Avaya Partners: 'It's Time For A Change'

Partners say the restructuring and reorganization at Avaya is a breath of fresh air as the company's channel partners have fought off competitors and a sales slowdown since the vendor filed for Chapter 11 bankruptcy protection early this year.

"Where we had deals held or maybe lost deals is really in that mid-market area where customers don't really understand it, because they heard bankruptcy and they think the worst -- not a successful company that is restructuring their debt," said Jeff Gardner, CEO of Carousel Industries, an Exeter, R.I.-based top Avaya partner, ranked No. 61 on CRN's 2017 Solution Provider 500 list.

"We've had an awful lot of conversations with customers over the last six to nine months explaining exactly what the bankruptcy means," he said.

[Related: Avaya Appoints New CEO And Plans To Emerge From Bankruptcy As A Public Company]

Santa Clara, Calif.-based Avaya this week revealed that Kevin Kennedy's eight-year run as CEO will come to an end on October 1. Taking over the CEO reins is Avaya's current chief operating officer and global sales leader Jim Chirico, who has been with Avaya since 2008.

Additionally, Avaya said it's making moves to reduce Avaya's $6 billion debt by more than $3 billion, with plans to emerge from Chapter 11 this fall as a public company. Avaya went private in 2007 after being sold to private equity firms TPG Capital and Silver Lake Partners for $8.2 billion.

Partners were surprised by that announcement as they thought Avaya's bankruptcy process would take longer, possibly extending into 2018.

"A lot of my customers have been waiting for this type of news to hopefully start upgrading their systems and buying more Avaya," said Gardner. "If they can get out of this thing in October, that's a positive for both Avaya and the channel … Avaya is in a great position coming out of this thing to go retell their story."

Although Avaya's partner sales numbers have been slightly down or stagnant in 2017, solution providers are optimistic that Chirico will bring the market momentum back to the channel.

"Kevin had been there for too long," said one top executive from a solution provider and longtime Avaya partner, who did not wish to be named. "It's time for a change, bottom line. Those that have stayed loyal to Avaya are continuing to stay loyal … [Chirico] is the sales guy that you need to run a company that is coming out of something like this. Everything I'm hearing is that partners are happy about this."

Partners said competitors have been leveraging the bankruptcy as a way to win over Avaya customers.

RingCentral CEO Vlad Shmunis told CRN last week that the Unified Communications as a Service leader has seen an uptick in Avaya customers switching to RingCentral since the bankruptcy filing.

"Some of our larger wins, we just announced a new international retailer – a 5,000-user deal – that was an Avaya replacement. We've announced our Hyatt [Hotels] deal – that was an Avaya replacement," said Shmunis. "In fairness, those cycles started before the Avaya bankruptcy, but most certainly things have accelerated. People see the writing on the wall. It's not clear what Avaya's longevity is."

During Avaya's second-quarter earnings announcement in May, the company reported a revenue drop of 11 percent year over year from $904 million to $804 million. Total bookings in the quarter dropped 17 percent compared to the prior year, reflecting extended procurement cycles resulting from the Chapter 11 filing, said Avaya. That had a ripple effect on channel partners: In May, for example, ScanSource reported a slowdown in Avaya-related sales.

Partners said the next 6 to 12 months are critically important for Avaya to jump start market momentum through the new organization.

"From the channel perspective, this brings clarity to the customer and that's where the channel has struggled in the last six to nine months while the bankruptcy talk has been on the street," said Gardner. "We could now get some momentum quickly here … Hopefully there's some innovation behind this, so we'll be talking about new products and new applications next year to our customers that's going to get them excited."

There is a scheduled court hearing for several Avaya agreements related to the bankruptcy set for Aug. 23. If approved, the company hopes to set a date for Avaya to resume business outside of bankruptcy protection with hopes to emerge from Chapter 11 this fall.

"I'm excited to have the opportunity to lead Avaya at a critical point in its history," said Chirico, in a statement. "We will enter this next chapter with unique strengths and a new capital structure, and I look forward to working with the talented Avaya team to accelerate our long-term success."