Tuesday the 27th, at Interop in Vegas, sandwiched between network stalwarts, HP (Marius Haas) and Cisco (Brett Galloway), Avaya CEO Kevin Kennedy will take the stage and talk about Avaya, the network vendor.Avaya a network vendor? That's about as crazy as Microsoft being in the voice business or Cisco selling servers! But here we are, Avaya with a keynote at Interop. For details on what products Avaya is announcing, you can check out Eric Krapf's blog here. What I want to discuss is more of the market impact and Avaya's chance of success.
When Avaya first announced the acquisition of Nortel's enterprise business I thought that they should sell the data business to a real network vendor and not be a UC vendor that pretends to be a network vendor. When Avaya management told me their intention to keep the business and invest in it, I was convinced that the network business at Avaya would be nothing more than an enabler for UC. However, after meeting with some of the Avaya data team (that still sounds strange) in Billerica, MA a couple of weeks ago, I'm convinced now that the former Nortel data business has cheated death and has a better than punchers chance at returning to being a major network vendor for the following reasons:
Product quality and innovation. Anyone that has followed the data space will tell you that Nortel products were always high quality, well built products with innovative features. The same Nortel watchers will also tell you that Nortel couldn't market their way out of a paper bag so the company was unable to convert these products into stuff that people cared about. The new regime at Avaya, led by Kennedy, does know how to go to market and execute. He's not the funniest guy in the world and isn't going to wow crowds with Chambers-like speeches on world economic trends, but the go-to-market and operation discipline there is greatly improved from the past, so Avaya should leverage Nortel engineering much better than Nortel would have.
An example of this is the integrated wired/wireless management in the new wireless LAN 8100 series. This is the first integrated unified management product in the US markets (3Com actually released one in China last year) and I expect Avaya to bring a higher level of business relevance to this than the technical geek speak Nortel team would have.
Installed base. While it's true that Nortel's share in Ethernet switching has been rapidly falling year over year, I estimate that the Nortel data business has a total installed base of about 10% of the overall market. While it's nowhere near the installed base they have in voice, it's still a significant chunk of the market. Anyone that's still a Nortel customer through all the shenanigans the company has gone through over the past few years is a loyal customer and would be open to a refreshed portfolio. Again, Avaya execution will likely to a better job that Nortel could have, especially with the legacy baggage surrounding it.
Competitive landscape. Just a few short years ago, the enterprise networking landscape was known as Cisco and the seven dwarves. The market was comprised of the 8 million pound gorilla and a bunch of small companies that were mismanaged (3Com, Nortel, Extreme, Enterasys) or niche (Foundry, Force10). Today, the competition is the likes of HP, Brocade, Juniper and now Avaya. These are companies that are much larger, financially stable and legitimate alternatives to Cisco. So, while a few years ago, the thought of buying anything other than Cisco for enterprise networking needs was a laughable concept, today it's actually crazy to not consider an alternative, at least to bring some price pressure to Cisco.
Market transition. Cisco's own CEO, John Chambers, always talks about how market share changes hands at the points of market transition because the incumbents are unable to be the ones to enable the change. Cisco has stolen share in many markets (voice, security, MPLS, etc) by adopting this philosophy. Well, the enterprise data center is undergoing a significant transition itself, and that's the transition to a virtualized data center and Cisco is the legacy incumbent. This transition means, a new, flatter architecture which causes network managers to undergo a competitive bid for the network. Cisco has seen this trend as well, but winning that business isn't a slam dunk any more, and Avaya will get a shot competitively. To execute on this though, Avaya needs to focus on compute partners, data center trends and a bunch of things that have nothing to do with UC (although UC is a driver of network upgrade).
Overall, do I really believe that Avaya can grab a significant chunk of Cisco's business overnight? Of course not. There's a huge installed base of loyal, Cisco-tattoo-wearing CCIEs that will never, ever buy anything other than Cisco, and moving these buyers away from Cisco is next to impossible. Although, people said that about voice years ago and that happened, so who knows--but the voice vendors were caught sleeping when Cisco rushed by them, and Cisco is obviously well aware of this trend.
However, while Cisco is about 70% of the Ethernet switch revenue, they're only about half of the ports, meaning that half the market is up for grabs. Even if you concede say 25% over the long term for HP-3Com, that still leaves 25% for Avaya to fight for with the likes of Juniper and Brocade, putting Avaya in a very fair fight. Avaya still needs to get more data stuff on the website and do more non UC oriented marketing, but this is the first step in the rebuilding of the network business.
