Businessmodel of Avaya

Customer Segments

Avaya has a segmented business model, with slight differences between customer segments. The company’s customers include small and medium businesses, multinational enterprises, and government organizations. They operate in a wide variety of industries, including retail, manufacturing, energy, transportation, financial services, and media and communications.

Value Proposition

Avaya offers four primary value propositions: accessibility, price, cost reduction, and brand/status.

The company creates accessibility through its open standards-based technology. The feature accommodates clients who have multi-vendor and/or multi-platform environments. The strong integration capabilities it provides enable these customers to utilize new contact center and collaboration technology as it is introduced.

The company provides benefits in the area of pricing. It operates a number of financing programs that offer flexible terms and affordable rates, making it easier for clients to utilize its solutions. Specific programs include lease offers for small and mid-size enterprises and the Flexible Acquisition Program, which enables customers to pay for networking equipment on a monthly basis.

The company lowers total cost of ownership by reducing the amount of hardware used. This contrasts with competitors who respond to customer demands by layering on more protocols and architecture – increasing overall costs while reducing flexibility and simplicity.

The company has established a powerful brand. It bills itself as a leader in business communication and collaboration solutions, with significant market share in contact center infrastructures, worldwide telephony systems, enterprise messaging, and voice maintenance services. It has over 300,000 clients, including 83% of the Fortune 500, with installations in more than half a million locations. Lastly, it has received many honors, with forms of recognition including the NorthFace Scoreboard Award for “World Class Excellence in Customer Service” (Omega), selection as a “Top Bay Area Innovator” by Thomson Reuters, and the ITSMA Gold Award for Marketing Excellence.

Channels

Avaya’s main channel is its direct sales team, through which it acquires most of its customers. The company also sells products through indirect sales channel partners, who include dealers, distributors, alliance partners, value-added resellers, system integrators, and telecommunications service providers. The company promotes its offerings through its website, as well as through the hosting of webinars and other virtual events, attendance at conferences and trade shows, and sponsorship of events in the sports, entertainment, and philanthropy arenas.

Customer Relationships

Avaya’s customer relationship is primarily of a self-service, automated nature. Customers utilize its products and services while having limited interaction with employees. The company’s website includes self-help resources such as videos and case studies. That said, there is also a personal assistance component in the form of phone, e-mail, and live chat support. There is also a community element in the form of the International Avaya Users Group (IAUG). This is a global organization that was established to foster interaction between users of Avaya offerings. It has over 5,200 members, largely communications technology professionals.

Key Activities

Avaya’s business model entails designing and developing its products and services for customers. The company outsources the production of its offerings to third-party contract manufacturers. The majority of this production occurs in facilities in southern China, with other locations including Mexico, Israel, Taiwan, Malaysia, Ireland, the United Kingdom, and the U.S. Avaya also licenses select software parts and purchases select hardware components from third-party original equipment manufacturers (OEMs), and outsources its distribution and warehousing operations to third parties.

Key Partners

Avaya maintains the following three key types of partnerships:

Global Service Provider (SP) – Arrangements in which Avaya works with top telecommunication service providers to sell its products and services, particularly its Cloud-based Communications-as-a-service (CaaS) services.

Global Systems Integrator (SI) – Arrangements in which Avaya works with system integrators to sell its products and services.

Ecosystem – Arrangements in which Avaya works with top IT and telecommunications companies to develop solutions that combine the benefits of their offerings.

If they so desire, partners may join Avaya Connect, the company’s business partner program that offers certification in the selling, implementation, and maintenance of its systems, services, and applications. Members receive technical, financial, and sales/marketing benefits. Avaya Connect currently has more than 9,300 partners.

Avaya also offers the Avaya DevConnect program, which focuses on the joint development, testing, and marketing of innovative products that are compatible with Avaya’s offerings. Members have expertise in a wide variety of areas, including contact center, IP telephony, and unified communications applications. Avaya DevConnect currently has more than 25,000 partners.

Key Resources

Avaya’s main human resources are the 2,200 engineers involved in the development of its products and the 2,800 individuals involved in the selling of those solutions. The company places a high priority on its intellectual property, and as of September 2015 it had 5,400 patents (issued and pending), including U.S. and foreign patents.

Cost Structure

Avaya has a cost-driven structure, aiming to minimize expenses through low-price value propositions. Its biggest cost driver is selling/administrative expenses, a fixed cost. Other major drivers are costs of products/services, a variable expense, and research/development, a fixed cost.

Revenue Streams

Avaya has two revenue streams:

Product Revenues – Revenues generated from the sales of its hardware and software products.

Service Revenues – Revenues generated from the sales of its services, primarily support for implementation, deployment, monitoring, and troubleshooting of its products.