This week Avaya held its reseller event, the Avaya Executive Partner Forum, in Cancun, Mexico. During the event the company highlighted some positive changes to its channel program and addressed some of the more controversial issues head on. Considering the number of new products that have come out of Avaya over the past couple of years, including new versions of Aura, IP Office, video, VSP 9000 to support the VENA architecture, wireless, collaboration pod, I really don’t believe product is an issue for Avaya anymore. The company must execute on its channel plans for growth, which will put it in a better position for an IPO in the future.
The most pressing issue Avaya and its channel partners face is growing network share. With all due respect to the excitement around video, cloud services and other hot markets, good old fashion networking is the key. If you look at the big buckets of IT spending, Avaya already owns about a quarter of the telephony share (give or take, depending on whose numbers you use), so gaining significant share there isn’t likely. Looking at the exciting video market, that market isn’t more than a couple of billion if you include infrastructure, end points and related items. If Avaya somehow miraculously took 20% share in that market, that’s equivalent to about $300M-$400M in revenue. However, just 5% of the $20 billion Ethernet switch market is $1 billion in revenue.
So the question is how does Avaya do something that so many other network vendor have struggled to do - pick up network share? It would seem that creating some leverage in the massive, albeit UC-centric, channel would go a long way and the company has shifted its channel incentives accordingly. Avaya has been steadily trying to increase the sales through its channel and has steadily increased the percentage of business that flows through the channel as well as the number of Platinum (34% increase), Gold (20%) and Silver (16%) partners.
Avaya has been beefing up all of its incentive plans, including the Grow Right plan that rewards partners for selling data networking, Radvision and other products. Avaya also introduced a new channel program that rewards partners that have a higher mix of new customers. This program alone could get the partner a nifty 15% rebate if the mix of the business is significant enough.
The other issue that Avaya addressed head on was the question of financial stability. Almost every partner I talked to mentioned this as one of the issues that prevents them from being able to compete more aggressively against Cisco. Matt Booher, VP of Finance for Avaya, addressed many of the issues of debt and financial stability and I believe the perception of Avaya’s financial problems has been perpetuated and exaggerated by competition. Unfortunately, as a private company, Avaya doesn’t get the opportunity to go in front of the industry every quarter to talk about the business and the balance sheet. From here it’s up to Avaya to arm its channel with the information it needs to resolve the issue.
However, all the channel incentives and market only gets you so far when competing with Cisco. The network products from the company are fine and you can debate whether Cisco’s Nexus 7K or Avaya’s VSP 9K is a better switch, but that doesn’t really matter. Avaya and other companies' channel partners tell me that much of the opposition they get has nothing to do with product. The company has all Cisco-certified engineers, a board-level relationship with Cisco, and John Chambers has met with the CEO.
So how does one compete against that? Well, the company has to find a way to change the game. A good example of this is what ALU did with California State University, where ALU pitched an architecture that was so completely different it created a price delta that the customer had to look at. This might involve replacing chassis with stackables, using a leaf-spine architecture in the data center instead of a centralized core switch, promoting the concept of an all-wireless edge, etc. I’m not saying most or really many will buy into it. Pitching something off the wall is admittedly a long shot, but it’s certainly better than no shot.
The other approach Avaya could take is to try and end-around the network manager like Cisco for years with the voice buyer. This could work particularly well in the data center where Avaya could approach the virtualization manager directly and try to make the network manager not matter. This may not be received very well by network operations, but it does create an opportunity for them.
Overall, the channel event hit the main points that I wanted to see. A greater focus on channel and better incentive plans geared to driving some business outside of its core strength in UC is what the company needs right now. The mood from the channel partners was genuinely positive as well, and most of them recognize the amount of new products they’re armed with now. Avaya has the product in place, the incentive plans and channel in place; now the fun begins.
Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his clients in the current business climate and long term strategic advice. Kerravala provides research and advice to the following constituents: End user IT and network managers, vendors of IT hardware, software and services and the financial community looking to invest in the companies that he covers.
Kerravala does research through a mix of end user and channel interviews, surveys of IT buyers, investor interviews as well as briefings from the IT vendor community. This gives Kerravala a 360 degree view of the technologies he covers from buyers of technology, investors, resellers and manufacturers.
Kerravala uses the traditional on line and email distribution channel for the research but heavily augments opinion and insight through social media including LinkedIn, Facebook, Twitter and Blogs. Kerravala is also heavily quoted in business press and the technology press and is a regular speaker at events such as Interop and Enterprise Connect.
Prior to ZK Research, Zeus Kerravala spent 10 years as an analyst at Yankee Group. He joined Yankee Group in March of 2001 as a Director and left Yankee Group as a Senior Vice President and Distinguished Research Fellow, the firms most senior research analyst. Before Yankee Group, Kerravala had a number of technical roles including a senior technical position at Greenwich Technology Partners (GTP) where he worked with Johna Til Johnson, the founder of Nemertes Research. Prior to GTP, Kerravala had numerous internal IT positions including VP of IT and Deputy CIO of Ferris, Baker Watts and Senior Project Manager at Alex. Brown and Sons, Incorporated.
Kerravala holds a Bachelor of Science in Physics and Mathematics from the University of Victoria in British Columbia, Canada.