VoiceCon: Avaya CEO talks about changes, competition

Louis D'Ambrosio became top guy at Avaya last July, making him only the company's second CEO since its inception in 2000, when Avaya was spun off from Lucent's legacy business telephony arm — a group which created the first cell phone and packet PBX. At the VoiceCon show this week, D'Ambrosio spoke with Network World about changes at the company, its competitors, and the enterprise VoIP market.The following is an edited transcript of that conversation.

What changes or initiatives have you put in place?

We've established three key priorities: strategy, execution and culture. What's most important is the interrelations between the three. From a strategy perspective, we're going from IP telephony and up the value stack. We're not interested on focusing on the infrastructure level. We're looking up the value stack, where we're embedding these core communications attributes into business processes, translating into major business impact. Acquisitions that we're making are very consistent with that. Ubiquity, Traverse -- they will all be geared towards that area. We are also reallocating our resources internally to focus on those areas. As of today, over 75% of our R&D now is spent on software development.

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Louis D'Ambrosio became top guy at Avaya last July, making him only the company's second CEO since its inception in 2000, when Avaya was spun off from Lucent's legacy business telephony arm — a group which created the first cell phone and packet PBX. At the VoiceCon show this week, D'Ambrosio spoke with Network World about changes at the company, its competitors, and the enterprise VoIP market.The following is an edited transcript of that conversation.

What changes or initiatives have you put in place?

We've established three key priorities: strategy, execution and culture. What's most important is the interrelations between the three. From a strategy perspective, we're going from IP telephony and up the value stack. We're not interested on focusing on the infrastructure level. We're looking up the value stack, where we're embedding these core communications attributes into business processes, translating into major business impact. Acquisitions that we're making are very consistent with that. Ubiquity, Traverse -- they will all be geared towards that area. We are also reallocating our resources internally to focus on those areas. As of today, over 75% of our R&D now is spent on software development.

Why are we doing that? Just go to the constituencies. For our shareholders, it's where the profit pool will grow in the industry. For our customers, most importantly, it’s a leveraging point for business processes. For Avaya, it leverages the strengths of who we are. We have a strong background in software. We're a Linux-based product. We have a compelling set of software attributes. In terms of execution, we talk about getting into fighting shape.

As opposed to the shape you're in now?

As opposed to not continuing to stay in fighting shape. It's a continual focus on how quickly our decisions are being made. Where are there cost efficiencies to be garnished? How can you move spending from back office to front office? At the end of the day a company does three things: It makes stuff, it sells stuff and it supports stuff. That's where the money should go. Getting into fighting shape is all about bringing the resources to those priorities in the business.

It's also about breaking down silos in the organization. We've put in place a Chief Learning Officer to do just that. To break down silos between products and services and sales. We're not trying to optimize at a silo-level.

The third priority is around culture. This is a big deal. . . . Culture is what contains a sustainable competitive advantage. One element of our culture is what I call the Avaya 6/100 advantage. We as a company on the one hand, have this rich heritage — this 100-year, Bell Labs heritage and sophistication. At the same time, Avaya is a company that is only six years old, with agility, speed and entrepreneurialism. Putting that together, we're quite formidable.

How is Avaya adapting to the changing telephony market, as Cisco continues to gain market share, and now Microsoft is emerging as a serious competitor?

I would describe one of those companies as a competitor, and one as a partner. Microsoft is a partner of Avaya. We have opportunities for companies to leverage the Microsoft desktop, then click into the Avaya communication suite. We provide interoperability because it makes sense for customers; it makes for both of our companies businesses. I've met with folks from Microsoft to continue to talk about ways to expand the partnership.

Interestingly, we do partner with Cisco in many instances where they have the data network, and we are providing the IP telephony on top. When there are customer service issues, it is not unusual for us and Cisco to get on a call together and solve those issues. But when it comes to IP telephony solutions, for sure, they are a competitor. But we have very different approaches to the market. Cisco's primary focus is on anything that could expand the use or need to build capacity in the network. Avaya's focus is on bringing the value-created applications, on top of IP telephony, to help create business impact for organizations.

How is Avaya's partnership with Microsoft different from what Nortel and Microsoft are doing with the Innovative Communications Alliance [ICA]?

The difference was that with Nortel, there is more of a financial aspect to that alliance. With us and Microsoft, there is a partnership that is built around the interoperability of technology. I think at the end of the day, that generates financial benefits to both organizations.

A senior executive at Avaya has said that the deal Nortel made with Microsoft around shared R&D, intellectual property, marketing and services was offered to Avaya first, but the company turned it down. Can you comment on that?

I'm not going to comment on other articles. But what I will say is that we have a strong partnership with Microsoft. The partnership is focused more on leveraging the feature-rich functionality we have, the 100-year part of our company, with the ubiquitous presence that Microsoft has on the desktop.

In light of the ICA, Avaya's relationship with Microsoft, and Cisco's own Microsoft partnering efforts, is there any confusion among customers as to which IP telephony vendor they should choose if integration with Microsoft is a priority?

Customers will decide. For example, I was with a large financial services organization recently. They have adopted the Avaya IP telephony solution as their standard. The questions were solely around the degree in which we're able to integrate with Microsoft — not about their potential to switching to Nortel or anything like that. We have been on multiple joint-sales calls with Microsoft and customers. If there is a greenfield opportunity, I can't talk about who Microsoft would recommend — us or another [IP telephony provider]. But I can say that in the situations we've been in with them, they have been a good partner. Partnerships are built out of mutual benefits.

We also have a very strong partnership with IBM. In addition to integrating at the desktop, the IBM partnership also extends to a much broader, go-to-market relationship. We have a very tight alliance with IBM on the services side. IBM is a reseller of Avaya solutions.