Irwin Lazar
Irwin Lazar is the Vice President and Service Director at Nemertes Research, where he manages research operations, develops and manages...
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Irwin Lazar | February 16, 2017 |


Where Does Avaya Go From Here?

Where Does Avaya Go From Here? Avaya is delivering new products and capabilities like never before, but all under the cloud of its recent Chapter 11 filing.

Avaya is delivering new products and capabilities like never before, but all under the cloud of its recent Chapter 11 filing.

At this week's Avaya Engage customer conference, previously an independent event put on by the International Avaya Users Group but now co-sponsored by Avaya and the IAUG, Avaya reinforced the themes and messaging shared with analysts back at its Executive Partner Forum in early 2016 and demonstrated that it had executed on many of its previously announced initiatives. Avaya's efforts span four broad areas: cloud, open application development, IoT, and digital transformation.

All Good, But...
On the cloud front, Avaya executed on its plans to expand its Zang pure-cloud offering to differentiate it within the increasingly crowded communications platform-as-a-service (CPaaS) market. With the introduction of Zang Office and Zang Spaces, Avaya now offers UCaaS and team chat, and is poised to deliver additional functionality as well as integration with its on-premises platforms so that it will be able to compete more effectively against other pure-cloud and CPaaS-only solutions.

In the area of open application development, Avaya announced plans to integrate Zang with its Breeze application development platform. Customers will get the ability to map communications services to workflows, leveraging Zang for capabilities such SMS and on-demand phone numbers. Avaya also discussed plans to make its Breeze environment available within Zang, allowing it to differentiate from CPaaS providers that only offer their services via APIs.

Avaya's IoT efforts largely focus on providing security and performance to support massive scale of connected endpoints. Avaya announced Surge, a security and policy management approach for all connected endpoints.

Avaya couched all of these initiatives in the context of digital transformation, arguing that it is uniquely positioned to map communications to workflows, provide analytics to enable customers to segment and optimize customer interactions across all digital channels, and secure a growing maze of connected devices. To execute on this vision, Avaya announced new and expanded partnerships with Arrow Systems Integration, HP Enterprise, and Salesforce, as well as new cloud contact center capabilities in partnership with Spoken Communications.

Underlying all of these efforts was an air of stability and progress for a company that is currently in Chapter 11 bankruptcy protection. Avaya's senior management team remains largely unchanged from a year ago, a remarkable span of stability for a company that had seen a great deal of change over the previous few years. Avaya executives and staff are generally upbeat, projecting an aura (an Avaya Aura?) that Avaya's best days lay ahead as it finally gets out of the massive debt that has clouded its future and consumed its financial resources in servicing costs.

Still, Avaya's Chapter 11 filing was the elephant in the room.

Many Shades of Avaya
Avaya is confident that, after reducing the onerous burden of its $6 billion of debt, it will emerge at some point in 2017 as a company with improved cash flow that it can use to fuel more innovation. But what comes out on the other side may be different, perhaps drastically so, from the Avaya of today.

For example, many analysts and pundits have suggested that parts of Avaya, such as its networking and services businesses, could be spun off. If this were to happen it would likely mean a disruption in Avaya's plans to mate communications-enabled workflows with IoT and fabric networking offerings. And Avaya likely will be under pressure from new equity holders to conduct an IPO aimed at returning value to creditors that will not want to hold ownership stakes in the post-Chapter 11 company. But it's difficult to see how Avaya could conduct an IPO given its current financial performance (note that given its previous performance, plus its debt load, Avaya was unable to conduct an IPO despite efforts to do so over the last several years).

Another scenario is that a private equity firm would again acquire Avaya with the goal of merging the company with other properties to create a larger entity. And it's not unthinkable that an Avaya competitor (many of which bought ad space in the Las Vegas McCarran Airport as a guerilla marketing campaign targeted at Avaya customers flying into town for Engage) could swoop in and buy a leaner, less debt-laden Avaya to gain its technology, patents, and customers.

It's not inconceivable to think that even Cisco might find Avaya attractive... as a way of gaining its UC and contact center customers (and keeping them from Microsoft). Salesforce, Arrow SI, or even Oracle could find Avaya's application development and CPaaS platforms ideal for their own digital transformation efforts or to provide new options for mating communications and business workflows. Mitel, which has seemingly been on a mission to consolidate the UC market, could use some of its windfall from its aborted purchase of Polycom to make a play for Avaya.

Keeping Positive
Avaya customers I've spoken with over the last year are generally more positive about the company than they were in years past, though many were concerned when it looked as if Avaya would split its UC and contact center businesses as it sought a way to reduce its debt load. Larger customers are doing their due diligence, though, to develop backup plans in case Avaya struggles to emerge from Chapter 11 (see "Avaya Users: Time to Build Your Contingency Plans"). Most all were either using, or were intrigued by the ability of, Breeze to enable customized call flows, applications, and business processes/communications integrations, and Avaya's integration with Salesforce should allow an expanded set of capabilities.

What Does the Future Hold?
Avaya is at a crossroads. It has introduced a slew of new products and capabilities at an unprecedented rate. It has achieved stability and created a vision that has previously been lacking. It's transformed its portfolio to one that's better aligned with the opportunities afforded by digital transformation, and it's provided a clear path forward for existing customers. The question is whether the company will get the chance to continue to lead its customers, or whether it will emerge as a radically different organization via Chapter 11 proceedings.

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