Avaya Chiefs: 'Race Is On' For Partners To Build Better UC Practices

To say Avaya is in the midst of a dramatic transformation is putting it mildly. The company is not only remaking its partner program, Avaya Connect, to fit the image of a new, channel-friendlier Avaya, but it is also digesting the entire package -- from products to partner communities -- of Nortel's enterprise unit, a former competitor that it acquired mere months ago.

Trying to do both at the same time means little room to breathe and plenty of room to stumble in 2010. But many partners, Avaya and former Nortel alike, have been optimistic, and Avaya's top executives, almost all of them new to Avaya within the past three years, are determined to keep them that way.

Sure, there'll be tough calls along the way -- Avaya recently decided to cut Ingram Micro as a U.S. distributor, for example -- but Avaya is going to some length to make sure the channel is confident in its evolution away from the direct-centric, conflict-plagued sales models of Avaya channels past.

At VoiceCon in Orlando last week, Avaya President and CEO Kevin Kennedy preached the power of SIP -- that is, how Session Initiated Protocol-based archiecture, such as that seen in Avaya's virtualized UC platform, Aura, goes hand in hand with the future of unified communications in the enterprise.

During VoiceCon, Kennedy and Todd Abbott, senior vice president and president, field operations at Avaya, sat down with Channelweb.com Assistant Managing Editor Chad Berndtson to talk Nortel, two-tier distribution, partner enablement and how Avaya views the competition these days. Excerpts of the conversation follow:

We see two big transformations going on with Avaya right now, both of them having started within the past year. One is Avaya Connect -- a more consistent channel program better engagement for Avaya parnters -- and two, the integration of Nortel's enterprise business unit. It's going to take another year, I think, and plenty of metrics before we see exactly how smooth it went, but it seems to have been pretty smooth so far. How are you qualifying the success of each?

Todd Abbott: One way and one way only: top line growth and share. At the end of the day, that's what our investors care about. Avaya Connect is a monumental change, but it'll come in pieces. The first piece is the certification piece, and with that now out, we're going through the learning and assimilation as to what it all means and how that translates to the partners. The process has just started, and it's one that when they [partners] get into it they'll find we've greatly simplified but we're also still learning and assessing.

The next piece of Avaya Connect requires pricing and discounting changes. We were going to have that ready in February, but we hit pause. We hit pause because frankly, we just felt there was too much change. We need to be conscious of the capacity of of partners to go through the changes. The integration of the Nortel roadmap happened recently and we thought one more change is going to be too much. We also have a major set of product announcements coming in Q2, so we're going to be piloting pricing changes in calendar Q3. We're going to go slow, make sure it's non-disruptive to our business and theirs. It's on track and I think it's going well.

The Nortel integration, I think that's going well, too. The biggest challenge we have is sorting through the changes in service models. It's a lot of hand-to-hand combat to help people de-myth the myths and deal with the facts, and that's a matter of rolling up our sleeves to make the adjustments to their model and maintain our competitive focus in the market. We're kind of in the middle of that right now. We're taking an unprofitable business model [Nortel's] and making it a profitable support model, and that involves how to help partners get from point A to point B.

At the same time, there's a structural change in the industry, where everything is moving from a TDM model to an IP-based model. That's two different worlds. But we think what we've been doing has been well-baked, relative to competitive benchmarks. Our responsibility and commitment to the channel drive growth in this business. I never give myself an A -- I'm a harder grader than he is [gestures to Kennedy] and he's pretty hard -- but we've introduced a lot of change while trying to be truthful about our capacity for success. I'd give us a high "B" grade right now.

Next: Avaya Versus Cisco, Siemens And Juniper

Getting into some of the Nortel nuts and bolts, why was it important to keep and not spin off or leave behind the data portfolio? What's the competitive advantage there? Nortel's market share in data wasn't what you'd call dramatic.

Abbott: It filled a lot of the voids in the product lines that had competitive exposure. I was being flanked, and we've closed that flank. Now we can deliver a cost-competitive voice- and data-integrated platform at the end of the network. Plus, if you're in the enterprise UC space, wireless is a critical component of it, as is mobility and mobility inside the four walls.

We have to have all the fit-for-purpose elements of the data solution to help us realize the objective of being No. 1 in UC. We had some gaps that we quickly filled. This market is looking for choice, and the down economy has demystified the need for a single vendor in IP infrastructure. We've got some very good technology that's less expensive from a TCO standpoint, is a better price performer, is more green, and that's fit-for-purpose of our enterprise customers. That's a good thing.

The competitive landscape is changing. How do you now seek to challenge Cisco and what to you is the fundamental difference in messaging?

Abbott: Open versus closed is the message. Open, versus closed. The reason why Cisco was so successful in the early days of the Internet was that it drove an open architecture. Now a lot of companies say the words "open," but the reality is they're trying to close off to certain solutions, as companies of that size tend to do. The way that UC is going to deliver value, however, is in innovation. We're not naive enough to think that we're going to be the monopoly on UC platforms, but we can be the standard-bearers on how "open" is defined from a SIP standpoint. We can drive alliances and federations of companies that drive innovation. We're open, we have alliances around SIP, and that's the fundamental difference.

Kevin Kennedy: I'll make an analogy to the late 80s and early 90s, when the big companies began to verticalize and become more proprietary. It's happening again. Google, proprietary. Skype, proprietary. Cisco, proprietary. Every place you look, the big guys are becoming more proprietary. But for the technology to evolve, it had to become open. My belief is we're going through exactly the same as the early 90s, when the big guys had to consolidate and made that move to try to become proprietary. Some guys tend to focus on "open." We will behave and implement for "open," and the industry will decide.

Abbott: You look at M&A, and consolidations happen all the time. We've had a lot of them in our own market. But as I look at my own customer base, if you look across the different aspects of communication, I've got customers with a lot of PBXes, and a lot of TDM, and some SIP. These architectures evolve, but they are never ripped and replaced. I've got customers with many different vendors for infrastructure. I've got video customers, many of them who have multiple vendors they rely on. Messaging platforms -- lots of messaging platforms -- and lots of e-mail, and even with similar e-mail programs you get a blend of cloud- and enterprise-based.

So, if the concept is that you'll get all of these communication applications from one vendor, and that that one vendor is going to be monopoly of innovation, well, it's been proven time and time again it just doesn't happen that way. Innovation is what drives the vibrancy of technology. It's cyclical. We're back in another cycle.

You have another enterprise competitor out there...

Abbott: Who?

... Siemens, which is also promoting a message of openness and open platforms. Obviously they have a much bigger presence abroad than they do on this continent, but they're trying to change that. How do you view them?

Abbott: Well, I think their first challenge is to get profitable, right? I'm not going to make a commitment to a vendor that's not profitable. We take them seriously. They've got some good technology but I think the customers are trying to assess what's their end game. I tell you, we've taken out a lot of Siemens infrastructure in the last six months. I think they have to figure out what they want to be when they grow up.

Next: Avaya's Distribution Strategy And Future

As A Public Company As you expand, especially with the data products, you'll gain new competitors? How do you view Juniper these days?

Abbott: They partner with us, they're a Dev Connect partner. Juniper is going to be classic co-opetition. We will do some joint development work and partner where it makes sense. We will also invest in our data portfolio and there will be places we'll compete.

Kennedy: You look at Juniper and Salesforce.com and I think they're metaphors for companies that exist as being the alternative to those coercing the industry into a proprietary place. I think Juniper serves that need. Salesforce serves that need in the CRM world. We serve it. We're kindred spirits, if you will.

Abbott Avaya has made a living staking out the high ground of UC and C, and contact centers without a data portfolio. We think our customers will continue to demand data, though, and we'll continue to invest in a data portfolio because we think there's stuff we can do in a fit-for-purpose way that's better than what some of the predominant players do. We can also do it riding on an IP backbone.

Do you see Avaya as a public company again? Is that the end game, and how soon?

Abbott: Absolutely.

Kennedy: Normally, private equity owners need a liquidity event in order to benefit, so yes, absolutely. Our private equity owners felt the Nortel acquisition would at a minimum de-risk and at a maximum provide phenomenal cash flows to propel that outcome. We're headed in that direction. Over time, we'll lower our debt as we bring in more cash. Once we get in the right spot and the market multiples are expanding, the owners will ask the company to consider that move. In the near term, we are focused on working hard.

Abbott: Our owners are longer-term investors, and they're the type that'll stay with the investment three to five years after it's public, because they understand that it'll take the market a while to see what we did to rewire the company. Given the downturn, it was actually a great time to be private because it allowed us to stay focused.

I'll point to a couple of data points: we closed the transaction when we said we would, and a lot of people didn't believe that. We got the product roadmap out when we said we would, and we could have had it out in a week but we wanted our channel to have the time to get educated. The next set of data points will be around four product announcements we'll do over the course of the year. I think they'll demonstrate that despite a long-term bidding and integration process, we never took our eye off the ball of innovation. But it's been good. Some of the things we've had to do would have taken five years to complete if we were a public company.

Let's look at your two-tier distribution model going forward. Ingram Micro will no longer be a factor in the United States. Can you walk me through how the decision was made to cut Ingram in the U.S. and add them in Canada, and then pick the four distributors [Tech Data, Westcon Group, Catalyst Telecom, Jenne] you're going with in the U.S.?

Abbott: It's all about coverage, and making sure we don't overcover. When you have too much coverage on the distributed, or the reseller levels, partners compete against each other and drive margins out. UCC is not a broadline distribution product, it's a value-add set of products. We're committed to making sure we don't overcover and don't drive margin out of the model for partners. We looked at who's going to have the strongest ability to drive value-added distribution models and provide the right level of coverage?

Of the big broadlines, then, why Tech Data over Ingram Micro?

Abbott: Both companies are fine companies, and I have a lot of respect for both [Ingram CEO] Greg Spierkel and [Tech Data CEO] Bob Dutkowsky. I have known them both for many years. At the end of the day, it came down to what's the best fit for us at this point in time. It all comes down to coverage: who had the most effective ability to drive a value set of services. We have a lot of respect for both of those guys, and they're both great companies, and this doesn't mean things don't change down the road. Out of respect for the channel, we felt we needed to get the right balance.

Next: The 'Right' Partners

As you're adding new partners that can understand the power of SIP and virtualization and all these things that are coming to define the UCC and contact center channels, what kinds of partners are you looking for?

Abbott: I don't know that we need to add partners. I've got 10,000 partners. I've got more than enough partners right now.

OK, so how do your existing partners need to change?

Abbott: Look at it this way. We've gone from a lot of point product certifications to a systems level certification and systems level views. SIP is going to enable new levels of certification and the creation of much greater differentiators between the best partners and the average.

They've [partners] go to step up and understand what competencies and changing go-to-market models are there for them, and how to capitalize on this innovation ecosystem. The race is on for them. We're trying to make it easier for them, but it's an open market and they've got to differentiate themselves. The ones that understand SIP and how to enable business processes around SIP are the ones that take the next step beyond traditional UC aspects and are the ones that will be most successful.

The race is on.

Abbott: The race is on. There you go.