Back to the Future:  Can Avaya Weather the Cloud-Forward Storms?

Reading the news about Avaya’s potential demise,

I think back over the history of the company that, essentially, invented the telephone. And it certainly brings back memories of my early days in sales when one of my first mentors—a guy named Bill Powers, who was the VP of Sales at American BusinessPhones, Inc. (with the acronym ABI, not to be confused with the “real” ABI, American Bell, Inc.) took me, a kid from Harrisburg, Oregon (population 1,500), under his wing, which I now know helped me navigate the industrial streets of Los Angeles with some hope of making a sale or two. It was 1984, right before the release of the movie, “Back to the Future”. This was before the internet. Heck, this was before the mobile phone.

Back then, we sold SMB phone systems that Tie Systems manufactured. (Never heard of Tie Systems? They ceased to exist as an OEM in the 1990s.) Back then, companies like American BusinessPhones sometimes didn’t hire designers to create their logos. Our company handed out cards that read “BU$INE$$PHONE$”—to this day I’m not sure whether those cards were meant as a signal to prospects and customers that our phones were expensive, or maybe that they would save a few bucks by going with us.

I credit Bill with helping me learn what I needed to know about the telecommunications industry. Without a doubt, Bill knew our industry as well as anybody I’d ever met. I remember him telling me that AT&T’s System 85 was the best PBX in the world. Even though we were focused on SMBs, so we didn’t compete against this enterprise-class product, Bill’s comment stuck with me.

Fast-forward a few years.

What was then the AT&T System 85 eventually morphed into Lucent’s Definity G3R. By most standards, Definity was also our industry’s greatest product of the era. I would argue that Definity had its heyday in the 1990s. One of the engineers at Continuant commented to me how remarkable the Definity software still is. It ran on incredibly thin software – software that could operate a 20,000-user phone system on a 286.

To be sure, AT&T and Lucent’s successor, Avaya, has improved the system software from the 1990s. Nevertheless, today’s Avaya CM, possibly the greatest on-prem PBX of all-time, is still based on software that was written 30 years ago.

Reliance on excellent software that is, in some respects, 30 years old leads to an uncertain cloud strategy for Avaya. Avaya’s software isn’t designed for a multi-tenant environment. As a result, when Avaya CM is deployed in the cloud, each customer requires its own system, or “instance”. This has its advantages. Avaya rightfully touts that it offers the only fully redundant cloud solution, claiming that other solutions are merely resilient. There are also disadvantages. It is difficult to be cost-competitive and it is very slow to deploy.

Avaya’s recent financial woes have made it doubtful that R&D will be funded at a level that will allow for significant innovation, and Avaya is already behind. Fairly recently Avaya offered its own UC solution – Avaya Spaces. I’ve never been on an Avaya Spaces call, and I don’t know anybody who has.

Avaya filled some of this gap by partnering with RingCentral. With Avaya owing RingCentral $300M that partnership looks tenuous. I wonder what Bill Powers might have to say today.