Avaya looks to reinvent itself

Reorganization, new products refresh company’s convergence efforts.

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.

Regrouping for growth

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.

“Switching is an important element of an IP infrastructure,” he says, but he adds that Avaya will refocus its research-and-development investments in some areas of LAN.

Thurk says new developments in Avaya’s Cajun line will focus on technologies that enable IP telephony and convergence, such as power over Ethernet and quality of service, rather than matching products feature-for-feature with competitors that compete solely in the LAN switch market.

According to IDC, Avaya ranked 11th in the $15 billion LAN switching market last year with 1.4% of total worldwide revenue. While LAN switch products raked in $212 million in revenue for the company in 2001, that figure accounts for only 3% of Avaya’s total revenue in 2001.

Avaya already has integrated its LAN technology into VoIP gateways, such as its S8700 Media Gateway. Thurk hinted that in 2003, other telephony-like features and functions would be integrated into Cajun products, such as distributing directory information stores or even call-processing functions out to wiring closet switches.

Opening up applications

Avaya’s application and software roots are in the world of proprietary operating systems, TDM and circuit switching. But the company says technologies such as Java 2 Platform Enterprise Edition (J2EE), Web services such as Microsoft .Net, and open standards such as the Session Initiation Protocol will be major pieces of Avaya’s telephony applications. Users could expect to see products incorporating these technologies starting in the first quarter of 2003, according to Karyn Mashima, senior vice president, strategy and technology at Avaya.

Avaya will open its APIs for its Multivantage call-processing software, which runs on its proprietary PBX Unix flavor, Intel-based Linux and Windows NT/2000.

“We’re breaking down our software products into reusable software modules,” Mashima says.

While Avaya’s existing product line of CRM, call-processing and messaging applications will stay on their respective platforms and development environments, she says, “all new applications will be developed in J2EE.”

As part of this strategy, Avaya is developing what it calls the Communication Application Server, which would run on top of a J2EE or .Net platform. From this platform, Mashima says, applications such as call processing, voice and e-mail messaging, instant messaging, and call center and CRM software can be developed and deployed. Mashima says an upcoming version of Avaya’s CRM and contact center suite will be based on IBM’s Websphere application server.

“Think of running a Multivantage PBX from a BEA application server,” Mashima adds.

Other products Avaya will roll out in 2003 include areas such as presence and personal workspace technologies, Mashima says. Personal workspace technology will involve the integration of cellular, wireless LAN and Bluetooth technology in IP desk handsets, wireless handsets that could let end users move from a cell phone to an office phone while transferring the call between devices without interruption.

At your service

Avaya says it will work on transforming its services division, with more than 2,500 technicians, into more of a consultancy-style of operation instead of a fleet of “phone guys” in white vans. Most known for its PBX phone maintenance services in companies, Avaya’s services business brought in about $2 billion in revenue (equal to its hardware and software revenue combined) in its 2002 fiscal year, which ended in September.

Beyond its PBX maintenance business, Avaya recently added assessment services for companies in the areas of IP infrastructure security, VoIP and convergence. The company is looking to add outsourced or managed telephony services, comparable to a WorldCom IP Centrex service, in the coming quarters.

“Avaya is taking its support group and turning it into a services group, which is interesting,” Current Analysis’ Riggs says. He says that with the tumult among carriers offering IP services, a managed telephony service based on Avaya equipment could be successful.

“They certainly have the technicians and workforce to do it,” Riggs says. “It will be interesting to see if they can pull it off.”

Avaya has the legacy of being the leading TDM voice vendor from its days as the enterprise telephony products and services arm of Lucent. This represents thousands of potential IP voice customers.

With Avaya’s extensive services group, the company has some 2,500 technicians who could be used in a more network consultant role.

Avaya must boost the visibilty of its datacom products, which have garnered praise from users, but made little market impact.