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"Is it possible that UC will become widely used, but not the profit-making machine some envisioned at the start?"
Marty, Just read your Voicecon eWeekly UC piece , and I agree totally that the Nortel UC MCS 5100 solution is definitely stronger than what Avaya kluges together. I think that Avaya, however, may decide to keep its own platform in place if only due to internal organization politics. It would be difficult for Avaya to port its UC capabilities to Nortel product, because too much of the software is embedded in Aura Communications Manager code, but it could be done over time. Sometimes companies make the wrong decision, and Avaya has shown to be an expert at this. It took a long time to develop and market Modular Messaging to replace the Audix and Octel platforms, and it may take as long to integrate the Avaya and Nortel UC offerings.I am also wondering how Avaya plans to generate significant revenues from its UC platform, if many of the feature-specific station user license fees are given away free as part of its Enterprise edition for Aura CM or for only $50 per user with Standard edition. I don't think that UC, by itself, will be a major revenue generator for Avaya or others when the license fees are bundled with the generic software package. It appears that many UC capabilities will become standard at no additional cost to the customer. The application servers, third party equipment, won't generate much in way of profit. Blackberry would profit more from mobile applications. Is it possible that UC will become widely used, but not the profit-making machine some envisioned at the start? And what happens if Google Wave takes off?
Hi Allan,Thanks for your message. I think the eWeekly article will be posted on NoJitter tomorrow, so we can share this dialog with others.
You are exactly right on the three issue you raise below. The eWeekly is suggesting how New Avaya “could” act, and avoided comments on past acquistions. It is a new executive team, so want to give them the benefit of the doubt; however, the killer behavior exists in Avaya Labs, who can choose whether to play nice, getting the best of the two portfolios, or to play badly, making up all the reasons this can’t be done.
Yes, you’re right that Avaya will be tempted just to keep their own conferencing portfolio, Meeting Exchange (even the name shows little innovation), but the Nortel MCS/Diamondware/Web.alive suite, with Microsoft and IBM integrations, is much further along. If there are actually open, standards based products at Avaya, there is no reason not to do this. All of Avaya’s Meeting Exchange products were acquired, so there is almost no dependency on Communication Manager or on the management suite.
ACE is another question. Again, it is better in my opinion, but the Avaya engineers and product managers will likely say that Avaya Application Enablement Server, which is now buried in Aura, already has all the needed integrations to Communications Manager. Of course, they will be missing the point; for UC, the important integration is to the rest of the technology stack, especially applications on desktops and mobile devices, and ACE is way ahead on that.
Lastly, as to whether UC can make a difference, given Avaya’s packaging and approach, well, that’s the entire point. If they choose just to keep selling PBXs, their supposed 25% share will fall back to 10%, just like ATT/Lucent’s 35% share dwindled when those parent companies thought they had better technology and customers would not embrace upstarts with IP Telephony architectures.
The new spending is on the UC elements. If Avaya chooses to bundle those with Communication Manager so as to pump up the “PBX” share, rather than focusing on share of the new spending, they will be sorely disappointed in 3 – 5 years’ time. We’ll see.
Thanks for sharing your always valuable perspective.
Allan: I think the revenue from UC will come not so much from the UC products and licenses themselves, but from value added capabilities like application integration, vertical applications, professional services, etc. Professional services will be key - especially when we start getting more into CEBP or business process integration with UC. The call control vendors (eg switch vendors) will need to offer vertical applications that they can charge a premium for, since call control will be a commodity. Things like voice mail and UM are being priced so low there's not much money to be made from that, so the vendors will need to get creative and find the value add. This is also where they can differentiate themselves from each other and the likes of Microsoft.
Blair, I agree with you on where the real revenue-generating action will take place.
One way to look at that is going to be a shift from traditional "person-to-person" contacts to either "process-to-person" contacts (personalized,application-initiated notifications or CEBP) or "person-to-process-to-person" contacts (skills-based/availability routing). These contact activities can be heavily exploited by consumer customers and tied directly to revenue-generating, multi-modal experience benefits rather than simply personal time productivity. What will be needed, howver, is for the enterprise to be able to selectively support all aspects of UC flexibility for all end users, including those who are not within the organization, such as business partners and customers.
This would be a more interesting conversation if you segmented out the different layers of the supply chain you are referring to when discussing whether or not UC is going to massively or only mildly profitable. However, for those of us working in the UC industry's trenches, the "profitability trail" is actually quite easy to follow on any level.
As long as technology trends in an upward spiral (as it has forever) it will always be in need of refreshing. Therefore, those manufactures of UC that either hold technological industry leadership positions or come to market with new, disruptive technologies (game-changers) will always do well. In other words, I wouldn't worry about Cisco, Polycom, or Sagem-Interstar going away anytime soon. Those, however, that fail to see new technologies on the horizon and/or fail to begin developing products and services to meet those new technologies will certain fail (see Nortel, Captaris).
However, the best barometer for measuring the UC industry’s wellbeing is really seen at the VAR level. The numbers of healthy and/or growing UC VAR's is tremendous, and their profitability can linked to three major practices. First, the health and wellbeing of their Level I vendors. These typically consist of their IPT vendor(s) plus one or two other complimentary technological leaders such as Microsoft, EMC, HP, etc. Next, all UC manufacturers have developed ecosystems wherein their Technology Partners are encouraged to develop UC add-on applications to fill the gaps in functionality that they themselves do not have the expertise and/or bandwith to create. And seeing the major source of profitability these applications represent, most have even put together programs that incent resellers to bundle applications with their basic UC offerings. This keeps their channel partners in the black and happy. And yes Blair, Fax-over-IP is one of those UC applications frequently included in these bundles. As for Professional Services being a source of profit, well, is that really a revelation? Ask any UC VAR what the single most profitable thing they sell is and they will all, without exception, tell you that it is professional services hours.
So the answer to your question is a resounding yes. Like anything else done right, UC is and will continue to be wildly profitable.