Lippis Report 161: The New Nimble and Innovative Avaya
For as long as I have been following Avaya—and it’s been a decade since it was spun out of Lucent back in October of 2000—it has undergone three fundamental transitions. First, Don Peterson, Avaya’s first CEO, managed to fix Avaya’s balance sheet after Lucent saddled it with heavy debt. He also pointed the way toward IP telephony in his six years at the helm. Then came Louis D’Ambrosio, with high energy and confidence, to point Avaya in the direction of unified communications, and a software and services business model, while bringing the company private in 2007 through TPG Capital and Silver Lake Partners. In 2008, Charlie Giancarlo became chairman, while Kevin Kennedy took the helm, ushering in a new wave of innovation and nimbleness while re-engineering sales and channels plus absorbing the Nortel enterprise business. Yes, what a long, strange trip it’s been, but Avaya is now the most innovative in its history and well positioned for the post-recession business cycle. In this Lippis Report Research Note, we examine Avaya’s prospects and challenges.
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If Peterson’s contribution to Avaya was “Righting the Ship,” and D’Ambrosio’s was “Energy and Purpose,” Kennedy is ushering in “Nimbleness and Innovation.” With each phase of executive leadership came a resetting of corporate culture. Peterson and the executive management team nearly all had AT&T/Lucent culture where the enterprise business was a rounding error. D’Ambrosio brought a customer focus, energy and big blue reliability. Both of these cultures were grounded in East Coast high tech. Kennedy reset the culture button to a West Coast pace of “go, go, go” with phased product roadmaps, advanced technologies and broad channels to market. The new Avaya has taken shape with a slew of product announcements and new technologies. Here are a few of its most novel directions:
The Flare Experience: In September of 2010, Avaya introduced the Flare Experience, which is a new human-machine metaphor to easily conduct videoconferences and collaboration. Flare seeks to provide a seamless video experience from desktop to softphone to video conferencing systems to android tablets, etc. The most notable aspect of Avaya Flare™ is the introduction of the Avaya Desktop Video Device, an android tablet that creates video sessions with the ease of dragging and dropping contacts from an address book to the center of the screen via touch screen technology. Key to Flare’s innovation is the linking of presence, directory and call establishment/tear down between Avaya one-x Communicator 6.0, the Avaya Video Conferencing solutions based upon joint development work with LifeSize, the Avaya Desktop Video Device, Avaya Video professional and managed services as well as Avaya’s web.live. But it’s the Avaya Aura collaboration server in the back end providing the magic code to create an enterprise wide video experience.
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What’s impressive about Flare is that Avaya has created a user interface that integrates voice, video, web conferencing, IM, presence, email, contacts, calendar, messaging, browsing, business applications and social networking that’s controlled by touch. Desktop or user interface design is usually not offered by communications companies, other than phones, so this is a significant innovation point for Avaya.
The Skype Relationship: With Skype and Avaya being owned in part by Silver Lake Partners, a friendly business channel was easily created. For years, most industry observers and IT business leaders sort a way to integrate Skype calls into enterprise communications and collaboration. Avaya was the first to do so by granting access to U.S. customers to Skype Connect™, from their existing UC endpoint via a SIP connection between Avaya Aura and Skype. The Avaya-Skype link becomes more feature rich in the second half of 2011 when federation is established so that Avaya and Skype business users can engage and interact via presence, IM plus voice and video. Beyond the cool factor, there are hard economic reasons why a Skype connection makes sense for Avaya customers. There are three value points…those being low international calling rates, access to Skype’s global community and inter-company collaboration via modern communications.
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The SME Roadmap: To show how nimble Avaya has become, when it acquired the Nortel enterprise business in late 2009, it had six products focused at the same Small to Medium Enterprise (SME) market. Those products were Avaya IP Office, Integral 5, PARTNER ACS, Norstar, BCM and SCS. The road to a single product was introduced in January 2010, and the Avaya IP Office was chosen as the SME platform. In 10 short months, Avaya has integrated the full feature sets of PARTNER ACS and has added support for BCM IP handsets into the Avaya IP Office 6.1 image. The next major software revision for IP Office is 7.0, due out in early 2011, and if all goes well, it will include complete BCM and Norstar features plus handset support. The integration value is huge as there are fewer products with overlapping features to support the large SME market simplifying IT executives’ lives, plus channel partners and Avaya’s businesses.
The Avaya Virtual Enterprise Network Architecture or VENA: With the Nortel acquisition, Avaya picked up the enterprise data networking group and associated products that include Ethernet switching, unified branch, WLAN, network access and network management portfolios. To organize these products and demonstrate an investment cycle, Avaya recently launched Virtual Enterprise Network Architecture (VENA). VENA focused the Avaya product set on a major inflection point occurring in the industry; that is virtualization in the data center as well as on the desktop via VDI and storage. There are clear problems with existing network architecture and design that has focused on physical versus virtual ports since the mid 1980s. New thinking in network design is needed if IT business leaders are to reap the benefits of virtualization as it spreads throughout an enterprise.
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VENA defines a virtual service network layer that maps IT services to unique virtual networks that run over a virtual services fabric, which is built upon enhanced IEEE Shortest Path Bridging. According to Avaya, this provides resiliency, simplicity and a consistent interconnect that transparently supports co-existing services. In short, applications and IT resources are assigned to virtual networks that are independent of physical ports, allowing more freedom and much less operator intervention during changes to applications, Virtual Machines, etc.
One thing is clear, and that’s Avaya is not tree hugging any technologies or products from the past. It has aligned its UC, contact center and data businesses with major market demands. The Flare Experience is a bold new approach to UC and video collaboration matched only by Cisco and in part Microsoft. It has executed the Nortel integration with speed rivaled only by much larger high-tech firms Cisco and IBM. It could not have picked a better market inflection point than virtualization to add value and investment for its data-networking portfolio. Avaya seems to be firing on all pistons from an operations, engineering, channel expansion and product innovation points of view. If its bets are right, it should be rewarded with market share gain.
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Avaya does have challenges too. By keeping the data networking group, it has, in essence, become a little Cisco, being about one eighth its size. But Avaya does enjoy very loyal data networking customers, particularly in the financial services industry, which date back to the days of Wellfleet and Synoptics. Avaya and Cisco could not be more different, however. If Avaya is a voice company with some data networking, Cisco is a data networking concern with voice technology. While Cisco and Microsoft have significant pull through sales of communications for their data networking and software, respectively, Avaya does not. Avaya has to compete for data networking and communications business, by and large separately, unless and until it provides a compelling value proposition to supply an architected solution consisting of networks, communications, collaboration and contact center.
Opportunity: Service Delivery Process
One of Avaya’s biggest opportunities lies within its ability to add value to a company’s “service delivery process,” thanks to its rich customer data afforded by Avaya’s Contact Center (CC) business. For example, just this past July, the Avaya CC business introduced the Avaya Aura CC Suite, which is designed to enable end-to-end service experience management. The Aura CC Suite’s Assisted and Automated Experience categories include multi-channel work assignment, self-service and proactive contact applications that drive communications and transactions with customers via voice, email, web chat, SMS or social media. Aura CC Suite also delivers a Performance Management category that includes Avaya’s analytics and reporting platforms, Avaya Call Management System and Avaya IQ, which provide companies detailed customer information that helps to improve profitability and customer retention. In addition workforce optimization and workforce management capabilities were added under the Avaya Aura WFO category.
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Service is a key competitive differentiator during this economic cycle where the service economy is the bright spot, and 82% of millennials stop doing business with a company after one bad CC experience. Avaya’s CC customers are equipped with vast customer touch points with every interaction, be it voice, chat, IM, email, etc., being a data point of needs. And Avaya does have a loyal CC customer base. Paradoxically Avaya and Harley Davidson are similar in the fact that both enjoy customers who never switch products. A Harley rider would be hard pressed to switch to another motorcycle as would an Avaya CC customer.
It’s all of these tools to monitor and control customer touch points that deliver so much value to customers and Avaya that it can now be leveraged to another level. Avaya can add value to its enterprise customers by synthesizing, aggregating and monitoring the huge number of customer touch points it offers its customers to afford them deeper market knowledge and allow them to be more adaptive, responsive organizations that deliver differentiated experiences and favorable business outcomes.
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Key Avaya platforms are Aura—especially as it invests to make Aura a media-agnostic application platform with special attention to video—and Agile Communications Environment (ACE). ACE facilitates the development of communications-enabled business applications to speed workflow. ACE 2.2 includes an Event Response Manager—a new packaged application that reduces downtime and increases efficiency by automatically notifying the right people with the right skills to respond to and manage unexpected events, such as inventory shortages, security breaches, disasters, stock crashes, etc. A new ACE developer toolkit seeks to make it easier to embed timely and personalized communications into business applications. With Avaya ACE, enterprises can communications-enable their business applications up to 80% faster than by using traditional methods, according to Avaya.
Leveraging Avaya’s huge DevConnect community to write applications around Aura that leverage Avaya’s UC and CC resources while riding over VENA is one sure way to elevate Avaya’s importance and consideration in the Enterprise market. With Avaya’s new nimbleness and innovation, it clearly has the ability to weave its UC, Collaboration, CC and Data products and services around “service delivery process” for its customers, as well as differentiate itself in a significant way. If there isn’t a value proposition around all of Avaya’s products and services, then it may find itself competing in four separate markets, with four separate customers, channels and competitors.