A Cooperative Project of VoiceCon and UC Strategies

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Yesterday, Tuesday, June 5, Avaya announced that “it has entered into a definitive merger agreement with Silver Lake” a private equity firm. Given Avaya’s role in enterprise communications, this move raises many questions, some of which are discussed below.

Issue 1: Why did Avaya do this?
There are several potential answers:

• The most exciting possibility is that Avaya’s leadership has decided to radically transform the company and recognizes that the best way to accomplish that change is as a private company. Avaya’s messaging over the past year or two has emphasized its intention to become a major player in communications software. It certainly has the intellectual capital and human talent to achieve that goal. Imagine an Avaya five years from now that is a $3–$4 billion software and professional services company earning 10–15 percent net income with 15+ percent annual growth, by focusing on innovative applications rather than desktop phones. That would be a huge difference from the current $5 billion software, hardware and maintenance services business earning 4 percent net income with a 5 percent annual growth rate. However, this transition would be a difficult if Avaya had remained a public company—Avaya executives would need to take a longer view than the next quarterly results and it is not likely that shareholders would be willing to tolerate the inevitable ups and downs along the way.
• Another possible contributing factor is that Avaya’s leaders realize the critical issues in the market are bigger than just winning the Voice-over-IP migration wars. Avaya’s recent acquisitions show a new focus on “Communication Enabled Business Processes,” and on integrating enterprise telephony into the public communication networks, especially with mobile voice (cellular) and data (Wi-Fi) devices. This buyout action may give Avaya more freedom to acquire or integrate new technologies or other companies to create a larger, critical mass for innovation in these areas.
• A third potential factor is that Avaya’s leaders, seeing significant change ahead in terms of industry consolidation and market-share battles, have concluded that it makes more sense to be proactive in evolving the industry structure rather than to be a passive bystander. Avaya’s apparent speed in taking the company private is a positive sign, indicating executive focus and avoiding a protracted a protracted period of uncertainty that would impact Avaya’s business—i.e., avoiding a situation such as Siemens has experienced trying to sell its enterprise communications business.

Issue 2: What do Avaya’s moves mean for UC?
To the extent that any of the three factors above result in an Avaya transformation, it seems likely that, if successful, we’ll see accelerated adoption and growth in Unified Communications. Avaya will have more capability for software innovation and, if it can replicate the success it has enjoyed over the past 15 years in contact centers, it would do wonders for enterprise communications and pump new energy into the entire sector.

A re-energized, software-centric Avaya could make significant contributions toward industry acceptance for the concept of standards-based, hardware independent solutions. This could dramatically enlarge the ecosystem engaged in Unified Communications, in parallel with similar initiatives by Nortel, Cisco, Microsoft, IBM, Google, Yahoo!, Oracle, SAP and Salesforce.com.

Issue 3: What should my company do now?
Maintain your course and speed—don’t let this distract you from your goals. This industry is no stranger to mergers and acquisitions, and it’s not clear exactly how this will play out—there could still be more bidders for Avaya. But if you weren’t anticipating this kind of market shift, now’s the time to wake up and smell the coffee.

This is the right time to be launching UC initiatives, regardless of what happens to Avaya. The benefits and ROI of UC are becoming increasingly clear. Be sure to negotiate tough and enforceable protections in your contracts (with any supplier, including Avaya), but good technology will endure through market shifts and vendor comings and goings.

What do you think? Please send your comments to me at marty@parkerbiz.com or post your comments here in the VoiceCon Unified Communications eWeekly forum.

Marty Parker
Communication Perspectives and UCStrategies.com

Posted in Standards, Market Trends, Tech Trends, Marty Parker, Unified Communications |

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