Late last month Avaya invited me to its ExperienceAvaya event in Singapore. Unlike Avaya’s U.S. Engage event, which is a massive conference that includes global customers, partners, the press and analysts, the Singapore event was much more intimate and regionally specific. Not only did it have a different feel to it, but it provided an excellent opportunity to talk to some of Avaya’s bigger customers. I left the event with a more favorable opinion of Avaya than I had going in.
Avaya Is a Cloud Company
There’s no question that the cloud is the way moving forward for the entire communications industry. However, this doesn’t mean only public cloud services such as unified communications as service (UCaaS) and contact center as a service (CCaaS). Most of the large enterprises I have interviewed regarding the cloud want a private or hybrid cloud, which is Avaya’s sweet spot. For Q1 FY19, the company reported that 11% of its $738 million in revenue was from the cloud, which equates to about $81 million per quarter. Its annual revenue for FY18 was $2.8 billion, which would result in cloud revenue of $313 million at that 11% ratio.
This makes Avaya one of the larger cloud companies, ahead of companies like 8x8. This revenue is primarily from private clouds, which is exactly what companies such as Bosch, Standard Chartered and Ethiad Airways want. The cloud will be the way of the future for communications, but it comes in many flavors and Avaya can deliver it any way the customer wants.
Avaya’s Private Cloud Is Fast and Simple to Deploy
In the past, Avaya’s Private Cloud Service (APCS) took weeks to proof of concept and months to deploy. The complexities of private cloud meant there was a lot of infrastructure to rack and stack, tweak and tune, which caused the long lead time.
Recently, the company rolled out its Avaya OneCloud platform, which is a turnkey, validated solution that offers customers a single stack for UC and CC in a private, public or hybrid configuration. By offering it as an engineered system, Avaya has removed all the complexity out of deployments by preconfiguring everything. Customers can get going with public cloud services in hours and a private cloud in days. A strong differentiator for OneCloud is that it can be customized to meet specific customer requirements so workflows can remain the same, minimizing disruption.
Avaya Has High Customer Loyalty
Through its bankruptcy process, many competitors jumped all over Avaya’s customer base. The company did lose some share, but it wasn’t the death knell that many predicted. Despite the full court press by the competition, Avaya’s install base is about 145 million seats, which is the largest in the industry. This includes the top 10 airlines, service companies, banks, insurance companies, hotel groups and auto manufacturers. Over the past several months, Avaya has taken back some accounts from the likes of its primary contact center rival Genesys. Most of the cloud pure-plays consider $1 million deals to be big, but last quarter Avaya had 83 deals of $1 million in total contract value, 10 over $5 million and three over $10 million, showing that Avaya does big as well as anyone.
Avaya Is Still Innovating
One of the concerns that customers had about Avaya during its bankruptcy process was that innovation would slow down. That wasn’t the case at all as the company poured money into R&D to ready itself to compete in the cloud era. In addition to the previously mentioned OneCloud, there was plenty of other cool new products at ExperienceAvaya, including the Avaya IX Workspace, which puts all of a user’s communications and collaboration tools into a single dashboard. Also on display was the new Avaya IX Collaboration Unit CU360, which is a complete, low-cost meeting room device that consists of a microphone, speakers and camera. The interesting thing about the CU360 is that it was developed by Avaya International based on customer feedback instead of in the U.S. At the event, Nidal Abou-Ltaif, president of Avaya International, talked about the importance of co-creating solutions with customers and then rolling those new products out across the company.
Another area of innovation from Avaya has been a refresh of all its desktop phones. Many experts have predicted the death of the desk phone, but the fact is all of the telephony vendors have seen continued strength in IP phones. Because of the this, Google, Amazon, Zoom and other vendors that were initially supposed to be the cause of the demise of the phone now all support desktop phones in a bit of an “if you can’t beat them, join them” move.
Avaya Is an AI Vendor
When one thinks of artificial intelligence, names like Google, Nvidia and IBM come to mind. However, Avaya has been very active with AI and has a number of interesting capabilities to improve meetings and contact centers. This includes AI-infused bots, speech to text capabilities, natural language processing and real-time translation. At the show, CEO Jim Chirico discussed Avaya’s strategy with a few of us analysts. He admitted initially the company wanted to do all of its own AI work but the leadership of Avaya came to the realization that this would be a monumental undertaking. Instead, Avaya has chosen to partner Google in the area of AI and use its tools.
Also, the company created an A.I.Connect program that enables AI pure-plays to work with Avaya and capitalize on its massive install base. Afiniti, Cogito, Nuance and Over.ai are just a few of the AI partners that bring unique capabilities to Avaya. This is the right strategy for Avaya and should enable it to keep ahead of the small vendors in UC and keep up with the larger ones. They will do what they do best and lean on partners for AI capabilities.
Avaya is expecting to see its revenues grow slowly over the next few quarters, but numbers don’t always tell the whole picture. The transition to a cloud model does play havoc with the business as revenues shift from one-time money paid up front to a recurring model. The fact is, for the first ever, the company appears to have stabilized the business while building a compelling portfolio that can compete in the cloud area. As I mentioned at the outset, the communications industry is moving to the cloud but the public cloud is far from being a fait accompli. Some will go that route and others will choose private or hybrid. Whatever choice customers want, Avaya can deliver a solution.
Zeus Kerravala is the founder and principal analyst with ZK Research. He spent 10 years at Yankee Group and prior to that held a number of corporate IT positions.