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Message to Avaya Customers, Channel: Don't Panic!
The Green Bay Packers, led by struggling QB Aaron Rodgers, started off the 2014 season 1-2. The always-calm Rodgers told the panicked Packers' fans to R-E-L-A-X, and the team ended up finishing 12-4 -- winning its division but losing in the NFC title game to the Super Bowl-bound Seattle Seahawks.
Rodgers' message to fans not to panic so early in a long season resonates with me as I think about the news coming out of Avaya yesterday regarding the sale of the data networking business.
We're obviously very early in Avaya's bankruptcy cycle, with the Chapter 11 filing coming about six weeks ago. Another piece of the puzzle fell into place last night, when the company announced that Extreme Networks had offered to buy Avaya Networking for $100 million. I see no need for Avaya customers or channel partners to panic; making rash decisions so early in a prolonged cycle can end up bad, so take a breath and see what happens.
The network isn't going to stop running because the paint changes from red to purple. In fact, the shift of assets from Avaya to Extreme is likely to be a good thing for customers. I've had extensive conversations with both Extreme and Avaya about this, and neither side wants to upset the customer base.
Eye on the Core
Post acquisition, Avaya will be able to focus more on its core, which is unified communications and contact center. However, Avaya intends to become an Extreme reseller to ensure continuity for its UC and networking customers after the transaction is complete. Between then and now, Avaya will continue to sell the entire portfolio of networking products, and doesn't expect an impact on any bid, quote, or deployment. Extreme wants to buy Avaya Networking for its technology, so that's not going to go away. That means customers shouldn't hold back their businesses by putting the brakes on a network upgrade plans.
Avaya channel partners should take the same approach. Most have invested a significant amount of money, time, and people in their relationships with Avaya, and making an off-the-cuff decision could lead to business disruption. The good news for customers is that most channel partners I've talked to are in fact taking the long view and reaffirming their commitments to Avaya. One example comes from Carousel Industries, one of Avaya's largest partners. In an email to his team, James Marsh, chief revenue officer, emphasized the company's commitment to Avaya. "We are absolutely focused on growing our relationship with Avaya," he stated. "I personally have never been more excited about where [Avaya] is investing and what they're bringing to market."
Just so everyone understands what happens from here, Extreme is now what's known as a "stalking horse bidder" in what amounts to an auction process. This means the door is open for another vendor to come in, up the offer, and buy Avaya Networking, so the sale to Extreme is not a fait accompli. If another company ups the offer, Extreme can counter or accept a break-up fee and collect a reimbursement for its legal fees.
However, as Occam's razor suggests, the simplest solution to a problem is typically the right one, and I don't see another vendor having the motive, fit, or opportunity to buy Avaya Networking right now. Looking at potentials... Dell-EMC could submit a bid, but the integration of those formerly separate entities is still underway and adding in another business would complicate that situation. Arista Networks certainly has the money, but as a data center pure play isn't quite the right fit. So the purchase is likely to remain in Extreme's hands, which is a good thing for customers and channel partners. Let me explain.
Customers should take comfort in the fact that Extreme is an enterprise pure play with a vision that's similar to Avaya Networking's -- networks are too complicated and too manually intensive to meet the needs of a digital organization. Avaya has built its Fabric Connect technology on the concept of a transparent core in which a network administrator can make changes at the edge of a network for proliferation throughout the network rather than on a box-by-box basis.
Avaya and Extreme have complementary portfolios, so I don't think much product rationalization will be necessary. Avaya' fabric operates at Layer 2/3, whereas Extreme's is at Layer 3. Avaya has great modular products, whereas Extreme's strengths lie in a fixed form factor. Both have a next-generation data center solution on the roadmap and without getting into details, I believe the market can support both based on vertical deployment and use case. Extreme has a strong network management platform, and Avaya recently introduced cloud management.
However, some rationalization would likely be needed around Wi-Fi. Extreme has an excellent Wi-Fi solution, bolstered by the recent acquisition of Zebra Technologies' Wi-Fi business, whereas Avaya's OEMs its solution from Xirrus. Extreme also has an outstanding network analytics tool, unimaginatively enough called ExtremeAnalytics. I would expect Extreme to ditch Xirrus and go to market with its own solution, which in my opinion is a better set of products.
So puzzle piece one was the bankruptcy filing, and piece two will turn out to be the divestiture of Avaya Networking. Avaya plans to file a plan with the court this month, so the picture should be complete soon enough. For now, let's follow Rodgers' advice, and R-E-L-A-X.