Avaya and RingCentral Seal Cloud Alliance Through $500 Million Deal

The game-changing deal is a lifeline for Avaya, a powerhouse in the on-premises UC market that has seen market share plummet as the industry overwhelmingly shifts to cloud-based solutions.

A newly minted partnership with RingCentral delivers a lifeline to Avaya as it looks to preserve its massive enterprise base by enabling those customers to shift to a cloud-based Unified Communications platform.

The deal, announced Thursday, will spawn Avaya Cloud Office by RingCentral. The coming Unified Communications-as-a-Service offering, exclusively leveraging RingCentral technology, will be brought to market by Avaya and its large channel as a vehicle to modernize customer telephony infrastructure.

To cement the alliance and ease Avaya's financial strain, RingCentral will purchase $125 million in Avaya stock for a 6 percent equity position in the company, while also advancing Avaya $375 million for future payments and licensing rights.

[Related: Report: Mitel, Avaya Could Come Together In Deal Valued At Over $2 Billion]

Avaya, headquartered in Santa Clara, Calif., has long been a powerhouse in the on-premises Unified Communications market, with some 100 million devices deployed across an install base that represent 90 percent of the Fortune 100.

But the industry's shift to cloud has led to plummeting share over the past few years. The company, having recently emerged from Chapter 11 bankruptcy, needed outside help to compete against cloud-centric rivals.

RingCentral, a Belmont, Calif.-based born-in-the-cloud UC vendor, has been on an opposite trajectory—soaring with a market that's abandoning on-premises infrastructure.

Striking a deal with its largest cloud rival was a strategic and necessary move to stay relevant in a rapidly changing sector of the enterprise communications industry, Drew Lydecker, president and co-founder of Avant Communications, told CRN.

The master agent has a thriving RingCentral partnership, and often supports its sub-agent channel in working with Avaya dealers looking to help customers that want to pivot to cloud-based solutions.

Avaya needed to give its customers a path to transitioning to cloud-based systems, and its own efforts to develop that technology have fizzled, Lydecker said.

"The runway for them to create something on par as the RingCentrals, 8x8s and others of the world would have been too difficult to do on their own with their shrinking market cap and financial situation," Lydecker told CRN.

By leveraging RingCentral technology, Avaya's enterprise customers "will now have access to a modern cloud communications platform," Zane Long, RingCentral's senior vice president for global channel, told CRN.

Avaya's massive channel, which includes more than 4,700 partners around the world, will propel the joint offering in the market, RingCentral's channel chief said.

"This unique partnership is a win-win for both RingCentral and Avaya, but most importantly a win for customers and partners," he told CRN.

Lydecker, of Avant, said the RingCentral-Avaya deal isn't only a win for both companies and their channels, but the UCaaS industry as a whole.

"This will now accelerate the UC cloud market," Lydecker said. "It's already growing by the minute, but now it will be by the second," he said.

The partnership will drive business to Avant's network of agents that serve as trusted advisors to customers seeking to adopt cloud-based solutions—a disruption in the industry that's moved even faster than most had expected.

"The trusted advisor community has grown more powerful over the years, and this is just another indication they're going to be that group that’s going to lead people through this confusion and disruption," Lydecker told CRN.