As most are aware at this point, Avaya filed for bankruptcy protection (Chapter 11) on January 19, 2017. By many in the Unified Communications (UC) community, this was at least a moment where the wait was finally over. Note that Avaya’s Q4 2016 was financially strong, but in my opinion could not overcome the debt Avaya has incurred over time in just one quarter.
From my vantage point, the wait is finally over for Avaya’s lingering debt issues. Yes, Avaya still has to go through bankruptcy process and proceedings, but the financial ‘thorn’ in Avaya’s side for years, especially in the UC and contact center businesses, is now being addressed.
What Is Your Risk Level?
There is risk associated with any company going into bankruptcy. Questions you may have include:
- What level of risk does this have on the enterprise customer?
- Will services deplete to some (or larger) degree during this period?
- Will SLAs continue ‘as usual’ during the bankruptcy period?
- What is the duration of the bankruptcy?
- What kind of dynamics does your company need through your own mergers and acquisitions, and any capacity issues with the current system, whether it be Avaya or any other vendor?
Look to measure your company’s level of risk based on your answers internally and from Avaya support team members to the above questions.
Cost Savings and Cost Avoidance Opportunities
You need to budget for any significant capital expenditures at least 18-24 (or more) months out. Most companies also need to have tools available to help pay for the capital involved. In fact, every enterprise client we have served in the last 36 months required a hard ROI and cost savings model attached to the upgraded/replacement model. (Cloud models are mostly OPEX, however, any increases in OPEX need to be similarly leveraged with annual savings as well).
Our firm gets involved in many TCO/ROI cost savings and cost avoidance initiatives that provide the financial leverage enterprises need to get projects approved. We clearly state that the savings and cost avoidance areas are not always native to IT, but do affect the entire organization as a whole.
- For a contact center client we were able to identify $4.3M annually in cost avoidance and lost revenue on an anticipated capital expenditure of $1.2M
- For another contact center client we were able to identify in excess of $24M annually in annual savings and lost revenue, helping facilitate a capital expenditure of $10M
In each case, the hard dollar savings and loss avoidance were enough for management to approve capital expenditures and have the project approved.
Developing a Budget For a Client’s Project
We recently were engaged by a client whose management was very ‘numbers driven’ and required a detailed analysis of hard dollar TCO costs for a replacement UC system, including contact center, over a seven–year period. The driver was an end-of-support system on older hardware with frequent issues and outages. We included cost estimates for
- Redundant data networks, including QoS across all sites and to all end points.
- SIP trunking replacing legacy PRIs and POTS getting increasingly (and alarmingly) expensive.
- Cabling requirements for both voice and data and pubic voice-only areas and cost options available in those areas.
- Data switch upgrade/replacement costs (POE data switches and long range POE switches).
- Virtualization cost benefits.
- Conference calling costs and possibilities for managing those external costs by bringing such services in-house.
- Budgetary closet upgrade requirements included HVAC and local UPS requirements to sustain the contact center in the event of an outage.
- Budgetary pricing for key contact center components going forward, from
- Basic server requirements, end points, headsets, skills-based routing, call recording, call reporting, to
- Callback, workforce optimization, speech and text analytics, multi-channel capabilities for chat, email, and video, score cards, IVR, speech recognition, post call survey, social media tools, and more.
Specific to the contact center and UC components, we developed a pro-forma baseline necessary for select vendors (including the incumbent) to provide us budgetary cost estimates for a proposed replacement system. We then provided a set of ‘blended’ costs back to the client that created baseline budget requirements for the proposed upgrade/replacement project.
We developed, with enough feedback and data from client interviews and walk-throughs of their IT environment, we analyzed the environment, developed a set of recommendations, and provided the client with a report for the requirements necessity for the system replacement and timing associated with project approvals. We also clearly identified the budgetary costs required for the proposed project, and we were able to dramatically offset that by identifying savings annually of close to three times the one-time capital costs necessary to get the project approved by senior management.
We then were asked to develop a final TCO ROI analysis clearly showing the break-even point for the larger project to support the client upgrade replacement.
We follow a similar process with most of our clients, based on their internal requirements and culture.
What Are the Next Steps?
The above details should provide enough of a starting point to begin the process of assessing an enterprise environment and identifying the level of risk tolerance while Avaya goes through its bankruptcy proceedings, as well as for any aging voice communications system or contact center at end-of-support. Any customer needs to (a) identify their level of risk, (b) identify cost savings and cost avoidance opportunities, and (c) define budgetary costs with a possible replacement system.
In every client situation we have been engaged with, the ROI hard-dollar opportunities quickly offset the costs for any possible replacement or upgraded system and facilitate a quick turnaround for approval for moving a UC or contact center project forward.
Stephen Leaden is an independent consultant and is not incentivized by Genesys for his writings.