Avaya prioritizes slow migration from on-prem to the cloud
The longtime contact center vendor aims to rebound from double bankruptcy by focusing on highly regulated customers' needs, such as continuity of some on-premises communications.
After 23 years of successes and most recently crushing defeats, Avaya has a comeback strategy.
Since CEO Alan Masarek joined the contact center and communications software vendor 10 months ago, he has led it out of its second bankruptcy and overhauled its business strategy to target hybrid cloud deployments.
"Unequivocally, undeniably, Avaya is back," Masarek said during his keynote Monday at the in-person and live-streamed Avaya Engage conference in Orlando, Fla., which runs until Wednesday.
Masarek's game plan has included mass layoffs, with some 2,500 employees losing their jobs last year.
"He got rid of a lot of employees, which I think was actually necessary," said Zeus Kerravala, an analyst at ZK Research.
Shifting focus to the customer
Masarek also has placed a renewed focus on customers with strict regulations and budgets that either delay or prohibit migrating their communications platforms from on premises to the cloud.
Masarek called this new strategy "innovation without disruption" during the keynote.
"Everyone doesn't go to the cloud at the same rate," Masarek said. "Many customers go very slowly, if at all."
Many of Avaya's bigger customers, including the Internal Revenue Service, U.S. Army and several big banks, "have no intention of moving all their calling to the cloud" due to the sensitivity of the correspondences, Kerravala said.
Avaya is trying to engage that large customer base by emphasizing the versatility of the vendor's contact center as a service (CCaaS) offering, Avaya Experience Platform (AXP).
A flexible CCaaS platform
According to Avaya, AXP meets the demands of a hybrid world: users can stay on premises or migrate slowly to the cloud, based on their needs.
It's more of a migration than it is a rip and replace, which is what would happen if you went with a pure cloud company.
Zeus KerravalaAnalyst, ZK Research
For example, customers can bring in different functions such as chat programs or AI applications, without obliterating their costly legacy infrastructure before their subscription cycles are up, according to Masarek.
"It's more of a migration than it is a rip and replace, which is what would happen if you went with a pure cloud company," Kerravala said, referring to the strategy of uprooting on-premises systems and substituting cloud platforms.
Masarek's new direction is more practical because it is based on the needs of a large set of Avaya's customers, Kerravala said.
"The company finally has a strategy in place, that it can move forward," he said. "They haven't really had that in a long time."
Avaya's former CEO, Jim Chirico, chased cloud technology's high stock valuation, rather than prioritizing the on-premises needs of Avaya's main users, Kerravala said.
"They did a bunch of things from the sales motion perspective that bolstered short-term revenue, but was ultimately bad for the company long term," Kerravala said.
With new leadership, Avaya is well positioned to retain its customer base and form new partnerships, according to Opus Research analyst Dan Miller.
"Avaya is in an interesting position," Miller said. "Direct competitors seek to replace them, but providers of CRM, call recording, analytics, workforce management (or optimization) and all that sort of stuff see them as a great partner or reseller.
"They will not disappear anytime soon," he added.
Since hiring Masarek, Avaya has climbed out of its second bankruptcy with $650 million in liquidity and started on a savvier fiscal path. During the past year, the vendor reduced its debt load from $3.4 billion to $800 million as part of a major restructuring completed in February.
"Masarek has done a great job of financially re-engineering the company so its debt-to-revenue ratio is among the best in the industry," Kerravala said.
Miller agreed. Avaya "is arguably stronger financially than it has been in decades," he said.
Mary Reines is a news writer covering customer experience and unified communications for TechTarget Editorial. Before TechTarget, Reines was arts editor at the Marblehead Reporter.
