On the growth path

When Avaya went public last year, you said your immediate priority was to achieve sustained profitable growth. Are you on track to do that?

Avaya is extremely profitable. Over the last 12 months, we have achieved over 60 percent gross margin range, which is good, especially if you look at our services business. In terms of profitability, our EBITA (Earnings Before Interest, Taxes, and Amortisation) last year was around 25 percent, which is again best-in-class numbers within the industry. We are generating a significant amount of cash – we had said we would generate cash from operations in the neighborhood of 10 percent of our revenues, and we are on track to do that.

As we move to private cloud solutions, migrating some of our existing managed services customers and new customers to virtually hosted platforms in our data centres in 15 countries, we will have more of a traditional cloud margin in the range of 80 plus percent, which will accelerate our gross margins percentage over time.

To what extent has Avaya been able to transition from a hardware company to a software one?

We have been at that for a while, and if you look at the last posted numbers, software, and services account for 83 percent of our revenues. We are continuing to improve that percentage to percentage every year, and the only hardware we sell today are endpoints, which is only 10 percent of our revenues.

Where do you fit into the whole digital transformation wave?

We fit right into the core. We are focused on our customer journey, and we look at DX from a couple of different aspects. One is the cloud, where we are offering the full breadth of capabilities to enterprises with our private cloud solutions. For the mid-market, we have Powered by Avaya IP Office, and recently, we have launched a storefront, simplifying the buying experience for Small and Medium Businesses (SMBs).  If you look at some of the advancements we have made in Artificial Intelligence (AI), identity as a service, and mobility applications; I think we fit well into the digital transformation journey. Avaya has the richest set of applications and integration points than anyone in the industry, and we have been able to harness third-party technologies as part of our solution set, offering a much richer experience for the end-customer.

What is Avaya’s cloud strategy?

If you look at our cloud strategy, because we are the leader in CC (Contact Centre) and UC (Unified Communications), we play in an exciting space. Again, compared to some of the pure cloud players in the SMB world, who are trying to figure out how to capitalize on that market, at Avaya, we actually own our IP and are a technology company at the core. That differentiates us. We may not be the first to the game, but we are going to leverage our technologies to deliver what our customers in the SMB space want, and enterprises, which is core to our business need, and keep providing solutions to our client base in 90 percent of the Fortune 100 companies.

Over the next 18 months, you are going to see the cloud landscape changing drastically with new entrants in the market and some earlier ones struggling because they don’t have the technology and financial strength to move to the next level. Our cloud strategy, quite frankly, is about delivering what our customers require when they want it, and we see an opportunity to provide differentiated solutions to enterprise customers and high-end of the mid-market space.

What is your competitive advantage?

One is our customer base, which is significant. They are loyal, committed, and we are a trusted partner to them. We have 140 million lines installed out there today. Second is our services capability – we have more than 4,000 service professionals, and our managed services business has roughly around three million cloud seats under contract. We are in the heart of what our customers do, and the move to ReadyNow virtual cloud infrastructure will enable us to offer truly multi-vendor capabilities around services. I think, more than anything, the number one advantage for us is our people – they are the best and brightest in the industry, not only in terms of technical skills but also go-to-market expertise.

Is the convergence between UC and CC happening?

The answer is yes, and in fact, that is another competitive advantage for us, but it is still early days. We see steady but slow traction in UC-CC convergence. Everyone is under a lot of pressure in today’s environment, and having multiple suppliers in your IT shop is challenging to manage. When you can provide the simplification, eliminate the complexities, and have a converged UC-CC system, it offers significant TCO benefits. Again, we are the only one in the marketplace to deliver those capabilities.

How are you leveraging AI?

In a couple of different ways. One is through our partnership with Afiniti, which is around behavioural pairing. Internally, our strategy is more about gaining deeper insights into user experience and real-time sentiment analysis with AI.
Going forward, our strategy can be best described as commoditisation of AI through external partnerships as well as developing some critical AI apps for large enterprises.

Earlier on, we thought we could do a lot of it by ourselves, but you can’t keep up with the pace of the technology. We have identified a few critical applications that we will do internally, and the rest will be done by harnessing the best-in-class third-party technologies.