Avaya CEO on changes, competition and copyright

Avaya's chief executive, Louis D'Ambrosio, talks about changes at his company and in the enterprise VoIP market

Louis D’Ambrosio became top guy at Avaya last July, making him only the company’s second CEO since 2000, when it was spun off from Lucent’s legacy business telephony arm — a group which created the first cellphone and packet PBX. At the recent VoiceCon show, D’Ambrosio spoke about the changes and challenges facing the company.

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 organisation. 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 optimise 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 organisations.

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 organisations.

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 organisation recently. They have adopted the Avaya IP telephony solution as their standard. The questions were solely around the degree to 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.

Avaya, as well as other IP telephony providers, often cite the fact that your products run on Linux as a selling point for stability and security. But based on copyright infringement comments Microsoft CEO Steve Ballmer has made about Linux in general, is this something to worry about?

That has never come up with one customer. Not one has ever brought that up. We run on Linux. Microsoft runs on its own platforms, Live Communications server.

Given that many companies are just figuring out how to tie IP and telephony networks together, are enterprises ready for some of the next-step integration plans Avaya is pushing, such as weaving VoIP into SOA [service-oriented architecture] and business processes?

Market readiness has to do with many things. It has to do with how compelling the value proposition is.

When you can do things — such as with Whirlpool, which compressed certain processes from two hours down to two minutes [using integrated messaging applications from Avaya] — the market cannot afford not to be ready.

Will there be companies that may not be ready? Will some of them be left behind? Probably. It would be a profound mistake to slow down innovation under the guise of the market not being ready.

Telephony installation and support services have always been a large part of Avaya’s business. How is this affected by the major shifts going on in Avaya — such as becoming a software-centric company?

When you’re talking about injecting core [voice and messaging] applications into business processes, wraparound services for sure are very important. There’s a direct correlation between the newness of a technology and the propensity of an organisation to buy services from the manufacturer.

Given where we are in this market, there’s a clear interest from customers to want to have single points of accountability. We deliver that. It is a differentiator, a secret weapon for us. It’s the ability to say, as you go through a very complex transition, there’s one person to call.

We are evolving the services business to go into some of the more advanced types of services — professional services, services that integrate voice applets into business processes. We’ve gone through significant skill enhancements over the years. We’ve built up professional services capabilities. We’ve brought on a set of people who truly understand IT. We’ve spent a lot of money in terms of developing existing services force to deliver that. We have leadership: The person who handles all of our services came from Oracle.

With so much “up-the-stack” focus on software and business processes, do you foresee a day when Avaya stops selling telephones?

I think there will be a proliferation of endpoints. Ergonomically, people will continue to have an affinity with the desktop phone.

Every focus group we’ve ever run, people are not going to be comfortable not having a desktop phone. There will continue to be broader use of softphones. Mobility will continue to [expand]. What’s important is that experience becomes integrated. That’s why we have the type of ecosystem we have with [Research In Motion], with Nokia, with Motorola and Microsoft and IBM. I think in the foreseeable future phones will continue to be sold. I also think there will continue to be a proliferation of devices through which people will communicate, in addition to their desktop phones.

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