have a climate like this, it's easy to start taking deals direct and do things that aren't channel-centric, like pull back money. The message from Avaya is that commitments were made to the channel a year ago. It's a year later, and commitments were met, and now more commitments are being made."

Butt, Corrigan and Neslund also acknowledged that Avaya was taking on a huge effort revamping its channels at the same time as a major acquisition that will redefine what it can bring to market.

The time lines it's laid out are subject to change, they said.

"We can't afford for us or for you to disrupt our business in any way," Butt told partners during the keynote. "We'll make sure that when we get to the first of February, we're in good shape. We are not so single-minded to say that if we come across an issue that we need a bit more space to deal with, if necessary, we will move that time around. We're driving hard to that deadline, but we don't want to have another pricing fiasco on our hands."

To some solution providers, however, that sounded like a hedged bet.

"I don't know what that means" said an Avaya Silver solution provider, who requested his name not be used. "You'll notice they gave themselves a few outs, the whole thing about not 'disrupting business' if they can't hit their deadline. It's not going to be easy to flip the switch. But they're saying a lot of good things. They know what they're bad at, and I'm sure that they're at least going to try to fix that, which in and of itself is important."

"It's a lot. Can they pull it off? Yes. Will they impact a lot of people? Yes," said ROI Networks' Hiebert. "Some partners will fall out but with the Nortel partners coming over, they'll grow the channel capacity and coverage models. I think they're looking to get rid of the Authorized [partner] level altogether, frankly -- they've got a lot of people who do so little, many of them dealing switches out of the back of their truck a few times a year. It's a new look. They're very 'I don't give a [hoot] what you did for me yesterday.' We want you on the boat, but if you're not on the boat, buh-bye."

Next: The Nortel Product Question Mark

Most Avaya solution providers interviewed by were sympathetic to Avaya's having to wait out Canadian regulators before it can offer a product road map for Avaya and Nortel going forward.

"The aim is 30 days off the close," Butt said. "Some stuff will stay. Some stuff will go away. People want to know, and we don't know yet."

That hasn't made it any easier for them to plan, however.

"We're taking a wait-and-see attitude. Between product and services, it's a lot, and there's also a very big difference between how Avaya goes to market for service -- it's a very different recipe with Avaya," said Tony Parella, president and CEO of Shared Technologies, a Coppell, Texas-based solution provider and Nortel's largest U.S. partner. "I'm not going to do a damn thing until I see how this shakes out. We've invested a frightening amount of money learning [Avaya], and it's like we're learning how to walk again."

Shared is among eight of the country's 10 largest Nortel partners that Avaya has successfully recruited in the past year, all of which were in attendance in Nashville.

Parella said Shared hasn't done any greenfield Nortel business in the past year as the Nortel bankruptcy and subsequent sell-off wreaked havoc on both business and the public perception of Nortel. Still, he said, Shared is advising end users to stick with the Nortel portfolio and not make any sudden moves.

"It's been a difficult year, between the bad economy and the [Nortel] bankruptcy. Customers and end users are very loyal to the product; they've had it forever," said Glenn Means, COO at Shared. "We're anxious to find out where it's going to go, and until that road map is out, we're telling them the best thing to do is be current."

Jay Lassman, a research director for Gartner's Communications Applications group, also said he continues to advise clients to stay with the Nortel brand, even as other vendors try to swoop in and take advantage of the Nortel turmoil. As Means pointed out, "Everyone's got a Nortel replacement."

Other vendors have indeed made no secret about trying to lure frustrated Nortel partners with their portfolios.

"Cisco is jumping all over that, but so are ProCurve, Mitel -- it's like a bunch of sharks circling," said Zeus Kerravala, analyst and senior vice president at the Yankee Group, at a press and analyst roundtable. "There's been so much uncertainty for so long with the Nortel base that the finale of having that done has helped. The data portfolio is there, but it's pretty clear there are a lot of synergies on the voice side. For Avaya, the quicker you can get through the product rationalizing and resolution, the better it is for the customer base."

Nortel's signficant data networking portfolio represents a big opportunity for Avaya, observers agree, seeing as Avaya doesn't yet offer competitive products there. While Avaya wouldn't say much about how Nortel's data products would become part of the company line, Butt confirmed in his presentation that Avaya would create a badge and certification for Nortel's data products and that Avaya did not plan to mess with the Nortel data portfolio.

"Nortel has a data portfolio and we're going to create a data badge. That is the plan we have at this moment. That's what we're thinking of. This may change," he said.

More broadly, Butt said that as part of the integration of channels, Nortel partners would be able to continue to sell Nortel products, and could sell Avaya if they're certified, and vice versa. Which products will still be around once the road map is finalized is the question, however, especially in Nortel's voice and unified communications portfolio.

Many solution providers interviewed called out specific products, such as Nortel's Business Communications Manager 450, the all-in-one UC platform Nortel targets to SMBs of between 30 and 250 users.

"I've spent the better part of a decade losing to that product and I'd like to see it integrated," said Ken Apperson, co-founder and chief visionary officer of Quagga, a Folsom, Calif.-based solution provider and Avaya Platinum partner. "It's challenging, for sure. Hopefully the folks going through that are taking a view of let's let the best technology move forward. But again, we don't know what the feelings are."

"[Avaya's] IP Office is one of our sweet spots," added Andy DeAngelis, executive vice president of AllBusiness Communications, a Norwood, Mass.-based solution provider. "We're hoping there aren't going to be problems. Times like this can really change the decision about what you buy."

Most partners admired what Avaya had advanced for its technology agenda, and said UC products like Avaya Aura should gain strength as more Session Initiation Protocol (SIP)-based solutions take hold in the channel.

"Those conversations are accelerating in all accounts," said John Babcock, senior vice president and general manager for technology services at Relational Technology Solutions, a Rolling Meadows, Ill.-based solution provider.

"It's like someone flipped the switch," added Apperson of the interest he saw in SIP products. "It's great to see Avaya so bullish on SIP."

What's clear is that Avaya will have its work cut out for it in the new year, managing new channel programs, a potential Nortel integration, and the expectations of Silver Lake and TPG Capital, the investment firms that purchased and took Avaya private in June 2007.

None would go on record as saying so, but several partners privately expressed concerns to that pressure from Avaya's investor parents to make up for difficult company losses a year ago was the reason Avaya was trying to do so much so fast. One prominent partner said, "We see a huge cultural battle unfolding inside Avaya, and to deny it's not there is total [nonsense]."

Regardless of perception, all observers agreed that the Nortel enterprise acquisition could be a make-or-break moment for Avaya.

"This could be Avaya's opportunity to screw up," said Gartner's Lassman. "If you look at the industry, and specifically Avaya's going back to Lucent, the track record hasn't been very good in these types of opportunities."

"I think it'll be done over time, logically," said Parella of the portfolio roadmap. "Avaya has an opportunity to thread the needle and get the best of both worlds, but also an opportunity to do too much too fast and stub their toe. Which would be tragedy, because we all know what happens then: It feeds Cisco. It's in everyone's best interests to make it work."