Partners, Analysts: Avaya Road Back from Bankruptcy to Be 'Long and Arduous'

Avaya has ended months of speculation over whether it would file for bankruptcy. The UC company has entered chapter 11, its second time in six years. Although Avaya faces many challenges, CEO Alan Masarek said the company he leads is ready for “transformation.”

Some experts suggest that Avaya is too big to fail. The company has 4,000 global partners and provides services to 220,000 customer locations in 190 countries.

Avaya’s Alan Masarek

“I joined Avaya to help unlock the power of its iconic brand, global customer footprint, massive partner ecosystem, large-scale communications deployments and outstanding team,” Masarek said. “Building on this tremendous foundation, we have made significant progress pioneering an ambitious business model transformation, establishing a competitive product strategy for our subscription and cloud-delivered services and implementing operational efficiencies to better serve the Avaya ecosystem.”

However, Avaya, known as a legacy hardware company, has tried to compete for years with highly successful cloud-native firms.

In 2017, when Avaya first filed for bankruptcy, Vlad Shmunis, founder and CEO of UCaaS provider RingCentral, said Avaya’s bankruptcy news was a “cautionary tale.”

RingCentral’s Vlad Shmunis

He added: “Legacy on-premises players in every industry are feeling pressure from the rapid growth and adoption of cloud solutions, and the enterprise communications market is no exception. Because of today’s mobile and distributed workforce requirements, the move to the cloud is continuing to accelerate while on-premises systems vendors struggle to survive. It’s because of this shift that we will continue to see disruption in the business communications space.”

No Longer a Technology Story

Six years later, outlooks changed. Coinciding with the current Avaya bankruptcy announcement, RingCentral said it would extend its multiyear partnership with Avaya. This guarantees minimum seat commitments and a better incentive structure. Additionally, the partnership expanded to included go-to-market models. These enable Avaya to sell Avaya Cloud Office to its installed base on a direct basis.

Although this partnership is encouraging, Jon Arnold, principal at J Arnold & Associates, raises more doubts about Avaya’s ability to weather another bankruptcy.

J Arnold & Associates’ Jon Arnold

“Last time when they came out of Chapter 11, they said, “We’re smaller, we’re more focused, we’re more strategic now,” Arnold said. “And how long did that last? The only difference is that the management team is different. I don’t know the state of their leadership team, the longevity of these people or their morale level. At the end of the day, it probably isn’t even going to be their decision. It will probably be the bondholders and the investors who are going to say, We’re running this now. This is a financial story now, not a technology story, and we will decide what’s going to be best.'”

What will Avaya’s story be coming out of bankruptcy No. 2?

Scroll through the slideshow above to get partner and analyst commentary.

Edward Gately contributed to this report.