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Avaya CEO talks competition, debt, innovation

Kevin Kennedy says managed unified communications services are more attractive

By , Network World
March 28, 2013 11:58 AM ET

Network World - Avaya is pushing a new range of unified communications products, but is finding that managed services are becoming more popular among its customers who would rather turn over complex UC transitions to someone else for a predictable monthly fee, says the company's CEO Kevin Kennedy.

Kevin Kennedy
Kevin Kennedy

In a recent interview with Network World Senior Editor Tim Greene, Kennedy also talks about the impact of browser-based communications capabilities in WebRTC, the rise of applications teams in making UC decisions and his company's race with Cisco and Microsoft for dominance.

[RELATED: Avaya willing to share customers with Cisco, Microsoft in three-way networking battle]

Here is a transcript of that conversation:

Avaya recently made some service provider announcements. How will these benefit business customers?

No.1 I think the major trend that we're playing into is the capX opX trend, and within our company we have a spectrum of ways of going to market and serving that trend. The first one that I spoke about that is one of our fastest growing pieces is managed services. This is a customer - say a pharmaceutical company - that says we would like to outsource our voice network or even our data network to you. So we developed a number of years ago - I spent $25 or $30 million to have a system that would allow us to manage that network remotely or from the cloud, if you will. That's one piece, we've been in market for maybe two years. Again total contract value there is - I think on our last conference call we talked about $750 million or so over about an 18-month period.

The second is really a host of capabilities whether it's video in the cloud, contact center in the cloud and UC in the cloud. The latter two were enabled by one, getting our products virtualized although we began that process in November most recently in the contact center this month. We began to incubate those service offerings with service providers in different parts of the U.S. and Europe as well as when we bought the RADVISION asset we had a number of service providers that had become hosted service providers for low-bandwidth, high-def video. Today's announcement was really to say that we've been through this gestation process, we are in market with a number of different service offerings. The obvious ones would be UC and CC. We have a very low-end UC offering and then we also have video. For the most part whether it's a customer wanting us to migrate them or for us to start a new service with a new entry point as a cloud there's multiple capex to opex models to be chosen. Today's was a very important announcement relative to that latter piece.

How does a business decide whether it wants to do the capex or opex model?

We actually went through an executive advisory council meeting about a week ago and posed that question to about 12 customers. Interestingly enough while I thought the answer would be similar in most cases it wasn't. Businesses that were cash-rich were more than likely going to continue to buy on the capex model. There were some businesses that have made a decision that their dominant logic would be trumped by where they wanted to spend their [human] resources or did they want to retain the resources to continue to manage legacy infrastructure. Of course with human resources come test labs for release management so there are other ancillary investments. There are some that just say 'Hey, I have a set of retail stores and I want to get people up and running on low-bandwidth, hi-def video on their iPads as quickly as possible and so tell me what the opex utility model is for that.' In each case it didn't necessarily lead with optimizing cash flows over a certain period of time. It really mattered what problem were they solving for their business, and so it was actually quite different.

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