Avaya's Channel Progress Questioned As IPO Discussion Lingers

It's been nearly two years since Avaya closed its $915 million acquisition of Nortel's former enterprise business unit and also revamped its channel program to a more streamlined global model focused on rewarding partner loyalty.

But questions remain about the vendor's channel direction, as as Avaya partners descend on Las Vegas next week for the company's U.S. channel partner conference, what's top of mind is what one partner described as a tug-of-war -- between an Avaya focused on growing its channel leadership and an Avaya so concerned about paying off its private equity owners and reaching a planned IPO that it's squeezed channel partner profit margins and gotten frustratingly distracted.

"There's been a lot of pain for partners over the last few years," said Stuart Chandler, president and CEO of Optivor Technologies, an Ellicott City, Md.-based solution provider and one of Avaya's largest data networking and government-focused VARs. "The margins for partners have plummeted, and that's a trend that cannot continue. They need to come out to the partners about how they're going to support the partner community and keep the partner community whole going forward. We are cautiously optimistic."

Several partners noted the substantial sweep of changes to the Avaya partner community, including that Avaya had cut a number of partners -- about 400 of the 600 previously authorized unified communications partners in the U.S. -- last year, but was also seeking new partners. As a result, the Avaya channel looks very different than it did two years ago, they said, especially given the frequent M&A activity among Avaya and former Nortel channel partners.

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"I'm interested in what they think they want the channel to look like," said Jim Maynard, vice president of sales at Parsippany, N.J.-based solution provider Strategic Products and Services, whose Avaya business is up more than 20 percent year-over-year. "There's a lot of consolidation going on, particularly in the middle and lower end of the channel, and I'm wondering how Avaya feels about that. Larger partners are getting substantially bigger, and does Avaya think it's good that we're putting on the heft to compete effectively."

Clarity is what Avaya partners are looking for, agreed David Johnson, president and CEO of Jenne, the Avon, Ohio-based value-added distributor and Avaya specialist.

Some of it is operational; for example, partners are still waiting for details from Avaya on how it will adjust pricing models for higher-tiered partners, he said. Some of it is strategic, including Avaya's motivation to recruit more net-new enterprise and SMB partners.

"I think we're anxious to hear the specifics," said Johnson. "We're all going to be there seeking some sense of the strategy and direction."

Avaya has made good on its promise to be more channel-friendly, Johnson said. But he also noted that in the past two years, it has, for example, offered fewer services opportunities for partners. There's a push-pull, Johnson agreed, between Avaya the channel-friendly vendor and Avaya the bottom-line driven company with an IPO on the horizon.

"They've talked about more going to the channel, but then more services to Avaya," Johnson said. "So what channel partners have to deal with here is a more balanced approach."

There's also been the distraction of constant executive changes, partners said, including, in the past year alone, the departures of former U.S. channel chief Carol Giles Neslund, and also Joachim "Joe" Heel, Avaya's former senior vice president and president, Avaya Global Services.

"I've told a number of folks on the executive team privately that this has been ridiculous," said the chief executive of a top Avaya partner, who requested his name not be used. "You can't set strategy, and build relationships, and get things done if it's a new face every six months. It seems like that's calming down now, but we've seen it almost every year for years now."

NEXT: Avaya's U.S. Channel Chief Promises Deeper Engagement

Whatever frustration exists over Avaya's frequent executive turnover, the company's choice in a U.S. channel chief is being applauded. Karl Soderlund, who became Avaya's new vice president, U.S. channel sales in October, will now be the go-to for U.S.-based Avaya partners.

"I think Karl Soderlund is going to be a great addition," said SPS' Maynard. "We knew him when was at Extreme. He can do well as the channel advocate inside Avaya to come out, see us, talk to us and learn about our focus."

Soderlund, who was most recently senior vice president, worldwide sales and business development at Certeon but is best known to partners for his years at HP, Fortinet and Extreme Networks, said knows partners have questions.

"We want to expand our current portfolio with that partner base, especially on the data networking side and into the video segments," Soderlund told CRN. "End users are starting to demand it it, and we're really going to incent our partner base to promote this new technology."

There are about 1,800 Avaya partners in the U.S., Soderlund said, and Avaya's win rate in competitive situations is increasing every quarter. There is a push on, he said, to recruit new partners to the Avaya fold, particularly with major competitors like Cisco still reeling from restructuring and other distractions. Expect updates to the Avaya Connect program at the partner conference and early in the new year, Soderlund said.

"We want to recruit and enable more partners. There's enterprise opportunity for us, and SME opportunity for us," he said. "Other competitors are making changes because their hands are being forced to make changes. We are progressively making changes and having a partner program that works. We will be making commitments to partners who are going to make commitments to us."

Soderlund said he plans to use his data networking experience to warm more telephony and UC-focused Avaya partners to the idea of selling Avaya data networking. He'll also be focused on partner profitability -- a big piece of his time at Certeon, where he spearheaded aggressive channel incentives like guaranteeing 20 percent margins for qualified solution providers.

"I told them my Certeon story," Soderlund said of his discussions with Avaya. "But it's not just greater margins; it's bringing a best-in-class solution to the table with best-in-class promotions. Go to any city from a geographic standpoint in the U.S. and you have 50 to 70 Cisco partners fighting over the same deal, where you could have three or five Avaya partners."

NEXT: Avaya The Technology Powerhouse

One thing Avaya observers don't dispute is that Avaya's product portfolio, from a technology perspective, is the strongest it's ever been. From the technologies built on Aura, Avaya's virtualized UC suite, to the newer Flare Experience, Avaya's core-to-desktop-to-mobile collaboration platform, partners are getting good looks and big wins behind the technology.

"We are now an innovator again," Soderlund said. "Fifty new products in the last 18 months."

Avaya has also kept pace with the integration of its Avaya and legacy Nortel customer bases, even with all those product launches. IP Office 7.0, the latest version of Avaya's flagship UC suite for SMBs, was the first to fully integrate Nortel's IP and digital phones fully into the Avaya platform, meaning Avaya VARs could offer IP Office as fully compatible with legacy Nortel SMB systems.

Avaya woke up to the loyalty of the Nortel customer base said Optivor's Chandler, who added that he is strengthening his Avaya line behind unified communications, data networking and video.

SPS' Maynard said his VAR is seeing growth and interest from customers on a number of Avaya fronts, particularly the Avaya Aura Contact Center suite and the Avaya Agile Communication Environment (ACE), a software offering intended to simplify how companies integrate multi-vendor communications systems and add custom applications.

"I came out of the software business doing applications and middleware," Maynard said. "The interest and attention we are driving around ACE is a game-changer. It takes what used to be plumbing and turns it into special-purpose middleware that sits in the broader IT applications stack, which is pretty compelling."

The impact of Flare is still a work in progress, VARs said. For SPS, customers have been sold on Flare as a collaboration platform, though not swayed by the roughly $2,000-a-pop video tablet that Avaya launched as a Flare endpoint.

"We're seeing interest in Flare as a user interface," Maynard said. "The tablet device seemed like a vehicle just to get it into the market, but I think by placing so much emphasis on the device initially, people were de-focused on the real message, which is that it's a pretty neat user experience."

Flare's availability on other mobile platforms, such as Apple devices and other smartphones and tablets, is the hook, he said.

"We are anxious to see it commercial-grade and ready to go on the iPad," Maynard said.