Avaya Bankruptcy: Here’s Your Plan B

With the much-anticipated news that Avaya filed for Chapter 11 bankruptcy, Avaya’s customers are asking themselves “What do we do now?”

…But before we dive into Plan B, here’s the quick and dirty look at what the heck happened.

There were two major factors that led to Avaya’s current situation:

1. Acquisitions

Since 2001, Avaya has acquired 11 companies. In the technology sector, acquisitions are a risky, expensive and lengthy processes. Unfortunately, these business ventures led to significant debts for Avaya.

2. A Changing Industry

With the introduction of VoIP (Voice Over IP), voice communication systems no longer required companies to purchase expensive on-premise equipment. As voice transitioned to living on a data network, Avaya had to transition to providing servers and software. This had a drastic impact on Avaya’s revenue stream.

Legacy on-premise communication systems were incredibly expensive and were (basically) one-and-done purchases providing significant revenue in a short amount of time. Big money in supported big money out. But not for long…

As businesses transitioned away from PBX to IP-based communication systems, Avaya’s finance model changed drastically. Rather than seeing the fruits of a sale within six months, IP-based communication systems were bringing in revenue over the term of a licensing and support contracts. Incremental little money in could not support big money out.

Okay, now what?

Filing bankruptcy doesn’t always mean a company is doomed to fail. Companies like Eddie Bauer, General Motors, and US Airways have all come back from the bottom. Avaya has chosen to hold on to their contact center business and restructure it to create a more viable revenue model. However, they don’t have an easy road ahead of them.

When it comes to keeping up with technological advances in the contact center industry, Avaya always seems to be a day late and a dollar short. Just as Avaya transitioned from PBX to IP, they now need to make the transition from on-premise to cloud – and quickly if they’re going to survive. Making that change is going to require significant overhead costs (R&D, market development, sales, etc.). Their ability to catch up with their competitors is going to be essential to their success, and they literally cannot afford to fail.

It’s always a good idea to have a plan B.

It’s too early to tell if Avaya will gracefully rise from the ashes, and their current customers should be cautious in their business dealings with the company (but you probably know that). At this point, the best thing you can do is be prepared with a Plan B.

If your company is using Nortel/Avaya equipment…

The best case scenario is business as usual. However, you should consider that reorganization and reduction in headcount could result in limited support as Avaya transitions away from the hardware side of the business. Another possibility is that Avaya sells the service contracts, which would likely lead to a significant increase in service costs.

If your company is using Avaya’s contact center software…

The best case scenario is that Avaya can ramp up and launch a viable cloud contact center solution quickly, but this isn’t as easy as it sounds. In fact, Genesys acquired Interactive Intelligence, and NICE acquired inContact to avoid the pain of spending the time and money to develop a cloud solution of their own. Why build it when you can buy it, right? Except Avaya can’t buy it, and “innovation through acquisition” rarely works.

If your contact center is using Avaya’s contact center software, you should start researching cloud-native contact center solutions. The industry has taken off, and there are some awesome companies who’ve been using really advanced technology and for longer than you might expect.

Here’s what to look for in a new vendor

As we’ve seen, technology in the contact center industry changes rapidly, and if a company is weighted down by legacy code and/or equipment, it’s hard for them to keep up with the competition. Truly successful, stable contact center software companies will be able to talk the nuts and bolts of how their technology will remain agile and relevant. They will have a solid vision for their future and a “what can we do next?” mentality.

If you’re using an on-premise or hybrid Avaya solution, accept the fact that going to the cloud is likely inevitable. As you’re in limbo with Avaya, start looking for a vendor who is sympathetic to your fear of moving to the cloud. It’s a big step, and may not be easy, but the right vendor will have the level of support you need to make the transition. Our best advice: Start the process sooner, rather than later. Go to the cloud willingly, don’t wait until you’re forced there.

More importantly, look for a partner who will champion your vision for customer experience. They should go above and beyond to understand and solve your unique business challenges because they make your success a measurement of their success.