I had a chance to sit down with Avaya CEO Kevin Kennedy yesterday at the company's partner summit in Las Vegas, and he offered his views on a wide range of strategic issues that the company faces; but it was a comment he made in the event's opening session that, for me at least, really frames the challenge and opportunity that Avaya and its competitors face.
In kicking off the opening plenary session, Kennedy told the audience that companies like Avaya that come out of the voice/PBX world face a new reality: "Applications are absorbing voice as a mere attribute of any interaction. That's a truth. It's a reality."
"The other reality, though, is that realtime call control has evolved," he continued. Call control, Kennedy said, is no longer just a function for voice media; video and text also now require realtime call control.
So if you thought Avaya was a voice company, you'd figure they're in trouble and facing an inevitable slow decline. But if you think of Avaya as a call control company, they're looking at a market that's getting ready to explode, and they bring as rich a heritage of call control expertise as any company in the world.
So when I sat down with Kennedy that afternoon, I wanted to know how Avaya plans to take that heritage and use it to prevail in a marketplace where the company confronts two giants in Cisco and Microsoft, as well as a host of other players.
Overall, Kennedy said, "The industry is very fragmented, increasingly pressed by consumer plays and consumer technologies." Avaya, Cisco and Microsoft may be the top-tier contenders, but Kennedy believes, "Consumer plays that are 'good enough' will be the fourth choice that will change the size of the market for all players."
Getting into specifics, here are some of the issues Kevin Kennedy addressed in our interview:
* Microsoft Lync: "Microsoft has done a great job either putting Lync trials into labs or [creating] awareness opportunities for people," Kennedy said. He said he's not seeing signs that major customers are considering abandoning an Avaya Aura migration strategy in favor of a core Lync-as-PBX strategy. In talking later that day with Sajeel Hussain, who runs marketing for Avaya ACE, it became clear that Avaya is planning to use ACE, its middleware for tying other apps to Aura, as a way to embrace Lync at the endpoint for customers who want Lync clients. Integrating Lync endpoints with Aura at the core via ACE middleware presumably would mitigate the customer's inclination to push Lync all the way into the core, where it would displace Aura.
* Other competitors: Avaya has two interesting emerging competitors, ShoreTel and Huawei, at the low and high end respectively. Kennedy acknowledged that "ShoreTel has done a great job" and said they "should be credited with focus." He also conceded that ShoreTel had taken advantage of Nortel's bankruptcy and the year of uncertainty that followed, to lure away customers. But ultimately, Kennedy said, "One good quarter for us is more than they'll do in a year."
On Huawei, which recently announced a major push into North America, Kennedy said you "always have to take Huawei seriously." But breaking into the North American market will be challenging for the Chinese manufacturer, and Kennedy said he doesn't believe Huawei is a threat over the next 24 months. If we're talking about a time frame of a decade, Kennedy would say only, "They're a well-run company."
* Further acquisitions: In plenary sessions, Avaya executives rightly took pride in the company's recent acquisition of Sipera, a small company that has a session border controller (SBC). As senior VP Alan Baratz pointed out in his general session talk, the SBC market is growing 40% a year, and SBCs have a key role to play in making wide area IP communications more seamless. Avaya had been OEMing Acme Packet SBCs (and will continue to do so), but these began as carrier products and are most suited to the largest enterprises; Sipera's SBC fills in the rest of the portfolio.
Kevin Kennedy told me that it's very possible that Avaya's acquisition picture for 2012 could look similar to this year's--four relatively small acquisitions, "technology tuck-ins" that fill out the Avaya portfolio. "They'll probably continue to be on the modest side," he said.
Part of the reason for that modest appetite, of course, has to do with the big meal Avaya has been digesting since the beginning of 2010, when it closed on the acquisition of Nortel Enterprise. Kevin Kennedy told me that, for all intents and purposes, that integration is now behind Avaya. In terms of personnel, partners and operational aspects, the integration is "pretty much done," he said.
Next page: SIP and Video
Kevin Kennedy is probably one of the most tech-savvy CEOs of any communications company, a PhD in engineering and a Bell Labs veteran. So he can talk tech, and for the past couple years, that's meant talking SIP (Session Initiation Protocol).
The industry has gotten pretty jaded when it comes to SIP, which is bound to happen when all the vendors spend a decade genuflecting before a standard and very few actually implement it in an interoperable way. My perception is that when Kevin Kennedy and the other leaders of Avaya talk about SIP, they're not talking about it narrowly as a standard, as IETF RFC 3261. They're really using the term as a proxy for the notion of Session Management, which goes back to the idea I mentioned at the beginning: Session Management is next-generation call control; it's what the PBX becomes when it emerges from the cocoon of voice-only. And as this post by Melanie Turek shows, Session Management may turn out to be a pretty good business to be in.
I saw evidence of this in the way Kevin Kennedy talked about video during our interview. Avaya execs have brought up video quite a bit here in Vegas, but they don't talk about video the way Cisco and Tandberg do, or the way video-centric companies like Vidyo and LifeSize do. Those companies see video as an application, whereas Avaya seems to see video as a medium. Cisco says that video is the new voice, but what I hear Avaya saying is that everything is the new voice. The Cisco formulation suggests video applications and endpoints supplanting voice apps and endpoints, whereas Avaya focuses on video as a communications modality.
To illustrate how I reach this conclusion, here's what Kennedy said to me about SIP and video: "Companies that are embracing SIP are doing so because of the potential of video." In other words, the only way to make video like voice, in terms of call setup and teardown, conferencing, and the like, is by running it on the same session management architecture that has evolved for voice under the rubric of SIP. And those customers who embrace SIP with Avaya, via Aura, believe or will be convinced that Avaya is a player in the world of video, Kennedy suggested.
You could argue that, in its way, this is every bit as self-serving a formulation for Avaya as Cisco's "video is the new voice" is for them. Kennedy himself conceded that the video market today is basically a Cisco-Polycom duopoly. And by Avaya's own admission, only a very small percentage of enterprises today have, in fact, fully embraced SIP.
But he also argued that, "The reality of the video market today is really scheduled video," as well as low-end, essentially consumer-grade desktop systems like Skype. Avaya isn't really after that first market, and they'd be crazy to bother with the second.
Conclusion
Avaya is making a big bet in its core market. They're betting that enterprises will need some form of centralized session control, signaling and management for communications, and that the best way to deliver this--for the customer and for Avaya's bottom line--is via a middleware platform that provides the call control and lets enterprises connect all their other applications into that middleware platform to allow the various media--voice, video and data messaging, to flow into those applications.
Sometimes grand visions get overtaken by events, but from where Avaya is positioned in the market, its vision makes a fair amount of sense. The test is whether customers agree.
