Avaya Declares Bankruptcy; Shrewd Business Move or Nortel 2.0?

As almost everyone across the IT community has seen, Avaya has filed for Chapter 11 bankruptcy. The move was apparently to protect the company from creditors and the challenge of covering a 900 million dollar payment structure before showing a profit to the bottom line. For those of us who have been around the industry for a while this smells painfully familiar to the Nortel bankruptcy filing from the past – a filing that was explained well in Phil Edholm’s post on NoJitter.com based on his firsthand experience.

What will become of Avaya and the impact the filing will have on the future of the organization is up for extensive debate (a debate I for one would happily have with you over a hot coffee or cold beer in the Denver area). Beyond the business impact and future of the Avaya organization is an impact that hits much closer to home for every client I work with on a daily basis – the ever present, entirely impactful, and business relevant question of “what does this mean for my business?”

What does this mean for my business?  

Mr. Edholm’s article references a customer who had previously decided to award a large Avaya upgrade over a Cisco rip and replace and the likelihood that the customer would put the award on hold to reconsider. For all of us who oversee parts of our respective organizations, we owe it to our organizations, employees, and owners/investors/boards/foundations to make smart, long-term decisions. With the underlying question of “what will become of a major player in the telephony space?” that becomes even more critical to discuss.

Any telephony investment is a business critical, long-term investment for the organization. Recently, I have been speaking with the Director of IT for an international organization. Prior to him coming onboard, a decision was made to go with a smaller player in the telephony market mixed with a software solution from a company with a background in business operating systems. The result has been an inconsistent dial tone. As we discussed the organization’s next phone system the number one request was simple – he NEEDS a consistent dial tone, and he needs it for the long term. Which brings me back to the actual topic of this post.

What does Avaya’s Chapter 11 mean for Avaya, their current customers, and the long-term stability of their offerings?

The question, in my mind, breaks down into two primary questions, the first of which is what does this mean in the short term? My personal feeling from what I have seen over the last 20 years in IT is that Avaya will endure a fairly slow fall and eventually fade into the background (e.g., Novell). This would mean it is highly likely current Avaya customers will have Avaya-based support through the end of their current hardware. I predict an increasingly slower release of new features, an increasing lack of support functions as they cut costs to pay off the creditors, and erratic cost cutting measures to retain viability as the end nears.

The second question is what do customers and prospects need to take into consideration as Avaya navigates their new reality? I would tell my clients the same thing I told them when Nortel was going through a similar situation: before you jump on the deal that seems too good to be true, because it often is, step back and look at the bigger picture. When my client said that dial tone is priority one, I strongly encouraged them to look at a company that has been a long-time telephony provider, who is on the cutting edge of telephone/mobility/collaboration, and who has shown for over 20 years to be stable and in it for the long haul. There is a time to be on the bleeding edge, testing a solution that appears to be the next big thing. But when you are making a significant investment in the mandatory infrastructure of your organization you need to take into account how important something as simple as a dial tone is to the daily functionality of your organization.

Investing in a telephony solution is not the time to buy off the bargain rack and it is not the time to buy the next “big” thing. The future of your organization’s communication capability needs to be invested in a stable telephony solution that includes the potential to offer the next big thing without throwing caution to the wind and hoping it works.

If you want to know which stable, long-time, innovative telephony provider I would recommend for your organization, contact me on LinkedIn. You won’t even have to buy me a beverage.

Craig Jeske is Director of Engineering at GTRI.