Enterprise Move to Software, Cloud Catches Up With Avaya
Laden with $6 billion in debt and unable to transition quickly into soft-ware and services, Avaya last month filed for Chapter 11 bankruptcy, leaving its enterprise customers wondering what’s next. The greatest contributor to Avaya’s downfall likely was the fight to innovate amid the ever-evolving telecom industry. Timothy C. Colwell, senior vice president at AOTMP, said that, along with the erosion of market share due to competition, probably pushed Avaya toward bankruptcy. As a result, enterprises should expect issues with support as Avaya restructures.
“While its position is ‘business as usual’, disruption in customer support and customer experience may occur as Avaya reorganizes,” Colwell said.
However, said Scott Lawrence, director of research and business analytics for AOTMP, “Avaya seems to be focused on minimizing customer disruption, so time will tell. Something had to be done as you cannot continue to operate with a net loss of millions of dollars.”
Avaya’s bankruptcy also could prove problematic for its supply chain and sales / service / integration partners. As Colwell explains, even if an enterprise does not have a direct relationship with Avaya, vendors providing its goods or servicing its products may run into issues with support and shipments.
The situation with Avaya is not unheard of in the telecom industry. In 2009, after a protracted accounting scandal and amid the global economic slowdown, Nortel, once one of the biggest names in telecom equipment, filed for Chapter 11 bankruptcy as well. Meantime, Cisco continues to struggle to move from a hardware-reliant business model to a cloud and software counterpart, leaving its fate unknown.
All of this raises the question: What is the advantage of using premium telecom brands in the age of cheaper, equally competent options? There may not be one, leaving the Avayas and Ciscos “to continue innovating to distinguish themselves from lower-cost alternatives,” Lawrence said. And innovation for entrenched, bureaucracy-laden companies is not easy. As a result, more nimble contenders have entered the telecom ecosystem, offering a range of quality options for equipment. “Competition is fierce,” Colwell said.
What Enterprises Should Do
Now is the time for Avaya-centric enterprises and suppliers to take action. First, go to the formal document to determine next steps. “There is likely contract language that specifies what will happen in the case of a bankruptcy,” Lawrence said. Then, review all maintenance, upgrade and sunset schedules to determine what work is required. Colwell said enterprises should pay particular attention to systems at or nearing the end of life, as Avaya may accelerate the sun-setting process during the restructuring. Finally, follow these best practices:
- Review all vendor-related contracts to determine any amendments or potential contract termination
- Negotiate contracts that provide options when mergers/acquisitions/bankruptcies occur to allow for leverage when renegotiating or terminating contracts
- Implement strong SLAs for all aspects of the business relationship – technical, financial, operational – that provide clear remedies and repudiation paths
All in all, telecom vendor consolidation probably will increase as IP and cloud adoption surpass that of legacy technologies, and as more companies offer sturdy products at lower prices. Enterprises can insulate themselves from vendor upheaval to a degree by crafting any telecom agreement with solid language from the beginning.
“It all starts with the contract,” Lawrence said.
Q&A: What Should Avaya Enterprises Do Next?
Ashley E. Kelm, vice president of global enterprise services at AOTMP, shares some thoughts about the impact of Avaya’s bankruptcy.
How are your enterprise customers reacting to the news?
AK: So far, we have not received very many direct concerns from our enterprise customers. Often times call manager-related technologies are managed by operational resources and/or IT operations versus telecom management teams.
What advice can you offer to help Avaya-centric enterprises navigate the bankruptcy proceedings?
AK: The enterprise’s Avaya vendor manager should be reaching out to the Avaya account manager/POC to discuss any potential ramifications to their environment. Each enterprise environment is unique and next steps would vary based on the organization’s current setup and structure with Avaya. However, if an enterprise’s Avaya account manager/POC did not prep them for this market alert or has not addressed the situation now that it has been announced, then we would recommend structuring that conversation with Avaya in the near term.
Additionally, if an enterprise’s telecom management team is not tasked with the vendor manager relationship for Avaya, but those services do reside within the organization, then it may be a good idea to reach out to those internal team members to see if they need any assistance in their planning.
What specific telecom management oversight should Avaya-centric enterprises employ during the bankruptcy process?
AK: There are several factors still at play with this situation. Based on the variances that could transpire, it is always a good idea for any enterprise to proactively communicate with their Avaya account management team. The Avaya resources should be assisting an enterprise in any next steps or concerns they have regarding their specific services. If an enterprise is experiencing challenges in reaching their Avaya account manager/POC then the next course of action should be to escalate into the Avaya organizational structure.
AK: Enterprises should also consider any of their outsourcers when evaluating the potential impact. If an outsourcing vendor (i.e. call center, help desk, etc.) utilizes Avaya systems, then the enterprise should inquire about any potential impact and/or planning from that outsourcer. The enterprise should receive an update on the outsourcer’s plans to proactively address any outlined impact. Even though the outsourcer has the direct ownership of their relationship with Avaya, a lack in planning or negative impact from this update could then have an adverse impact to the enterprise’s internal/external customer experience (based on the outsourcer’s structure).