This is Allan Sulkin's take on the Avaya analyst meeting:
During his first (and maybe last) presentation to industry analysts as Avaya CEO, Charlie Giancarlo (who will also be a keynote speaker at the upcoming VoiceCon San Francisco) told the gathering that the company's goal is to be the #1 supplier of communications systems to all enterprises (small to large, inclusive). Until recently Avaya could realistically claim global market leadership status, but the fast rise of Cisco Systems and the future threat of Microsoft makes it anyone's ballgame given the dynamics of the industry sector.Among the supporting reasons Giancarlo gave for achieving the lofty objective were: Avaya's reputation for strong and reliable products; a well respected brand name within the market sector; leading market positions in several product and application categories, particularly contact centers; and its services capabilities. He also cited the loyalty of its customers and channel partners.
Giancarlo revealed two interesting items during his presentation. Avaya had revenues of $5.2 billion for the recently closed fiscal year, down slightly from fiscal 2007; and he described the scenario for Avaya again becoming a public company. Citing the example of Silver Lake Partners' Seagate acquisition, he said Avaya would again become a public company a few years down the road, assuming revenue/profit growth and improved financial market conditions. The Silver Lake acquisition took Avaya private one year ago, seven years after Avaya was spun-off from Lucent Technologies (now merged with Alcatel).
Giancarlo said that his term as interim CEO may be over soon, because several candidates for his position are being evaluated right now, with a decision and announcement expected sometime early next year. Avaya was very fortunate that the former Cisco executive was available for the interim position; he is a Managing Director of Silver Lake (which owns Avaya in partnership with fellow private equity firm TPG). According to Giancarlo, Avaya is currently in its cultural transformation stage. Fiscal 2008 was its get-ready stage and Fiscal 2010 is set for its growth stage.
During the past year, Avaya has had undergone a major corporate realignment, with many new executives assuming major roles and responsibilities. New business units were named (Unified Communications, Contact Centers, and Integrated Office Communications), its supply chain problems were addressed, structural improvements in its IT infrastructure were implemented, and a new Go to Market (GTM) strategy was developed.
The last item appears to be following the Cisco model, because Avaya plans to reduce its percent of sales through direct channels, and increase indirect channel (System Integrators, VARs, service providers, and CPE distributors) contributions. About 55% of current Avaya global sales are indirect, and the goal is to increase this to the 75% - 85% level. Direct sales still lead indirect in the U.S., because most of Avaya's designated global accounts are domestic-based companies. Avaya's 1,200-strong field sales force will provide hand-holding support of the indirect dealers in an effort to expand market coverage and reduce internal costs.
Giancarlo took care to emphasize Avaya's "high touch" of customers despite the new indirect channel-centric GTM strategy. The last time Avaya handed off a significant number of direct sales accounts to its channel partners, more than a few customers were peeved, to say the least.
This fiscal year will see a new focus on business users, leveraging of new business processes, and introduction of new products and product enhancements (stay tuned for my article early next year) across all three business units. Fiscal 2009 will be used to set the stage for Fiscal 2010 growth (according to Avaya plans). Future growth will be highly dependent on how well Avaya retains its current customer base, fending off continuing attacks by Cisco and new attacks by Microsoft, as well as the recovery of the global economy.
Giancarlo said that during difficult economic times, customers look to financially secure and stable vendors for their IT needs, emphasizing that Avaya was one of only two who would currently qualify for this designation. Audience members, like myself, assumed Cisco to be the other (Microsoft was probably not included in Giancarlo's competitive market mix at this time).
When a slide of the current executive management team was shown, it was probably the first time many audience members saw the faces of most individuals on screen, because there has been a major influx of new talent to Avaya during the past year. As someone tracking the organization the better part of three decades, I can't recall when the top management positions were occupied by so many outsiders to the voice communications market. Perhaps Avaya needs fresh perspectives on the marketplace, because the market is highly dynamic and constantly shifting focus.
The market learning curve for the recent hires has to be accelerated, because competition has never been more intense. Fortunately for Avaya, there are strong levels of management below the top tier, with years of voice market experience and it includes many individuals I have known for too many years.