Avaya Gains Unified Communication Market Share in Q3; Microsoft Falls

Avaya’s share of the unified communications market grew in the third quarter, while competitor Microsoft saw its revenue fall sharply. Much of Avaya’s growth came from double-digit quarterly gains in enterprise voice revenue.

Unified communications is a big market, pulling in an estimated $5.7 billion in revenue in the third quarter, according to a recent report from the Synergy Research Group. By Synergy’s calculations, Avaya is tied with IBM as the third-largest unified communications vendor in the world.

Once you start to unpack that $5.7 billion figure, a compelling picture emerges, with Avaya making important gains in revenue while our competitors battle for increasingly smaller pieces of the pie.

Synergy’s definition of unified communications is pretty broad. It includes business telephony, email, unified communication applications, video conferencing, collaborative digital workspaces and enterprise social networks.

It might be helpful to look at a rough breakdown of each of these market segments, according to Synergy. Enterprise voice takes the lion’s share of revenue, representing nearly 40 percent of the market (or about $2.6 billion in quarterly revenue).

Email software takes 20.3 percent of the market, followed by unified communication applications with 18.5 percent. Video conferencing, collaborative digital workspaces and enterprise social networks together make up the remaining 21.4 percent of the market.

Avaya is the undisputed leader in enterprise voice revenue. Synergy estimates Avaya’s enterprise voice revenue grew 11 percent in the third quarter, compared to the previous quarter.

“These numbers suggest Avaya has stabilized quite a bit,” Synergy President Jeremy Duke told No Jitter.

Thumbnail image for Dell'Oro Global Enterprise Telephony CY12 Rev Share.JPGFY2012 Enterprise Voice Market Share by Revenue (Dell’Oro Group)

Microsoft desperately wants to break into the list of the top 10 biggest enterprise voice vendors worldwide. Synergy estimates Microsoft’s revenue in enterprise voice grew 35 percent year-over-year. Still, that’s barely enough to make a blip on the radar.

Meanwhile, Microsoft lost quarterly revenue in email, and Cisco and Polycom continued to lower the price of their video conferencing systems, leading to higher unit sales but flat revenue.

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Debate Over Online Video Codecs Continues at WebRTC Conference & Expo

There’s a battle over technology standards being waged right now, and the future of video on the Internet hangs in the balance. In some ways, the debate over WebRTC is par for the course in Silicon Valley, with proponents of an open source, royalty-free standard clashing with the inventors (and paid patent-holders) of a more established, higher-quality standard.

That argument played out onstage this week at the WebRTC Conference & Expo in Santa Clara, Calif. The discussions between rivals here have been cordial, at turns deeply technical, but they all seem to come back to the same sticking point–whether WebRTC will be powered in the future by VP9 or H.265.

The architects of Google Chrome and Mozilla’s Firefox have forged ahead by adopting VP8 and VP9, the free video codec that they’d like to see become the backbone of WebRTC–the standard that gives Web programmers access to audio and video players without special plugins. The powers behind Safari and Internet Explorer-you know who they are–remain major holdouts, refusing to adopt WebRTC in its current form. Meanwhile, Cisco Systems last month proposed open-sourcing its version of H.264, a move which won some support from Mozilla.

If you didn’t catch all that, the net result–once WebRTC gets adopted across the board–will be lots more audio and video on the Internet very soon.

But first, it seems, they’ll probably have to agree on a common codec.

(Codecs, a portmanteau of coder/decoder, compress a media file for transmission over the Internet, and decompress that file when it arrives at its final destination).

We already consume massive amounts of online video. Analysts at Comscore estimate 189 million Americans watched 49.1 billion videos on the Internet in October.

While those videos–playing out on YouTube, Facebook, Netflix, Skype, Facetime and others–might look similar on the surface, they’re all powered by a number of different codecs, some open-source, others licensed or proprietary.

The argument over which codec is better is largely academic, said Vidyo cofounder Alex Eleftheriadis. That said, his company is a big proponent of VP9.

“Video has been around since the ’70s and ’80s, and it didn’t manage to take off in any big way,” Eleftheriadis said at the WebRTC conference, in a panel discussion moderated by Avaya Director of Product Management, Anatoli Levine. “The key problem was that it did not deliver a high-quality experience, commensurate with the users’ expectations. … If we develop products with a subpar video experience, we will be penalized by the end users. They will not embrace it.”

Eleftheriadis has a big dog in this fight. Earlier this year, Vidyo licensed its scalable video selection software to Google for inclusion in VP9. (VP9 currently powers Google Hangouts, and will soon power YouTube).

On the other side, proponents of H.265–the latest version of a licensed video standard powering the majority of video conferencing systems today, including Avaya Scopia–argue that their MPEG-based standard delivers higher quality video than VP9 today, and is already compatible with the majority of enterprise video applications. It’s an important distinction, as this explosion of audio and video will inevitably need to be routed through enterprise servers and tools.

“There can and should be a mandatory codec for many, many reasons,” said Hans-Peter Baumeister, Director of Digital Media at Fraunhofer, a German research nonprofit that helped develop the industry’s most widely-used codec, MPEG. “MPEG codecs are the codecs of choice today in 95 percent of all applications. Certainly 95 percent of all traffic on the Internet ultimately runs over MPEG codecs. So, I would advocate that a standard like WebRTC, which has a lot of promise, should not be encumbered by codecs that some companies are not able to embrace, and should in fact, use existing, open, standard-based, patent pool-based, very clear, nice, established codecs like MPEG codecs.”

Selecting the codec will prove to be a very small piece to a very complicated puzzle, Eleftheriadis said. More important, perhaps, is the performance gains that developers will be able to squeeze out of the codec.

For example, DVDs were first released in the mid ’90s, running off the MPEG-2 codec–a relatively basic codec by today’s standards. DVD encoding technology improved by 40 percent between 1994 and 2000, Eleftheriadis said, merely because developers had time to explore the parameters of what was possible with the codec.

Avaya’s Levine noted the politics over codecs occurring behind the scenes, and urged the audience to focus on the larger issues surrounding WebRTC–delivering delightful user experiences over the Web.

“It’s impossible to select the ideal, best codec,” Levine said after the panel. “It’s really a question of the ‘good enough.’ In an ideal world, yes, you can choose the best possible codec, but the problem is, if you’re waiting for the ideal world, then you’re not delivering solutions today.”

Who's the Real Number One in Business Telephony?

The telephone is far from dead. You know who still loves to call people? Family members, close friends and…the Pope. No joke: 76-year-old Pope Francis has startled a quite a few strangers with a call from a Vatican landline in which he simply announces, “It’s the Pope.” It’s happened to enough people that the Corriere della Sera, a leading newspaper in my native Italy, published a front-page article offering tips on how to make small talk if His Holiness calls (tip #1: talk about soccer).

You know who else loves the telephone? Businesspeople. Unified Communications may be a diverse, ever-growing set of tools and technologies, but the channel that started it all still plays a central role. It’s why there’s a never-ending stream of articles advising how to schmooze colleagues on the phone, how to run your phone meetings, how to close sales deals on the phone, how to ace telephone job interviews, etc. The stakes are high, which is why telephony remains such a hotly-contested market.

Last week, Microsoft put out a blog claiming it is “now shipping more enterprise telephone lines than any other technology company in the world.” It was a bold claim. So bold that longtime industry expert, Eric Krapf of No Jitter, felt compelled to investigate. One respected market watcher, Infonetics’ Diane Myers, told Krapf that her own research – which shows Cisco and Avaya neck-and-neck far above other rivals in telephony – made her “struggle” with Microsoft’s claims. When Krapf confronted Microsoft’s spokespeople, they admitted that Redmond’s claim to have shipped the most telephony lines was based on different data, revenue. As anyone familiar with software bundling knows, revenue alone can paint a deceptive picture.

However, revenue COMBINED with other data CAN be illuminating. While Microsoft and Cisco bicker, they are ignoring what’s really going on in the voice market. According to the well-known telecom market research firm, the Dell’Oro Group, Avaya passed Cisco in Q2 this year in telephony according to two key metrics. First, powered by growth in our small and midsized UC solution, IP Office, the number of telephone lines Avaya shipped grew 10% quarter/quarter to 1.8 million, while Cisco’s slipped for the 3rd-straight quarter, according to Dell’Oro:

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Source: Dell’Oro Group

As a result, Avaya had a commanding lead of the global enterprise telephony market by revenue, both for Q2 2013:

Dell'Oro Global Enterprise Telephony Systems Q213 Rev Share.JPG


Actually, Avaya led Cisco by the same margin for all of calendar year 2012, too:


Dell'Oro Global Enterprise Telephony CY12 Rev Share.JPG


How come Microsoft’s nowhere to be found? We asked Alan Weckel, Vice President, Enterprise Telephony & Ethernet Switch Market Research at Dell’Oro and author of the report, who “confirmed that Dell’Oro Group does track Microsoft in the report. While Dell’Oro group does not break out Microsoft call control directly, based on the size of the remaining market, Microsoft would not be amongst the largest vendors on the charts.”

Why is Avaya gaining telephone users and increasing sales revenue? For a number of reasons:

1)The rock-solid quality of our flagship Avaya Aura platform (read how billion-dollar real estate firm Forest City Enterprises virtualized Avaya Aura software onto VMware and cut costs and increased reliability);

2)The cutting-edge advances in the Aura platform, including the new Collaboration Environment platform to enable developers to quickly build communications apps, and the Avaya Messaging Service that finally brings texting into the enterprise world (and supports any vendor’s system, even Cisco);

3)The quality and cost-competitiveness of Avaya IP Office;

4)The increasing attractiveness of IP Office 9.0 to the fast-growing mid-market segment;

Importantly, we see many customers that use the Microsoft Lync solution for IM and presence turning to Avaya for voice. Rather than deploying Lync software all the way or integrating with Cisco, hundreds of enterprises are trusting the Avaya Client Applications (ACA) plug-in, which offers scalability, ‘Five 9s’ of high-availability, technical features such as open call control, protection for your other communication investments, and tight integration with our contact center solution, which happens to be number one in the market according to Gartner.

Related article: Avaya’s New Wireless LAN 9100 Mutes the Sucking Sound of Network Downtime

ACA is not a tactical solution, either. Providing a comprehensive, open alternative for customers who wish to avoid vendor lock-in is part of the Avaya long-term strategy. Simply put, we want to be the best Lync integrator in the industry.

Lync software undoubtedly excels at IM and presence. But as Cisco Collaboration chief Rowan Trollope pointed out last week, IM and presence are last decade’s news. The future is things like enterprise-friendly text messaging (like Avaya Messaging Service) and open collaboration platforms that let businesses pick the best technologies for their needs.

So when you’re thinking about your UC solution, don’t think it’s only about Lync software vs. Cisco vs. Avaya. The telephone isn’t going away anytime soon. And if telephony is important to your business, the right solution might very well be a combination of a Lync client and Avaya.

Q&A: Pierre-Paul Allard, Avaya's New Head of Sales

Pierre-Paul Allard has been Avaya’s Senior Vice President of Corporate Development & Strategy and Marketing since joining a year ago. As of Wednesday July 10, Allard has added Worldwide Sales and Field Operations to his responsibilities, taking over from Tom Mitchell, who will stay on until September to ease the transition.

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A 19-year veteran of Cisco Systems, Allard formerly headed sales and operations for Cisco’s $2.5 billion global enterprise division. He also served as President of Cisco Systems Canada, where he helped build that subsidiary into a $1-billion-plus a year operation. A collegiate hockey player at the University of Ottawa, where he graduated with an Honors degree in Finance, Allard also spent 11 years in various management roles at IBM. 

I’ve had the pleasure of working with Allard, known as PPA to all of us around the office, since November and s01at down with him in our Santa Clara, CA, headquarters to discuss the announcement (see the video snippet with PPA lower down, too).

What is the immediate impact of your new role?

We’ve been on a path to drive Avaya to growth and revenue. This is in the same vein. The idea now is to combine all aspects of strategy, marketing, alliances, channel and sales so that we have one strategic motion for our customers. 

In your opinion, what are Avaya’s strengths today? 

Over the past year I’ve had a chance to dabble in all aspects of Avaya’s business. It’s given me good visibility into the potential this company has, and let me tell you, it is tremendous. The product portfolio has never been stronger than it is now under Gary Barnett’s leadership. He has been able to bring solutions to market that start from really-small customers to the largest contact centers in the world with more than 100,000 agents. So when you think of Avaya, you think of quality, and you also think of scale. 

What is our strategy for capitalizing on these strengths?

First is the way we continue to fine-tune how our products and solutions delivered to different market segments. This is another way of saying, “I understand my customer and I’m aligning to their needs.” It means we don’t try to treat everyone the same. That’s exciting, because it lets us drive a real value-based proposition for every single customer.

Enterprise is where we were born. As I noted earlier, that allows us to run the largest contact centers in the world, as well as some of the largest users of UC and IP telephony. But now as we gravitate downstream into the mid-market, we’re finding all kinds of opportunities through our new solution sets like IP Office and other bundles. We are bringing the same enterprise strength down to the mid-market.

This is exciting because this is the segment of the market that is growing the fastest. And we’re a player in that. We have been for the last 18 months when we expanded the reach of IP Office to handle up to 1,000 users, and we’re gaining market share every day. We’re not No. 2 or No. 3 here. We are the dominant player in that space.


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Watch the clip at Avaya’s Youtube channel.

You had long stints at Cisco and IBM. How did those positions prepare you for your new role?

They taught me the ability to drive a multi-threaded sales strategy, from the mid-market, small business, large enterprise, service providers, and channels.  I also learned the ability to lead a country-level organization, from top-to-bottom. In Canada for Cisco, I turned a small entity into a billion-dollar enterprise.

My experience with IBM brought me an understanding of verticalization and how you can better serve your customer needs through proper segmentation. Think of the requirements for Bank of Walnut Creek versus Bank of America. Think of the importance of technology to the retail industry and how they uniquely use it to gain a competitive advantage. That’s the sort of strategy I’ve been able to nurture over the years, and that’s what I bring to Avaya now.

Avaya relies almost completely on our partner ecosystem. Will that change?

Our indirect sales have grown to close to 80% of our revenues.  So yes, virtually all of our business flows through channels. But we use different ways of engaging our customers depending on their size.  Obviously we have a higher touch in the large enterprise. Our customers there demand that. But, and this is key, fulfillment flows through partners and integrators.  As you go down market, partners are the leads for us into the accounts. The channel also fulfills with the right solutions. There’s no way without a strong partner strategy that you can reach all of the customers we’ve been talking about. Partners are key to our success.