As-it-happens coverage from the networking vendor’s Americas partner event
CANCUN, MEXICO – Avaya welcomes more than 300 top executives from its channel partners to the Avaya Executive Partner Forum event here Thursday morning, opening its time with its partners with a general session including presentations from Americas channel chief Karl Soderlund, Avaya Americas boss John DiLullo, go-to-market president Tom Mitchell, global channel programs boss Barat Dickman, and many others.
I’m fortunate enough to be in attendance, and will be bringing you live updates as they happen from the Gran Melia resort here.
Please join me after the jump for the latest from the conference, starting at about 9:00 am Central time.
Things are underway here, with John DiLullo talking about time, change and innovation — taking attendees through the history of the Beatles, and the journey they went on through just seven years together.
And now onto 500 years of French wine — DiLullo’s presentation thus far seems to be about the preciousness, and impact of time.
He’s talking about how wineries around the world, and in California in particular, rose to prominence in the aftermath of French wine becoming unavailable during the Second World War.
And now onto the topic of the computer inudstry, looking at some of the unfortunate and long-remembered quotes that missed the mark — Thomas Watson’s comments about the world needing more than five computer; DEC’s belief that the home computer was not necessary; Bill Gates’ oft-repreated “640k ought to be enough for anybody.”
And on to the tale of Apple — its role in the creation of the rise of the personal computer, and its failures of the late 80s and 90s.
“I believe that the history, the heroics, and the drama of Avaya parallel those of some of the previous vignettes,” DiLullo says.
The company has introduced 70 new products since 2010, and is now number 442 on the Fortune 500.
The company traces its innovations back to the telephone, the translator, solar cells, laser, the Telstar satellite, touch tone, Unix, the single-chip digital signal processor, voicemail and automated attendance, automated attendants and voice response — all of these things are connected “to Avaya’s lineage,” DiLullo says.
“It was said we were a 747 flying 15 feet off the ground,” he says, a very large company running on very thin margins.
TPG and SilverLake helped Avaya get things under control, brought in new leadership, invested in innovation, slashed number of SKUs dramatically and took the company from 29 business lines down to four.
With the money it saved, it went after a number of acquisitions, including Sipera, Radvision and, oh yes, Nortel.
“Eight out of the last 11 quarters, Avaya has shown growth, we’ve seen a 40 per cent improvement in the cost of goods, and our operating margins are up 18 points,” DiLullo says.
The company is focused on driving efficiency, increasing productivity and reducing costs through communications technology. “Nobody in the industry supports open standards better than we do,” DiLullo suggests.
There are four commitments DiLullo offers to all of the company’s partners.
- “You’re in the business to make money. If were present you business cases that don’t make money, you won’t stay long. So we will not engage in a program, we will not embrace a product launch, that does not acknowledge that the people in this room need to make a fair return on what they do.”
- “You need the manufacturer’s help to create demand. My commitment to you is that in the first six months I’ve been in this role, we have taken dramatic steps to put more feet on the street helping you to create demand.” On October 1, introduced more territory account managers to help create growth in the midmarket and generate channel demand. The company has diverted “all of the marketing dollars” from the Avaya brand to joint marketing efforts, including more partner presence at the company’s Evolutions event. “We will put in front of you 10,000 new prospects in the next year,” he says.
- “I realize we can’t have conflict. Conflict is a disease. It adds cost and uncertainty, and reduces your interest in doing business with Avaya.” He says a new policy is in place to take out conflict — he has to approve personally taking any deal direct, “and my approval will not be forthcoming.” He says they’re also being “intelligent” about deployment and recruitment. to minimize inside-the-channel friction.
- “I know you build your business on a multi-year basis, that you can’t respond as quickly as we’d always like you to. We have to build on a strong foundation, not quicksand.” He says he guarantees that “we are 100 per cent alligned” with our channel and will “do nothing to shake the ground beneath you.”
DiLullo talking about the four things that are leading to more opportunity for the company and its partners: BYOD, cloud voice services, video, and and the flexible nature of the modern office.
And the fifth element, which is “our customers want to communicate with us differently,” he says.
“We are at the intersection of these five megatrends. They are happening right now, and we are better prepared today for our companies to mutually take advantage of these opportunities. This is our call to action, and the alacrity and the precision with which we respond will determine whether we are remembered or forgotten,” he says.
Mitchell is walking partners through areas where he sees growth, stagnancy, and decline.
While the company’s TDM systems and sets and traditional voice support are declining and call control and voice endpoints are flat, Mitchell says he sees growth in the SME space, in unified communications apps, and others.
Areas of growth include IP Office, which is outselling Business Communications Manager 3:1 in FY11, and has grown to a 10:1 IP Office:BCM ration in Avaya’s fiscal 2012.
The company is making efforts to “stabilize the enterprise” by seeking growth with critical customers, while also “fueling the mid-market,” seeking broader coverage and driving growth in strategic areas.
In the enterprise, the company is not “looking to hunt elephants,” but sell applications — Mitchell suggests it’s about “hitting singles and doubles” rather than sitting back and waiting for home runs.
Meanwhile, in the mid-market and the low end, it’s about seeking out white space and “going toe to toe” with rivals including Cisco and ShoreTel.
Radvision, the company’s latest video acquisition, is an example of “hitting singles and doubles” at the desktop level, rather than having to convert an entire enterprise infrastructure. “It’s very quick time to cash, and partners are often able to just add it in on a quote for a department they’re selling,” he says.
“The enthusiasm about it is infectious,” he says.
Mitchell talking about problems with the gray market, and the company’s efforts to reduce challenges. The company has done 71 investigations, closed 60 with 39 resulting in penalty or enforcement action, including terminating employees and partners who have engaged in grey market activities.
The company’s OneSource tools for souricng and procuring Avaya product will be launching for partners in Canada and the U.S. next May, Mitchell says.
Mitchell’s advice to partners:
- Sell highand wide
- Look at unified communications, look at apps. Sell the whole portfolio based on customer needs
- Hunt new customers, and we’ve got a great opportunity for that right now.
- Build a balanced midmarket practice. “It’s going to take a model change in many cases,” he says. “It’s a very different thing, and those who are having high growth rates are doing it.”
“This is not a conversation we could have had six months ago,” he says, because of the company’s challenges in the enterprise, and because lack of a midmarket story that went to 1,000 users, a problem corrected with the launch of the latest version of IP Office.
With that, Mitchell hands things over to Matt Booher, corporate treasurer and investor relations officer.
Looks like Booher is going to do a deep dive on the company’s financial performance — talking about ten quarters of growth after buying Nortel, interrupted by the economy earlier this year, but were up for the last reported quarter, and “will be up” even more for the next quarter.
Booher says the company is finishing up some of the restructuring, finally, that comes from the integration of Nortel. “It takes a lot of time to do an integration like that, particularly with a company that was in financial crisis.”
Booher showing that indirect channel is three quarters of the company’s revenue streams, and has been growing while the company’s direct business has been steady.
“If we were in trouble financially, I can guarantee you we would not be growing our R&D budget,” Booher says, currently at 18 per cent of revenues for FY2012 on R&D, up from 17 per cent last year. (This is based on R&D budget compared to product revenues. The industry average, he says, is 14 per cent.)
Acquisition and integration expenses are coming down, Booher says, including the expenses of integrating Nortel. That will allow Avaya to start working on its debt and further on efficiency, he says.
With that, Booher’s wrapping up and it’s time for a brief break in the action. After the break, expect to heart from global channel programs chief Barat Dickman on changes to the company’s Avaya Connect partner program for Avaya’s fiscal 2013.
We’re back, and global channel program and GTM strategy chief Barat Dickman takes the stage.
This is pretty much the fourth anniversary of the Avaya Connect channel program. Dickman’s taking partners through the history of the program, saying his goal is to provide “a frank and candid status” of what Avaya did last year, what it’s going to do this year, and what its strategic intentions are.
Dickman’s three areas of differentiation for Avaya Connect:
- Better margins through no over-distribution;
- A full suite of partner benefits (financial, marketing and others); and
- Global recognition and branding for the Avaya brand.
Partners are moving up the program, Dickman says — 34 per cent more Platinum partners, 20 per cent Gold, 16 per cent more Silver programs compared to last year. Training and certification are also up — 14 per cent more total sales authorizations for the company’s partners, and three times more services authorizations for partners.
The company moves up partners on a monthly basis when partners reach a new level, but demote on an annual basis for those who are unable to maintain, Dickman says.
“We manage Avaya Connect like a product,” Dickman says, with feedback sources including anecdotal and partner satisfaction surveys used to drive further changes.
The company has “boiled down” its partner marketing assets to three sources — its MarketLeaders program for lead generation, its partner marketing central site for self-service marketing, and its content syndication program for Avaya-synchronized product content, which is available in English, Portuguese and Spanish, but apparently not in French.
Three years ago, the company handed out 437 leads to partners. “And that sucks,” Dickman admits. In fiscal 2012, in the US, that figure as 13,996, and the company is looking to continue to accelerate.
Customer satisfaction with partners is up, from 3.71 ratings in fiscal 2011 to 4.23 in fiscal 2012 – both on a scale of 5.0. “This is after a similar increase in the scores the year before. You all have done a great job of this,” he says.
Partner satisfaction with Avaay is up – 2.81 in November 2010, to 3.00 in October 2011, to 3.30 in September 2012.
“We think we deserve a higher score, so we’re going to continue to work very hard to improve our performance and your satisfaction,” Dickman pledges.
Switching gears to discussing training – Dickman says it now takes partner 54 per cent less time to get credentials than it did in 2011. Training is also getting more “progressive” and interactive, moving away from traditional courseware.
Details of the 2013 financial incentives plan: Over the last four years, the company has refocused compensation incentives for when partners’ activities match Avaya’s own priorities. “We’re trying to provide funding to help accelerate that,” he says, targeting things like revenue growth, new product absorption and new customer acquisition, new product growth and market share.
The company is changing MDF for fiscal 2013, including removal of milestone requirements, streamlining the proof of performance requirements for partners, and offering a clarified and simplified MDF program guide. The company is investing more in MDF next year, particularly around new technology areas, like its Radvision acquisition.
A new Avaya Acquisition Advantage program is launching in January for US Platinum partners, with launch shortly afterwards for Canadian and Latin America Platinum partners. The program offers rebates between three and 15 per cent on new technology sales to net new customers.
The company is also expanding its Grow Right promotion (20 per cent back every quarter for growth on selected strategic product sales) to now include all Radvision products, all networking products, Aura conference and Aura messaging. It will also now provide monthly updates rather than quarterly, to help partners see how they’re doing. Dickman urges partners to change their own sales people’s compensation to maximize partners’ Grow Right benefits.
On to deal registration. Dickman is walking through how the company is expanding it. Now making “a transformational” improvement, starting in the US and going international – the deal registration will now include the same 12 per cent bonus on most things, and a “bonus” 17 per cent for strategic products.
The company will also increase the number of products available for deal registration, including all networking provides, all Radvision products, and IP Office Server Edition. The latter two fall into the 17 per cent bonus category.
These changes, he says, complete a three year journey in deal registration, and make Avaya’s deal registration program “one of the most advanced” in the industry, in Dickman’s estimation.
He’s talking through the Radvision Scopia product line, and how it’s “gone viral” at Avaya — even for a communications and collaboration company, Avaya has done more video since it bought Radvision than all of its previous history, he suggests.