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Avaya Brings on CRO with Growth, Customer Culture in Mind
With an eye on accelerating growth while maintaining its extreme customer-focus, Avaya last week announced that it has hired of its first chief revenue officer, Stephen Spears, who will report into CEO Jim Chirico and oversee the strategy, performance, and alignment of revenue operations for Avaya.
Spears comes to Avaya from his role as CRO of SAP SuccessFactors, which provides cloud-based human capital management software and is known for having great relationships with its customers. At SAP, he also held a number of other positions over the years, including a stint as SVP of HANA, a relational database management system.
On the surface, Spears’ alignment with Avaya is obvious. Avaya is now a cloud and software company and needs to operate as such. In its last earnings call, as I discussed in a recent post, the company reported that 89% of revenue came from software and services, 64% of revenue is now recurring and cloud, and alliance partner and subscription accounts for 30% of revenue. That’s a huge shift for a company that has historically lived on hardware and maintenance revenue.
As this shift happens, Avaya will need to implement new tools and processes to accelerate the transformation of its business model. Trying to grow the business without the right tools and processes could negatively impact its channel and customers and adversely impact the company. Avaya is off to a good start, but having a seasoned SaaS vet on board ensures success.
Avaya reinforced its commitment to customer success, especially after the April launch of Avaya Cloud Office by RingCentral, with dedicated programs to ensure businesses are getting the most value from, and actually using the things, for which they’re paying. Cloud and subscription services are a double-edged sword. If a customer purchases this way and if they take advantage of all the features available, that purchasing model is the gift that keeps on giving. It creates stability, predictability, and growth. However, if customers do not use the features and functions of what they’re purchasing, renewals are hard to secure — businesses typically don’t like to pay for things they don’t use. This isn’t a new problem for cloud companies to solve, and Spears will likely draw from his experience at SAP SuccessFactors to align Avaya’s different customer success initiatives to maximize customer value and revenue.
This dilemma has plagued the communications industry for years. Legacy systems are filled with features and functions that many customers aren’t even aware exist. With a one-time, upfront pricing model, a vendor can sell a product, shake the customer’s hand (pre-COVID) and say thanks, and then not worry about a refresh for a decade. In the meantime, it rakes in maintenance revenue. With subscriptions, customers will often sign one-, two-, or three-year contracts and purchase capabilities/features in tiers. The more they use, the more they buy, and the higher the subscription tier. This, in turn, results in higher revenue per user. If they don’t use all the available functionality, they’ll downgrade a tier.
This is where Spears’ experience at SAP SuccessFactors will pay huge dividends. SAP went through that transition years ago and although Spears had only been CRO of SuccessFactors for three or so years, he was part of the executive team that did this, plus he did lead the go-to-market strategy for HANA Cloud. In fact, the 2011 acquisition of SuccessFactors forced SAP to accelerate this transition. I haven’t talked to Spears about this directly, but I’m assuming he’ll apply many of the best practices learned from this experience at Avaya.
We should expect to see continued changes at Avaya that focus on cloud and SaaS, further validating that today’s Avaya isn’t the same Avaya of years past. This might seem like a lot of changes in a short period of time, but the market is moving fast and all players should be continually evolving.
Beyond the surface, the alignment runs deeper, around customer intimacy and loyalty. SAP SuccessFactors is renowned for its stellar customer service. This goes beyond customer success, and creates loyalty to the point where customers have almost an emotional bond with the brand. Salesforce, Microsoft (with IT buyers), and GPU vendor Nvidia are examples of companies that have managed to achieve this stature with customers, as well.
And Avaya has this same sort of customer culture. I’ve talked with many industry watchers who are shocked Avaya has as many large logos as it does given its financial ups and downs of the last few years. The reason Avaya has been able to retain many of those customers is that it is a very customer-focused company. Consider this: At the start of the COVID-19 pandemic, Nidal Abou-Ltaif, president of Avaya International, and his team called many of their customers almost daily to check in to see if they needed any help. These were not sales calls, he assured me. He also told me Avaya International, along with partner Extreme Networks, rallied the day after the explosion in Beirut to get many of the hospitals there up and running. Again, Avaya didn’t view this as a revenue opportunity, but rather simply as the right thing to do.
During a recent TV interview on First Move CNN with Julia Chatterly, CEO Chirico discussed Avaya stepping in and helping Humana and other healthcare organizations transition to work from home (WFH). Understand, this isn’t the same as shifting 50 contact center agents who are already using cloud to WFH. Avaya has many big customers with 10,000, 20,000, even 50,000 agents that will likely stick with a private cloud for years to come. Moving these agents to remote working is a significant amount of work, but Avaya did that, often free of charge — and not for the good press but because it was the right thing to do.
Spears is the latest hire with customer-focus in mind. CMO Simon Harrison came from Gartner, where he ran much of the CX research and is leveraging those insights to change the way Avaya engages with customers and partners with a focus on “outcomes and experiences” to drive adoption. The recent announcement of Avaya OneCloud is an example of how different Avaya looks and speaks. Frank Ciccone, who joined Avaya in January 2019 from Verizon Enterprise Solutions and is now SVP of North American sales, implemented the recent subscription programs, and when you think about some of those massive customers with tens of thousands of employees and contact center agents across just about every vertical, they’re the ones Ciccone and his team have been supporting. I’ve known Ciccone for years, and know he has a passion for customer service.
If you’re looking for another external proof point, this is what equity analyst Catherine Trebnick of Colliers Securities said about Avaya in a recent coverage note:
“Avaya has a huge customer base (+100k Customers, +100M UC seats and 5.5M CCI seats) that have yet to migrate to the cloud. Avaya now has to take advantage of the opportunity ahead of them now that the company has a full suite of products and offerings (with many consumption models) to mine its customer base and add new logos. We believe investors have undervalued Avaya's large, loyal customer base.”
Trebnick has done extensive research on Avaya and has talked with many of its very large customers and can confirm they have no intention of moving off Avaya platforms. Customers like Avaya and Avaya likes its customers, and I expect Spears, who comes from a company with a heart in its logo, to take these internal cultural changes to the next level as Avaya accelerates its cloud transformation journey.