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So that's next year; what about longer term? What are the goals for the Chirico era at Avaya?
Long term, it may sound a bit cliché, but it is about continuing to deliver innovative solutions and services, and delivering shareholder value and growth. It's also about the company's character and being a company known for having the best talent in the industry and one that not only faces the toughest challenges but wins.
Let me go back to when I started 10 years ago. We needed to transform the company to one that had a best-in-class business model. We were bleeding on every operational front. We successfully transitioned to top quartile performance via operational execution. Secondly, about five years ago we needed to transform from a hardware-centric business to a software and services company. I'm proud to say we've successfully moved the business to about 80% software and services revenue, 60%+ recurring, and EBITDA is north of 25% of revenue, just as examples. Now we're embarking on the next transformation, which is centered on the digital experience. Avaya will lead the industry in this digital transformation, partnering with customers along the way. We have rich history and heritage here, the best talent in the industry, the largest customer base, the best IP and innovation, and now the wherewithal to invest and a track record of execution.
Executing to win starts with employee engagement, giving purpose to the work, making sure the teams are aligned around the strategy and the customer -- having a winning attitude. At the end of the day, what matters is the final score on the scoreboard.
How do you intend to restore revenue growth at Avaya, and how long do you think it will take?
Actually, we're seeing growth in many areas of the portfolio, like cloud and professional services.
Let me step back and give you more background. When we went through transformation from a hardware to a software and services company, it put the topline under pressure. That is mostly behind us now. We're going to be at the forefront of the next transformation of our industry -- a digital transformation that leverages the cloud, big data, and AI, as an example. So first is stability in 2018 and investing for growth. Second, as I noted, with our financial strength we have the flexibility to invest in our core, adjacencies, and new markets. In order to accomplish this, we're going to take advantage of our strong business model and new capital structure, which freed up over $300 million of cash to invest.
As an example of growth, the contact center industry is on the front end of the transformation to the cloud -- maybe 10% of the way there.
I'm sure it's nice to have Chapter 11 behind you. My sense is Avaya was prepared and deliberate when the process started. As you were there throughout it, can you share some of the surprises that occurred last year?
Let me give you an honest reflection. I'm not sure we fully appreciated the complexity of the process and what it meant to employees, customers, and partners. And for a while it seemed like every day we were reacting to something in the press that our customers or partners heard or our competitors spread. Distractions. So, we kept the teams focused on the customers and delivering value and we erred on the side of over-communicating to stay above the noise. Competitors took their best shot at us, but we not only retained the business but exceeded our targets.
The last year has also given me an appreciation of how pervasive our brand and technology is in the market. I heard countless times from customers and partners that they were behind us, wanting us to succeed. They came through for us at an important time -- especially the channel, which is truly an extension of Avaya, a trusted partner.
One should keep in mind that Chapter 11 was never about solvency. It was about addressing the capital structure -- cleaning up the balance sheet. Throughout the process we stayed focused on areas that we could manage and delivering solutions our customers required.
Usually new leadership takes some time to learn the business before implementing changes. Since you've been at Avaya for 10 years, can we expect rapid changes?
Rapid, yes... and thoughtful. The first 100 days have been fast-paced. We've brought on a new management team, one that's action-oriented and willing to disrupt and they know what good looks like with a track record of execution. We've brought on a new board with diverse and relevant backgrounds, formed a business unit entirely focused on cloud, and we've rebalanced research and development priorities to increase focus on emerging tech and cloud.
I'm also taking a formal approach to transformation. We can't underestimate the importance of disruption to facilitate a transformation. I'm being directive where I need to be but also fostering collaboration, looking for feedback and empowering the teams to make changes. You have to walk the walk in order for the rest of the organization to realize it's not just words, it's coming out in the actions and, in turn, the results. It's my job as a leader to lay out the journey for the company, put the right capital structure in place, then execute and organize the business to sustain growth.
These are important points. Our previous prevailing emotion was best characterized as being cautious. And the fact is, a while back Avaya crossed a line from being aggressive to being cautious. For me cautious translates into a fear of taking risk, indecision, and as a result paralyzes organizations. We will not be cautious; we will be thoughtful and confident. We're going on offense.
Continued to Page 3: Chirico's take on market differentiation, debt, UC, and more
