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Avaya Goes All In at Engage

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Last week, I was able to spend some time with Avaya's new management at its user event, Avaya Engage. This was the first big event since the RingCentral partnership announcement and Avaya Cloud Office, based on RingCentral’s UCaaS offering. As I indicated in this post, my key focus was understanding how Avaya was positioning its vision for its three major markets: large enterprise general employee communications (Aura and CM), SMB/mid-market general employee communications, and contact center.
 
Overall, Avaya Engage had an energy level that has been missing for several years, and over 3,000 attendees came to Phoenix for the event. Much of this was attributable to the new management team and their belief that they can transform the company. With 14,000 members, the International Avaya Users Groups is the largest in the industry. From a customer perspective, the messages were generally clear across the board.
 
Avaya Cloud Office
For the IP Office customer base, Avaya Cloud Office (ACO) was the migration offer emphasized. Explaining the differentiated value of the ACO solution, Avaya indicated that beyond migration tools, they would replicate key Avaya patented telephony features into ACO that would not be available on the general RingCentral solution. While there was little additional detail, the teams indicated that migration tools and phone reuse would be a major migration driver as well. One key question that came up in this discussion that is not clear is the percentage of current IP Office IP Phones that can migrate to ACO. Finally, Avaya announced that Avaya phones would be in the RingCentral general order area starting this month.
 
Avaya Cloud Office will ship at the end of February with enhanced functionality coming later in the year. Avaya is currently working with some early customers to onboard them to the RingCentral version now and will migrate them to ACO later. The Avaya team indicated that two of these customers were 600 and 900 seats. This will be a critical point if Avaya can accelerate the adoption of the ACO solution into these larger organizations.
 
Contact Center
In the contact center/customer engagement arena, Avaya showed a number of new capabilities and integrations to enhance the customer experience. Throughout the day, it became clear that Avaya is even more focused on this space than before, as they should be for the market growth. In fact, during discussions with senior Avaya leaders, there was little pushback to saying that customer experience would define Avaya in just a few years. One particularly interesting area was how Avaya is using these tools in the healthcare space. By integrating closely with Epic, Avaya is creating integrated patient-care solutions that better reflect the needs and deliver enhanced outcomes. This seemed to be a major learning moment for Avaya. For this next generation of advanced solutions, vendors must take the lead to drive early integrations to show the value to customers. According to the Avaya team, they don’t sell APIs alone, but rather focus on the outcome and how to deliver them.
 
Avaya also discussed the development of their next-gen CCaaS solutions. While there was no announcement of timing, it’s clear that Avaya is very focused on this deliverable. One key question is how to migrate the current Elite Contact Center base onto the new CCaaS platform. The Avaya Elite Contact Center platform is intimately integrated with on-premises/hosted PBX software of CM and Aura. At this time, there are no announced plans to change that, indicating that the emerging CCaaS platform will not be derived from the current Elite platform. While this was to be expected due to the transformative value of moving to a true cloud architecture and the Elite Contact Center’s age, it confirms the challenge of migrating from an on-premises CC platform to a new cloud CC platform with a different set of functionality and interfaces. I look forward to how Avaya will provide tools and incentives to facilitate the migration of the large Avaya Elite Contact Center base to the Avaya UCaaS platform. Clearly, as Avaya moves to be a more customer experience-focused organization, this is a critical component of overall success.
 
CM and Aura (and CS1K) Customers
Finally, for the large enterprise general business communications arena, where Avaya has 80 million seats, the path forward is less clear. For telephony, there appear to be three options: staying on the premise, migrating to a hosted version of the Aura/CM platform, or migrate to the new ACO UCaaS platform. In addition to these three telephony options, Avaya was showing its Spaces UC video/collaboration solution. This is a UCaaS type solution that Avaya staff claimed is better than Zoom or Microsoft teams at half the price. All of these options are available in different options as part of the Avaya IX subscription offer that includes licensing, upgrades, etc. Avaya IX also allows a 20% overage in users (1,200 users require a 1,000-user license). This is confirmation of the general movement in the industry to this form of licensing. From a growth perspective, the lack of a large enterprise UCaaS cloud or hybrid solution offer other than ACO in this space will prove challenging in securing new customers. It will be interesting to see if the volume of other vendor transitions to the Avaya OneCloud/ReadyNow offer (not migrations from Avaya premises). The rapid movement of Cisco and Mitel to a UCaaS offer in the telephony space along with some of the other large UCaaS players like 8x8, Vonage, and Masergy are making gaining new telephony focused procurements challenging.
 
For this cohort, there does not seem to be a single right path. While the RingCentral-based ACO offer is a UCaaS transition option, the reality is RingCentral's average customer is about 10 users. During the conference, Avaya indicated they are currently deploying 600 and 900 seat customers deployments into the RingCentral/ACO platform, but that will probably not be a reasonable proof for many of the large (5,000 seats and up) Avaya customers. Before this option sees major adoption, Avaya will need to prove the migration works for increasingly larger deployments, for features, availability, scale, migration tools, phone res-use, etc. For most of the large installed base, the migration plan seems to be to move to the Avaya OneCloud and ReadyNow Private Cloud deployments of the Aura platform. For an existing Aura/CM customer looking to maintain a stable telephony platform through the next turbulent period in communications, this is a very good option and financially good for Avaya. The choice of Team/Meetings solution between Avaya Spaces and Microsoft Teams seems to be one that could weigh in these decisions.
 
One clear challenge in this area is the partnering/competition relationship with Microsoft O365 and Teams in the Avaya large enterprise base. As I indicated in my pre-Engage article, there is good evidence that 60-70% of the large enterprise Avaya customers have already committed to O365 and Skype/Teams for their knowledge workers’ personal productivity tool solution. For this group, Avaya is offering Microsoft Teams integration solutions. However, as the Avaya Spaces UC/UCaaS offer is competitive to Microsoft Teams, it will be interesting to see if Microsoft promotes or dismisses the Avaya telephony platform for customers with O365. Having Microsoft less focused on removing Avaya from accounts as competitive might extend retention of the Avaya telephony presence in major O365/Teams accounts for years. I look forward to hearing more about how Avaya is encouraging and managing its customers committed to teams with their ongoing telephony solution needs.
 
A Re-energized Avaya
Coming away from my day at Engage, Avaya appears to be incredibly re-energized. I believe that Avaya will see a short-term revenue bump, due to the pent-up demand of upgrades that were held off in bankruptcy and over the last year as Avaya defined its path forward. As we saw after the Nortel bankruptcy and acquisition, when the base is comfortable with the strategy, those upgrades happen quickly. As 85-90% of Avaya revenue is attributable to ongoing activity in the installed base, and upgrades are on a three/four-year cycle, there may be a significant amount of pent-up demand and spending. Based on the presentations and path at Avaya Engage, customers seemed to be generally happy with the path.
 
For customers, the path forward is dependent on which product you are using from Avaya and the other products in your overall corporate architecture. For IP Office and large CC customers, the paths seem very clear (ACO and “stay the course – move to private hosted,” respectively). I look forward to seeing how Avaya and Microsoft partner or compete, and how they will discuss working together at Enterprise Connect this year. This seems to be the last area where clarity of path remains to be defined. While Avaya has a UC/UCaaS capability in Spaces, it’s a relatively late entrant and will require major efforts to displace Microsoft O365 bundle solutions. Perhaps Avaya will follow Cisco in Azure-based gateway deployment so Microsoft Teams to enable Avaya telephony usage in Teams deployments.
 
Avaya is showing new signs of energy and life; the new management team is infusing a new sense of purpose and direction. There is a clear renewed focus on customer experience and migrating the IP Office base to ACO. Remaining is the final path for UC capabilities for large enterprises, and how they integrate/replace the existing Avaya Aura/CM telephony system base remains to be clearly defined. While it isn’t clear how resurgent and successful the new Avaya will be, it’s absolutely re-energized and much more focused. Avaya has opened the door to success; the key will be how they focus and partner in the new business communications market.
 
A Cisco Footnote
In the time it took to write and edit this post, I also attended the Cisco collaboration analyst meeting in Santa Clara. The clear focus of Cisco in the CC/CX space, combined with its total installed base scale in the IP based business communications market and the ability to acquire key assets and people/innovation in the emerging CX transformation, will be a strong challenge that Avaya must address. I look forward to understanding more detail about Avaya’s path in the overall CX space at EC20 and Avaya analyst meetings later this year.

Looking to see what Avaya and Cisco have in store for the future? Then, make sure to visit their booths at Enterprise Connect 2020 (Booth #1418 and #200, respectively)! Not registered yet? Check out the full exhibitor list and register today using the code NOJITTER to save $200 off the current rate!