Avaya: The Contact Center Champions

Follow Avaya on :

Jim Chirico, President & CEO Once a premise-based unified communications (UC) giant, Avaya has spent the last three years bouncing back and moving full-speed ahead into the cloud. Today, the Durham, N.C.-based provider is flexing its muscles with a full portfolio of hybrid UC offerings, video, contact center as a service (CCaaS) and Communications platform as a Service (CPaaS) solutions that are all catching on with customers with the help of Avaya’s robust channel ecosystem.

In fact, Avaya’s Cloud, Alliance Partner and Subscription (CAPS) revenue grew every quarter of 2020 and continued to tick up during fiscal Q1, which the company reported earlier this month. CAPS revenue now accounts for 34 percent of Avaya’s total revenue compared to 18 percent in the first quarter of fiscal 2020. Avaya expects Cloud, Alliance Partner and Subscription to represent between 35 and 40 percent of Avaya’s total revenue in fiscal 2021, which means plenty of room for opportunity for channel partners.

Avaya in December revamped its channel structure and strategy to line up with its cloud goals. To that end, the company promoted Dennis Kozak, former senior vice president of business transformation, to lead Avaya’s global channel efforts as the company’s first global channel chief in years. Steven Spears was hired as Avaya’s first chief revenue office to handle global sales, and Mike Coleman, Samsung’s former mobility channel chief, also joined to lead Avaya’s North American channel efforts. Jim Chirico, president and CEO of Avaya says, “As technologies converge, so do your efforts. The channel is still extremely important to us. It’s 70 percent of our revenues globally. We needed to make sure that structurally, we had the infrastructure to go sell new. We needed to make sure we had a focused, concentrated plan, because we could ill afford to have people not aligned and miscommunicating. There’s no better way to do that than to name a head of global channels so you have the pilot of the plane, if you will, driving and directing. We don’t have 12 kids in canoe trying to go down a creek – that’s chaos. It’s really important to get structure and alignment and dedicated plans, because we need to improve the speed and velocity of business.”

Accelerating Digital Transformation

Avaya has turned the corner from its days as a premise-based unified communications powerhouse. The company’s software and services hit an “all-time high” in its most recent quarter as cloud and recurring revenue continue to trend upward. Software and services sales climbed during the company’s second fiscal quarter and now accounts for 90 percent of the company’s revenue, up from 88 percent year over year. “Clearly, we’re a software and services company,” Chirico states.
Avaya’s goal is to get that percentage up to the mid-90’s and grow its recurring revenue to account for more than 70 percent of its business, he adds.


We’re more than poised to take advantage of this opportunity for the foreseeable future

The company’s cloud and recurring revenue growth is indicative of the structural investments Avaya has been making over the last few years, which are starting to “reshape” the company’s revenue portfolio, Chirico said. “Knowing we have this continuous revenue stream coming in -- in fairness, that’s [helped] in getting us through not only the last 15 months or so with COVID-19, but also, the amount of dollars it takes to transition your company to cloud. Being profitable is extremely important and having that continuous revenue stream goes a long way.”

Cloud, Alliance Partner and Subscription (CAPS) revenue grew every quarter of 2020 and continued to tick up during the first two quarters of 2021. CAPS revenue now accounts for an impressive 40 percent of Avaya’s total revenue compared to 18 percent in the second quarter of fiscal 2020 and 34 percent last quarter. What’s more, Avaya said during its first quarter of the year that it expects Cloud, Alliance Partner and Subscription to represent between 35 and 40 percent of Avaya’s total revenue in fiscal 2021 and has since raised that metric to 37-40 percent based on the segment’s continuing growth.

The OneCloud Subscription

Chirico calls CAPS a “proxy” for new and emerging, high profit solutions for the company and the segment is seeing great adoption, he added. The company’s recurring revenue accounted for 66 percent of the mix, up from 64 percent a year ago, and Avaya’s partners have been critical in driving that uptick, Chirico says. The work-from-anywhere trend, which isn’t going away, is driving new opportunities for Avaya, Chirico says. “A couple of years ago we really did position our portfolio to more of a cloud consumption, recurring revenue, AI-oriented technology portfolio and we did that when these were emerging technologies. Now with the pandemic, they’re front and center,” he mentions. “We’re more than poised to take advantage of this opportunity for the foreseeable future.”

Avaya in 2020 started to see a big change within its cloud annual recurring revenue metric, OneCloud ARR, which was up 31 percent sequentially during its fiscal 2021 second quarter, to $344 million. OneCloud ARR includes Avaya’s OneCloud subscription, Avaya Cloud Office, its Communications-Platform-as-a- Service (CPaaS), Device as a Service, and the company’s private cloud offering that gives enterprises a hybrid communications option.

The second fiscal quarter, which ended March 31, marked the fourth consecutive quarter that had more than 100 deals worth over $1 million, with 16 of those deals worth more than $5 million.
Avaya is also stealing mindshare, having added 1,500 customers -- many of which are competitive displacements -- for the third consecutive quarter, Chirico said.

Innovation and Growth go Hand-in-hand

Contact center, another growing part of Avaya’s business, made up 60 percent of Avaya’s recurring revenue during the most recent quarter. Chirico called contact center “a great opportunity with great growth potential” for partners for both private cloud and public cloud options. Avaya’s contact center offering is available in 40 countries currently and will be available in 60 countries by the end of 2021, Chirico says.

"We don’t have 12 kids in canoe trying to go down a creek – that’s chaos. It’s really important to get structure and alignment and dedicated plans, because we need to improve the speed and velocity of business"

Avaya posted revenue of $738 million, up 8.2 percent compared to the second quarter of fiscal 2020, marking its fourth consecutive quarter of year over year revenue growth. The company’s non-GAAP net income was $72 million, up from $59 million a year ago, and equal to 74 cents a share. Despite revenue growth across segments and overall, Avaya Holdings still came up short on Wall Street’s predictions of 75 cents per share. Avaya also missed on guidance. Avaya predicts that sales will range from $720 million to $735 million in Q3, with profits from 66 cents to 73 cents, a prediction that falls short of analyst expectations 80 cents per share.

Reimagining Digital Communications

So Chirico’s and Avaya’s message to partners in 2021? “My message is that we’re going to continue to build on partnerships. I think they know how critical they are to the success of the company, more so now than ever because of the adoption of the new products are going to propel us into the next step along our journey of growth and profitability,” he answers.

Avaya has been working really hard with partner community, and Chirico tells there’s a different motion. “If all [partners] had to sell was premise-based solutions, the good people are going to go where the hot products are. But now, it’s a completely different conversation. The best of our partners are selling Avaya solutions because they are relevant and have differentiation, and they have a full portfolio to sell -- they have - ACO, subscription, private and premise-based [solutions], they have UC and CC and CPaaS solutions,” informs Chirico. “You’re seeing a 180 shift and really now, we are making joint investments together and have the best and brightest people selling. There is more of a pull than there was before, and we are seeing growth in our channel. As Avaya is growing, by definition, our channel is growing. All three of our [geographies] beat the plan last quarter. An 80-plus percentage of international business comes from the partner community. The synergies, alignment and cooperation, it’s really an extension of our sales force, and it’s really great to see.”

Company
Avaya

Headquarters
Durham, North Carolina

Management
Jim Chirico, President & CEO

Description
Uses open, converged, and innovative solutions to take intelligent experiences to new heights for partners and their customers; in the cloud, on premise, or a hybrid of both