Avaya has kickstarted its second round of layoffs in just four months.
The layoffs are reportedly much greater than those announced in July when the company let go of 180 employees (equating to three percent of its workforce).
Avaya said in a statement to CX Today:
“Avaya continues to align its investments in people and resources to enable us to compete and win in the marketplace. Our team has made great strides in FY24, focusing on customers to improve retention, extend contracts and achieve our targets.
“As we enter our FY25, we continue to align our people and investments to instil the disciplined and disproportionate focus on customers we are best positioned to serve and the innovations that are most crucial for their success.
“Avaya is uniquely positioned with the people and portfolio to deliver the comprehensive solutions the enterprise market demands – demonstrating our commitment to building and sustaining a profitable company.”
Zeus Kerravala, Principal Analyst at ZK Research, confirmed to CX Today: “The cuts are deep.”
Having sat on a briefing call with Avaya’s senior management, Kerravala added:
They’re letting go of entire areas that don’t align with the focus on large accounts.
However, Kerravala did add that he expects some reallocation and that Avaya will staff up in areas like account management for larger customers.
“The result will be a net reduction,” he continued. “But with reallocations to support Avaya’s G1500 (top 1,500 global clients).”
How Did Avaya Get Here?
Once upon a time, Avaya was the de facto standard in contact center technology.
As such, they onboarded a mass clientele, ranging from small businesses to many of the world’s largest enterprises.
However, as the industry transitioned, Avaya missed the mark, and the brand hit hard times – including two bankruptcies over the past seven years.
Over that time, many of its customers – mostly small and mid-sized businesses – shifted to more agile, cloud-based competitive offerings.
Yet, entire segments of customers didn’t disappear. Avaya still has very small customers alongside very large ones.
“What’s happened over time is that servicing those smaller clients has become more expensive, especially with clients distributed across different countries,” added Kerravala.
Of course, it might have been easier if an entire segment had dropped off, but business doesn’t work that way. Instead, Avaya lost a little at a time. Kerravala summarized:
I think the mistake Avaya made in the past was trying to be all things to all people.
The Avaya under Jim Chirico could certainly be accused of that. Indeed, some have suggested that he overly focused on prepping the company for sale instead of making it healthy.
When that didn’t happen, Avaya needed significant restructuring. As such, Alan Masarek came in and slow-rolled that transition.
Now, Patrick Dennis – who took over as Avaya CEO in September – “wants to do it all at once,” according to Kerravala.
What’s Next for Avaya?
In focusing on its largest 1,500 customers, Avaya is effectively following the Broadcom model.
Broadcom is an exceptionally well-run company with a 42 percent operating margin (as of January 2024). It doesn’t try to be all things to all people. Instead, it aligns its business to its biggest clients’ needs.
In making this observation, Kerravala suggested that the layoffs may have also badly impacted Avaya’s marketing teams. He noted:
For a company like that, there’s no need for a large marketing department or many event planners.
“If you’re focusing on a top segment, like Avaya’s “G1500″, you don’t need teams working on products for smaller clients or niche products that don’t sell.”
While Kerravala didn’t share much more on the niche products Avaya could potentially drop, solutions like its video endpoints may face the chop.
Yet, while Avaya slims its portfolio and workforce, Kerravala holds out hope for the vendor’s future.
“AI will push more large enterprises to prefer on-prem and private cloud data solutions, which aligns well with Avaya’s hybrid model,” he said.
“Most cloud vendors are only available in certain countries, whereas Avaya can support global operations for clients like big banks with branches worldwide.
“Being one of the few companies offering this hybrid cloud solution could work in Avaya’s favor as the market matures.”
Nevertheless, Kerravala recognized the troubles impacting the broader market and shared a big warning for several other providers.
Warning Signs for the Contact Center Space as a Whole
The contact center industry is crowded, with layoffs across many of the most prominent brands this year. Meanwhile, Afiniti filed for bankruptcy in the U.S. earlier this week.
Meanwhile, there are nine vendors in the Gartner Magic Quadrant alone, plus countless smaller players. Kerravala added:
Demand simply doesn’t match the supply, and I expect more companies to face financial challenges as a result.
Moreover, the space is evolving rapidly, with on-prem companies, cloud startups, AI-focused vendors, and even CRM players all crowding into the market.
“There’s too much competition, and some companies will struggle to survive,” he concluded.
Given this, it’s critical that CCaaS buyers thoroughly asses the financial health of their prospective providers and start asking some of those tough questions.
