Allan Sulkin
Allan Sulkin, president and founder of TEQConsult Group (1986), is widely recognized as the industry's foremost enterprise communications market/product analyst....
Read Full Bio >>

Allan Sulkin | August 17, 2009 |


Avaya is Giving it Away

Avaya is Giving it Away Software can make for a potentially high margin sale, but if necessary it can be used as the primary sales incentive to sell the system.

Software can make for a potentially high margin sale, but if necessary it can be used as the primary sales incentive to sell the system.

One of the first things I noticed about Avaya's quarterly shipment report was that the number of UC licenses outnumbered telephony system line station shipments by almost a 2:1 margin, about 4 million UC licenses compared to about 2.2 million line stations. I asked Avaya about this apparent anomaly, thinking that the UC license data was the collective number of licenses for specific functions or applications and that some station users required multiple license fees. But no, the UC licenses were All-in-One licenses that include a range of Avaya UC-defined applications, including desktop soft phone, presence, mobile extensions with GUI client, teleworking, and Applications Enablement Services (AES) for API/SOA requirements. Why then did UC licenses so greatly outnumber line station shipments?The answer, it turns out, is simple. The majority of the UC licenses were free giveaways as part of a promotion plan to incent customers to upgrade their installed Communications Manager software to a more current release (R5.0 or greater). Normally only customers who purchase the Enterprise edition of Avaya Aura Communication Manager receive free UC All-in-One licenses for all station users; Standard edition customers pay a nominal fee of $50 per station user desiring the license.

To truly understand the potential dollar savings for customers who benefited from the license fee promotion one should know the original prices of the individual options before everything was bundled. When most customers first installed their Avaya system, the collective street cost of the individual license fees for soft phone, mobility, et al, were on the high side of $500. As an example, the original list price for the Avaya cellular extension software option was $150 and the mobile GUI client license fee was at about $100. Customers who received these options at no cost as part of the upgrade promotion certainly had a lot to financially cheer about; customers who did pay license fees for any or all of the station licenses included with All-in-One prior to the promotion are probably not so happy.

When UC features, functions, and applications first hit the market, it was thought they would generate a profitable revenue stream that would significantly increase bottom line profits, because software offerings have high profit margins. What has happened is that many of Avaya's UC features and functions are currently priced at bargain basement rates for competitive pricing reasons. More than once when Avaya introduced a new pricing initiative they said it was in response to Cisco's pricing strategy. Avaya's All-in-One bundle was a competitive response to the Cisco Unified Workspace Licensing (CUWL) bundle (Professional edition). Cisco offered its dealers major discounting incentives to pitch customers the CUWL bundle and to position it against competitor's UC-limited standard generic software offering. Though these two competing packages don't exactly align--e.g., Cisco's includes basic Meeting Place conferencing and collaboration capabilities while Avaya's Meeting Exchange option is priced separately--they do share several common elements, such as soft phones, presence and mobility. Other competitors have also joined the UC license giveaway fad, such as Siemens Enterprise Communications, who now includes some basic UC capabilities in its entry generic software package for OpenScape UC Server that were previously available with standalone OpenScape, only.

There have always been enterprise communications system promotions, but none have had the financial scope of what we are currently witnessing. For another example, I recently wrote about Alcatel-Lucent's free IP station license promotion, (which does include all standard generic software features, a fact verified after the post was published). Like the Avaya and Cisco bundle packages, this is a significant cost savings for customers, because this can be applied to a very large number of system subscribers. Previous promotions were usually for a limited number of telephone instruments or a fixed application server software license worth a few thousand dollars, at best. The Alcatel-Lucent promotion can save a customer about 25% of the total system cost; the Avaya and Cisco software bundles can save customers more than half if the once-optional license fees were purchased for all station users.

The likely reason we are now seeing free software as a marketing tool is that it is a relatively inexpensive form of discounting based on cost of goods sold. The primary cost to the system supplier for software is usually fixed, sunken R&D expenses that were itemized for income statement purposes many months, sometimes years, ago. System hardware costs are more current expense items and variable based on system configurations. The current cost for giving away 10 software licenses is the same as giving away 1, but the hardware costs for 10 circuit cards or telephone instruments are about 10 times the cost of only 1 card or phone. In addition to R&D expenses, hardware component costs must factor in raw materials, labor, storage, inventory, and shipping, among others. Software has virtually none of these components. What's in the past is past (like software development), but what happens today is important for tomorrow's earnings report.

Software can make for a potentially high margin sale, but if necessary it can be used as the primary sales incentive to sell the system, even with little or no associated profit margin. It appears that the highly competitive nature of the enterprise communications market is dictating that software be sold as the latter.Software can make for a potentially high margin sale, but if necessary it can be used as the primary sales incentive to sell the system.


March 7, 2018

Video collaboration is experiencing significant change and innovation-how can your enterprise take advantage? In this webinar, leading industry analyst Ira Weinstein will present detailed analysis

February 21, 2018

Business agility has become the strongest driver for enterprises to begin migrating their communications to the cloud-and its a benefit that enterprises are already realizing. To gain this benefit

February 7, 2018

Enterprises are starting to grasp the critical importance of security and compliance in their team collaboration deployments. And once the risks are mitigated, your enterprise can integrate these n

March 12, 2018
An effective E-911 implementation doesn't just happen; it takes a solid strategy. Tune in for tips from IT expert Irwin Lazar, of Nemertes Research.
March 9, 2018
IT consultant Steve Leaden lays out the whys and how-tos of getting the green light for your convergence strategy.
March 7, 2018
In advance of his speech tech tutorial at EC18, communications analyst Jon Arnold explores what voice means in a post-PBX world.
February 28, 2018
Voice engagement isn't about a simple phone call any longer, but rather a conversational experience that crosses from one channel to the next, as Daniel Hong, a VP and research director with Forrester....
February 16, 2018
What trends and technologies should you be up on for your contact center? Sheila McGee-Smith, Contact Center & Customer Experience track chair for Enterprise Connect 2018, gives us the lowdown.
February 9, 2018
Melanie Turek, VP of connected work research at Frost & Sullivan, walks us through key components -- and sticking points -- of customer-oriented digital transformation projects.
February 2, 2018
UC consultant Marty Parker has crunched lots of numbers evaluating UC options; tune in for what he's learned and tips for your own analysis.
January 26, 2018
Don't miss out on the fun! Organizer Alan Quayle shares details of his pre-Enterprise Connect hackathon, TADHack-mini '18, showcasing programmable communications.
December 20, 2017
Kevin Kieller, partner with enableUC, provides advice on how to move forward with your Skype for Business and Teams deployments.
December 20, 2017
Zeus Kerravala, principal analyst with ZK Research, shares his perspective on artificial intelligence and the future of team collaboration.
December 20, 2017
Delanda Coleman, Microsoft senior marketing manager, explains the Teams vision and shares use case examples.
November 30, 2017
With a ruling on the FCC's proposed order to dismantle the Open Internet Order expected this month, communications technology attorney Martha Buyer walks us through what's at stake.
October 23, 2017
Wondering which Office 365 collaboration tool to use when? Get quick pointers from CBT Nuggets instructor Simona Millham.
September 22, 2017
In this podcast, we explore the future of work with Robert Brown, AVP of the Cognizant Center for the Future of Work, who helps us answer the question, "What do we do when machines do everything?"
September 8, 2017
Greg Collins, a technology analyst and strategist with Exact Ventures, delivers a status report on 5G implementation plans and tells enterprises why they shouldn't wait to move ahead on potential use ....
August 25, 2017
Find out what business considerations are driving the SIP trunking market today, and learn a bit about how satisfied enterprises are with their providers. We talk with John Malone, president of The Ea....
August 16, 2017
World Vision U.S. is finding lots of goodness in RingCentral's cloud communications service, but as Randy Boyd, infrastructure architect at the global humanitarian nonprofit, tells us, he and his team....
August 11, 2017
Alicia Gee, director of unified communications at Sutter Physician Services, oversees the technical team supporting a 1,000-agent contact center running on Genesys PureConnect. She catches us up on th....
August 4, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, has lately been working on integrating enterprise communications into Internet of Things ecosystems. He shares examples and off....
July 27, 2017
Industry watcher Elka Popova, a Frost & Sullivan program director, shares her perspective on this acquisition, discussing Mitel's market positioning, why the move makes sense, and more.
July 14, 2017
Lantre Barr, founder and CEO of Blacc Spot Media, urges any enterprise that's been on the fence about integrating real-time communications into business workflows to jump off and get started. Tune and....
June 28, 2017
Communications expert Tsahi Levent-Levi, author of the popular blog, keeps a running tally and comprehensive overview of communications platform-as-a-service offerings in his "Choosing a W....
June 9, 2017
If you think telecom expense management applies to nothing more than business phone lines, think again. Hyoun Park, founder and principal investigator with technology advisory Amalgam Insights, tells ....
June 2, 2017
Enterprises strategizing on mobility today, including for internal collaboration, don't have the luxury of learning as they go. Tony Rizzo, enterprise mobility specialist with Blue Hill Research, expl....
May 24, 2017
Mark Winther, head of IDC's global telecom consulting practice, gives us his take on how CPaaS providers evolve beyond the basic building blocks and address maturing enterprise needs.
May 18, 2017
Diane Myers, senior research director at IHS Markit, walks us through her 2017 UC-as-a-service report... and shares what might be to come in 2018.
April 28, 2017
Change isn't easy, but it is necessary. Tune in for advice and perspective from Zeus Kerravala, co-author of a "Digital Transformation for Dummies" special edition.
April 20, 2017
Robin Gareiss, president of Nemertes Research, shares insight gleaned from the firm's 12th annual UCC Total Cost of Operations study.
March 23, 2017
Tim Banting, of Current Analysis, gives us a peek into what the next three years will bring in advance of his Enterprise Connect session exploring the question: Will there be a new model for enterpris....
March 15, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, discusses the evolving role of the all-important session border controller.
March 9, 2017
Organizer Alan Quayle gives us the lowdown on programmable communications and all you need to know about participating in this pre-Enterprise Connect hackathon.
March 3, 2017
From protecting against new vulnerabilities to keeping security assessments up to date, security consultant Mark Collier shares tips on how best to protect your UC systems.
February 24, 2017
UC analyst Blair Pleasant sorts through the myriad cloud architectural models underlying UCaaS and CCaaS offerings, and explains why knowing the differences matter.
February 17, 2017
From the most basics of basics to the hidden gotchas, UC consultant Melissa Swartz helps demystify the complex world of SIP trunking.
February 7, 2017
UC&C consultant Kevin Kieller, a partner at enableUC, shares pointers for making the right architectural choices for your Skype for Business deployment.
February 1, 2017
Elka Popova, a Frost & Sullivan program director, shares a status report on the UCaaS market today and offers her perspective on what large enterprises need before committing to UC in the cloud.
January 26, 2017
Andrew Davis, co-founder of Wainhouse Research and chair of the Video track at Enterprise Connect 2017, sorts through the myriad cloud video service options and shares how to tell if your choice is en....
January 23, 2017
Sheila McGee-Smith, Contact Center/Customer Experience track chair for Enterprise Connect 2017, tells us what we need to know about the role cloud software is playing in contact centers today.