Do I think Avaya will be successful in its data center plans? I actually do and there are several reasons why.
When Avaya acquired the Nortel enterprise business unit the majority of focus was on how the two company's voice businesses would be integrated together. Almost all of the focus was on voice and UC and rightly so. It's what Avaya did and most of what Nortel did, and will continue to be the bulk of revenue from "Norvaya". However, Avaya did inherit a once powerful enterprise data business as well.
When the acquisition took place I thought Avaya might have tried to sell off the once powerful and, at that time, beleaguered data business unit. However, considering the whole enterprise business went for approximately $900 million, and most of the valuation was in the voice business, the data business wouldn’t have fetched more than a couple of hundred million, at best. Considering Brocade paid $3 billion for Foundry Networks, who revenue wise is about the same, it certainly seems that Avaya wouldn't have got what Nortel data was worth. Obviously Foundry was trending up and Nortel data trending down, but the point is, Avaya probably wouldn’t have gotten enough money to make it worth selling.
The other thought I had was that Avaya would take the data business and make it primarily a UC enabler, taking much of the value away from it but when I met with the Avaya data group (that still sounds a little strange) they assured me that wouldn’t be the case.
The VENA and related product announcements this week (check out Eric’s blog on the details) were a solid proof point that Avaya isn’t “UCing” up the data portfolio and is indeed working towards solving bigger problems in the enterprise than just how to make voice and video work better.
At the highest level, VENA looks to solve the same issue that other data center architectures such as Juniper's Stratus, Cisco's Fabric Path and Brocade's Virtual Cluster Switching (VCS) does. The problem is that in today’s data center, the networks are designed using an old protocol called Spanning Tree that is optimized for older, more static data centers where all the traffic runs North-South. From a vision perspective, the future data center will be comprised of virtual workloads that create a significant amount of East-West traffic, driving the need for a different type of architecture.
So, do I think Avaya will be successful in its data center plans? I actually do and there are several reasons why.
The first is that this is a level playing field and the first real opportunity any vendor has had to take share in a long time. As John Chambers has stated repeatedly, meaningful share shift only occurs when a market is in transition. The move to VoIP gave Cisco the opportunity to take share and they did. The data center network is definitely in transition and if you look out into the future, the move to cloud computing, virtual desktop, coupled with new form factor devices may cause a transitional shift in the overall corporate network, so there is an opportunity there. If one of the many vendors building fabrics can demonstrate a marked advantage over their competition in data center networking, I believe share shift can occur quickly. The market's wide open right now for someone to step up and grab share. Cisco has an obvious advantage because of its incumbency but the network in the data center is far too important for an enterprise to just hand them the business.
A second reason to believe Avaya has better than a puncher's chance at being successful is Nortel engineering. Anyone that’s followed the Ethernet switch market over the years knows that Nortel’s strength was the quality of its products due to strong engineering. Sales efficiency, marketing and go to market was a big weakness, but the products tended to be fairly strong. For example, Nortel has had a feature called split multilink trunking (SMLT) for a number of years that does provide an alternative to spanning tree. Nortel really didn’t do a good job of promoting SMLT nor creating any kind of immediate need for it, but Avaya can leverage that technology now.
The third reason to think Avaya can have success is installed base. While Nortel has rapidly lost share over the years, the installed base of customers that has Nortel network equipment is still sizeable. I believe the cumulative installed base of Nortel networking equipment is bigger than any other vendors except Cisco and HP. Couple this with the fact that Avaya sales reps now carry a data quota and the potential is there for Nortel to have success at least with the installed base.
Lastly, Avaya is a much better run company that it was before, certainly better than the management team that was in place at Nortel during the last few years of its existence. A strong management team, even with crap product, can often be successful. On paper the VSP 9000 seems to a rock solid, energy efficient product that can be a core switch in a virtual data center. Kennedy and company is a very strong team and should be able to drive a successful launch.
This is the first time in a long time that I've seen actual differentiation in network products. Historically vendors were either a little faster than Cisco (Foundry) or cheaper (HP) than Cisco and that was pretty much it for differentiation. The challenges of a virtual data center have given all the vendors a chance at gaining share. Considering outside of Cisco and HP, no one else has more than a couple of percentage points of market share, only small gains are needed to have a big impact on the market. It's too early to tell whether Avaya’s VENA vision and products are significantly better than Fabric Path, Stratus or VCS, but Avaya's got as good a shot as anyone, and that’s the best opportunity the Nortel networking group has had in years.
