Avaya looks to reinvent itself

BASKING RIDGE, N.J. - With its legacy as a Bell spinoff, Avaya has had to fight the image of being a technology dinosaur trying to compete with companies more evolved for the IP infrastructure markets.

In its second year since leaving Lucent, the company says it is refocusing its efforts on converged IP hardware and more flexible software products in areas such as CRM and advanced unified messaging. Recent organizational changes and a few sneak peeks of new converged communications technologies have some observers saying Avaya can compete in the converged enterprise market.

Avaya was the third-leading seller of IP telephony systems (including IP PBXs, IP phones, software and gateway equipment) in the first half of this year, with 8.5% of the market, which is expected to reach $1 billion by year-end, according to IDC. Leading the market was Cisco with 35.6% of the market, and 3Com with 17.8%. Avaya's PBX rivals Alcatel, Nortel and Siemens ranked fourth, fifth and sixth respectively.

"We were very late to this party," Avaya CEO Don Peterson said of the IP telephony market while speaking to a group of Wall Street analysts last month at the company's headquarters.

Avaya debuted its ECLIPS (Enterprise Class IP System) voice-over-IP (VoIP) products in the fall of 2000, while competitors Cisco and 3Com had products on the market a year before. This year, the company debuted its next-generation line of ECLIPS products - the Linux-based S8700 Media Gateway and S8300 Media Server - which have brought the company up to the level of Cisco.

"This is a market space we absolutely have to lead," Peterson said.

As a means to that goal, the company recently realigned itself into four divisions: the Converged Systems and Applications Group, which includes all TDM and IP hardware and software; the Small and Medium Business Group; Avaya Services Group; and its Connectivity Solutions, which includes its cabling business.

By bringing its PBX and TDM voice, IP LAN switching, VPN, wireless and CRM applications under one umbrella, Avaya now has one sales, marketing, and research and development group responsible for all its large-enterprise products. This is an important step if the company aims to dethrone the likes of Cisco and 3Com from the top of the IP telephony market, analysts say.

"Creating one business unit for both voice and data makes a lot of sense for Avaya," says Brian Riggs, senior analyst with Current Analysis. "It's something they needed to do for a while."

Having all voice and video products under one group will help the company streamline its sales and support operations while letting the company develop better convergence products, Riggs says.

"Avaya has been mixing and matching voice and data products, but they still had separate divisions with different cultures that didn't talk to each other that much," he says.

With its combined voice/data/applications group, the company will take a different approach to its LAN switching and data infrastructure products, according to Mike Thurk, vice president of Avaya's converged systems and applications group.