BANGKOK, THAILAND--With software and services now accounting for the bulk of its revenue, Avaya says it is well on its way to becoming a software-driven player, but dismisses suggestions it is planning to exit from the hardware segment.
The networking and communications vendor had embarked on a plan three years ago to detach itself from a hardware dependence and transition to a software-based architecture. Its efforts appeared to have paid off, according to company executives.
In its latest fiscal quarter, software and services accounted for 73 percent of Avaya's global revenue, with half of all sales originating from new and cloud-enabled technologies, said Nidal Abou-Ltaif, the company's international president, who was speaking here this week at the Asian leg of the Avaya Technology Forum 2016.
"We have moved to become a software company," Abou-Ltaif said at the conference show attended by its customers and partners.
Along with market players such as Cisco Systems and HPE, Avaya heavily champions a software-defined networking (SDN) and enterprise landscape that the latter says is necessary to bring about more intelligence and automation in the business environment. It offers a suite of software tools built around this model including its core architecture SDN Fx, and SDN system, Fabric Connect.
Achieving elasticity and scale are among the oft-touted benefits of a software-enabled environment. Unlike its competitors, though, Avaya does not require its customers to start their SDN journey with a bagful of controllers, choosing an alternative deployment strategy focused instead on building an underlying architecture--before scaling out to an expansive SDN environment.
Speaking to ZDNet on the sidelines, Jean Turgeon, Avaya's vice president and chief technologist of software defined architecture, explained that most customers typically sought out a list of key priorities that would include business continuity, higher reliability, speed in deployment service, quicker downtime recovery, multi-tenancy, and enhanced security.
"Rather than conclude that you need a controller, we came up with Fabric Connect, which allows our customers to resolve 85 percent of these requirements without the need for a controller," Turgeon said. He added that Avaya made a deliberate decision not to build a controller like most of its competitors had done, which he said introduced unnecessary complexity to customers' SDN journey, requiring various components and changes to be made to their existing network.
He pointed to the company's recommended five-step deployment plan for SDN, beginning with the initial phase of simplifying a customer's architecture. With an increasing number of network protocols deployed over the past couple of decades to enhance performance, traditional networks were typically laden with legacy systems, making them difficult to manage.
These should be minimised and removed as much as possible, and replaced with industry protocols such as shortest path bridging (SPB) that were developed to support a cloud environment, he noted.
The other steps towards an SDN would require automating edge devices to improve service delivery speed including TTS (time-to-service), automating applications and processes, enabling orchestration so the wider enterprise architecture would support SDN, and finally enabling open orchestration where software could be used to deploy and configure all components across the enterprise. This end-stage also would mean the infrastructure could interoperate with any virtualised device or function.
Not exiting hardware business, but APAC needs more attention
Its focus and significant gains in its software business, however, did not mean it was plotting an exit from the hardware market.
Turgeon was quick to dismiss suggestions that Avaya would exit the hardware business, stressing that the vendor would continue to manufacturer appliances for customers that still wanted them.
He revealed that it would cater to service providers and systems integrators interested in "private label switching", in which they preferred to install equipment bearing their own brand at their customer's site but running on Avaya technology. The company's transition towards becoming a software company meant ASIC vendors such as Broadcom were now integrating its Fabric Connect technology with their own hardware, he explained, adding that the same would apply with large service providers that preferred to source their own hardware running on Avaya software.
Despite its traction into such market opportunities, Turgeon said Avaya would continue to offer a combined portfolio of software and hardware offerings for customers that wanted all-in-one turnkey products.
Asked if it would eventually stop selling appliances, he said: "We will continue to offer them in the foreseeable future, until customers tell us they don't want any more appliances. But we don't see that happening right now."
What it would need to do, however, was to better tap market opportunities in Asia-Pacific, Abou-Ltaif acknowledged, especially since the region accounted for just 10 percent of its total revenue in fiscal 2015. The US contributed 54 percent, while EMEA clocked at 26 percent and Americas International was at 10 percent.
Having only 10 percent of its business from the region indicated Avaya badly needed to ramp up its focus and visibility in Asia-Pacific, he said. This figure inched up to 11 percent in its latest quarter, ended December 31, 2015.
Citing industry research, he noted that 14 of the world's mega cities would be in Asia by 2025, with five of the world's top economies to come from Asia by 2020. In addition, Asia was poised to overtake Europe in R&D spend in the next five years.
"The region is growing...and organisations here aren't afraid to use technology and try new things," Abou-Ltaif said, adding that there were fewer legacy systems among Asia-Pacific businesses, giving Avaya more potential to tap the market.
In its fiscal 2015, the company reported a 7 percent drop in revenue over 2014 to US$4.08 billion, while bookings also dipped 2 percent in constant currency. Adjusted EBITDA climbed slightly to US$900 million or 22.1 percent of revenue, compared to US$898 million or 20.5 percent of revenue in 2014.
Based in Singapore, Eileen Yu reported for ZDNet from Avaya Technology Forum 2016 in Bangkok, Thailand, on the invitation of Avaya.