Avaya‘s emergence from Chapter 11 bankruptcy was a cause for celebration after a challenging period for the company.
While there were many “tough decisions,” as CEO Alan Masarek told UC Today in an exclusive interview last month, the healing process has begun with Masarek emphasising trust as the central philosophy behind the next stages for the company.
“I actually think trust is at a very high level,” Masarek added to UC Today. “Even though we’ve had these fairly large cost reductions in terms of the quantity of staff, I still feel that there’s a spring in everybody’s step.”
Masarek also praised the loyalty of its partners and customers during the process. But while Avaya is out on the other side of its bankruptcy, and Masarek stresses Avaya has “significant financial resources” for growth, there is still uncertainty for customers and partners who stuck by the business during its time of adversity. What action should a contact centre with Avaya technology, for example, consider? To persist with the vendor as it has done or potentially migrate away?
“Avaya’s lucky in that they’ve got an oddly loyal user base that, as you go upmarket, companies become less averse to change,” Zeus Kerravala, Principal Analyst at ZK Research, told UC Today. “Swapping out things like a phone system or contact centre creates incredible disruption. So as long as you provide a path forward, a lot of those companies Avaya has, Top 10 government organisations and banks and things like that, they tend to stick with them.”
Kerravala stressed that he didn’t want to minimise Masarek’s success in redoing Avaya’s financial structure, which he praised as “impressive”. “But in a lot of ways, the hard work begins now,” Kerravala continued.
“I think the company had this big boat anchor they could use for their lack of innovation. But now the financial issues are behind him, and the five-point checklist he had, he’s checked all those off. Right now, he’s going to have to start executing. He needs the chief product officer, he needs the chief marketing officer, and he needs a new CFO. So his executive bench is pretty devoid. He’s got a whole new Advisory Board.”
Kerravala argued that, at this stage, the challenge after deciding on his executive team becomes the execution on the business for Masarek — and that the CEO’s tough decisions on who he wants for his executive bench will determine what Avaya does for the product.
“They still have a mixed bag of different products that serve different needs, and I think it creates an overly expensive model,” Kerravala added.
“I think it’s fair to say they haven’t done a lot of innovation over the last few years,” he expanded. “They did roll up the CCaaS product, but they’ve got some product integration issues and a whole bunch of different products for different markets. He talks about innovation with disruption, but you can’t really do that without the innovation half of that. It’s a lack of disruption from a lack of innovation.”
For Irwin Lazar, President of Metrigy, a notable aspect of the Avaya story is that the company is currently a “pretty good acquisition target”, as he described to UC Today.
“As Zeus said, they’ve got a loyal customer base, and they do well in the very complex, large-scale contact centre,” Lazar expanded. “So if you think about a company that’s a partner of theirs — and an investor at this point — RingCentral can potentially look at Avaya’s bank balance now and say, ‘You know what, they’re a lot more attractive now. They get us into that larger enterprise; they give us that on-premises portfolio for those complex situations.'”
“Irwin brings up a good point,” Kerravala said, “because somebody did ask me that today, ‘Is it more likely they acquire, or are they an acquisition target?’ I think it’s 50/50 on that. I do think because of the install base and their lack of debt now, in this industry, acquiring customers is really hard. Install bases are hard to move. Acquisition is the one way to do that quickly, and they have an install base that’s coverable by everybody.”
Lazar is particularly curious about Avaya’s plans for growth now they’ve emerged from Chapter 11. “Okay, they made it through bankruptcy,” he said, “they’ve got really good at getting through bankruptcy quickly. The big question is — how do they grow from here?”
Avaya’s strategy for growth is, indeed, an overarching question. However, Kerravala highlighted the positives that Masarek and Avaya could take confidence in going forward: “On the good side, I know he did feel coming into the company that there were a lot of inefficiencies there. He said he could add a thousand people to the company, and it wouldn’t really affect revenues.”
“So I think he’s got the organisation right-sized now. Now he’s got to focus on hiring an executive team, and then it’s going to come down to execution. If the company can actually even grow, they’ll be fine, and if not, they’re going to find themselves in this situation another five years from now.”
