Wednesday, October 22, 2008

Avaya Global Analyst Conference - My Take

There was a lot to look forward to at this year's Avaya global analyst event, and on the whole, I'd say they lived up to expectations quite well. Yesterday I had a chance to post some photos, and now I'm set to share my overall impressions.

The big change is that being a private company now, there is less transparency in how they're doing. I'm not a financial analyst, so this is a bit less important for me, but still, this is a great opportunity to get an inside look as to how Avaya is faring since going private. The other development is in their leadership, with Charlie Giancarlo moving in from Cisco to serve as interim CEO. Lots of history there, but basically, Cisco's loss is Avaya's gain.

As with all analyst events, attendees are under NDA, either explicitly or implicitly. So, I'm not going to cite performance data, even though we did get a few glimpses. There was a lot of interesting messaging, and I'm just going to hit the high points here.

Charlie Giancarlo set the tone right away by stating Avaya's goal is to be 'the #1 global supplier of enterprise communications systems'. Take that, (enter any Avaya competitor here). While the definition of 'communications systems' is open for debate, the aim of being number one is not, so it's clear Avaya is intent on making the most of being private.

In terms of the grand plan, he shared Avaya's roadmap through 2010, by which time all the moves to refocus/reinvigorate the company should bear fruit. He didn't rule out going public again, and cited Seagate as a successful model to follow. They were taken private for $6 billion, and a few years later had doubled in value and went public again.

Some of the big initiatives underway to duplicate this feat include stronger regional alignment with corporate objectives to make Avaya more of a global organization, and a more channel-centric go-to-market model for driving sales. Another key Cisco hire was Todd Abbott, and I was very impressed with his vision for building the kind of sales organization to support these initiatives. It's all about sales at the end of the day, and he brought a lot of 'his people' over to Avaya, and this may well have as much bearing on Avaya's ultimate success as having Charlie Giancarlo on board.

It's clear that Avaya has worked hard to get the right management/leadership team in place, and it was really interesting to hear them say that this was easier to do as a private company. I never really thought about things this way, but when the stock equity of your employer gets weaker by the day, the harder it becomes to stay motivated. In today's market, the prospects of moving over to a company with a great brand that's just gone private and is in rebuilding mode become very attractive for all kinds of reasons. I get that, and now we're looking at a company with a top tier team, big money behind them, and free of the pressures of meeting quarterly earnings calls. That's a pretty good recipe for success, especially since the markets are not going to turn around any time soon.

Another interesting view from Charlie was the classic 'flight to quality' angle that will help drive growth. He took pains to point out that Avaya is one of only two financially stable vendors now ' the other one remaining nameless, but not hard to figure out. The financial mess we're all in has yet to take its toll, and sure, there will be casualties, and logic dictates that Avaya will be seen as a friendly haven for nervous customers and will get their share of business.

Fair enough, but he made another point that is probably more telling about the current market environment. That is, meaningful market share shifts happen in bad times, not good times. I've been out of MBA school too long to remember such things, so I don't have any empirical evidence to validate this, but it does make sense. If that holds true, and if Avaya executes well, then, sure, they are poised to capture market share. Whether it comes from above ' the other stable vendor ' or below ' everyone else, many of whom are in a weaker state ' I'm sure they're just happy to be growing.

There was a strong, recurring theme about focusing on channel support and moving away from the conflicts caused between direct sales efforts competing with the channels for business. In Avaya-speak, they call this being 'fulfillment neutral'. Okey dokey. More importantly, the new mantra is to become 'high touch, channel centric'. Let the channels do the selling, and provide more touch points to support them with things like training, certification, better order fulfillment and more marketing programs. This also means new compensation models to better incent them. Details weren't provided, but it was explained how some types of sales did not generate income for some channel partners, and they're moving now to address things like this. Sometimes it pays to build on best practices, and in this area, I'd say there's a lot of Cisco thinking here, which is not a bad thing. Todd Abbott summed this up best by saying this new focus on channels is 'a corporate strategy, not a sales strategy'.

Aside from being channel-centric, there was a lot of talk about becoming customer-centric. Really focusing on the needs of end users and getting beyond voice solutions. Karyn Mishima touched on how the consumer experience is now driving change and expectations around what Avaya has to deliver today in the enterprise. Not just new ways to communicate ' Facebook, Second Life, etc., but in new contexts such as retail kiosks in banks and telemedicine. There wasn't the Web 2.0 focus I saw at BroadSoft Connections earlier this month, but Avaya is playing in a different league, and are bringing elements of 2.0 in their own way. I saw some pretty interesting Web/voice mashups in their Demo display, but these are still in the lab. They won't be coming to market until next year, and what I saw looked very much like what's running today on BroadWorks Xtended.

I'm not an IT guy, and given Avaya's Bell Labs pedigree, there were a lot of technical presentations that I could only follow to a degree. However, it's clear to me that they're leveraging their Ubiquity acquisition pretty heavily, especially for their Unified Communications Solution. It was often mentioned how the majority of the installed base out there is still TDM, and to bring customers along into IP, they need to seamlessly support H.323 and SIP.

Other updates of note include One-X Mobile, which extends the PBX feature set to the mobile phone, with support for all the major handsets (and not just smartphones) and operating systems. For the broader Unified Communications solution, Jorge Blanco provided an extensive progress report, talking about how they've established a reference architecture to support enhancements across all touchpoints and applications ' the desktop, mobile phones, Web access, messaging and conferencing. Other developments of note include their Intelligent Presence Server which aggregates presence across multiple communication modes, and Session Manager, which among other things provides better interoperability for third party application developers. That said, there was not much about videoconferencing or social media/collaboration solutions, but there's plenty here for most enterprise uses.

SME is another key focus, and while Cisco has made similar proclamations, this space seems like a better sweet spot for Avaya. Geoffrey Baird runs this unit and pointed out how fragmented this market is. Nothing new there, but going into a down economy, this matters for both vendors and buyers alike. Avaya is profitable and well-capitalized, and not many of their competitors can say yes to both of these. Vendors with a focused offering who execute well and develop strong channel programs will do well, and that's the story we were being told/sold. I came away feeling pretty good about Avaya's chances here with IP Office, and Geoffrey cited some solid proof points to back this up (but I can't share those).

To get SMEs buying IP communications solutions in today's market, they really need to see attractive ROI metrics. I think there's a real opportunity here for vendors to tailor their ROI stories in the context of a business slowdown. SMEs will be looking to cut costs wherever possible, and while I didn't see any Avaya ROI scenarios, it sounds like they understand its importance for nervous business owners. SMEs also need manageable financing or leasing programs, and this is an area where Avaya's financial strength gives them a competitive edge. All else being equal, this can be the deal maker for SMEs deciding among comparable solutions from multiple vendors, and it looks like Avaya is playing that card pretty well.

I could go on, but will leave it at that. They packed a lot into a day and a half, but it felt about right, and it certainly was time well spent. Overall, I'd say Avaya is about as well positioned as one could expect, and I sure like their chances. The overall mood seems upbeat and energized, and based on my impressions from talking to people there, the move to privatization was the best medicine. It will be interesting to see who fills the full time CEO role, but the team in place today looks pretty solid to me, and next year should give us some strong clues as to how well this translates into growth.

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