When news broke of a new round of layoffs at Avaya last month, worries stirred once more for what it might mean for the company's future.
In July, Avaya announced its previous round of layoffs, cutting roughly 180 jobs. This reduction accounted for around three percent of the company’s total workforce and followed the significant number of jobs cut in the second half of 2022 in the run-up to Avaya filing for Chapter 11 Bankruptcy at the beginning of 2023.
"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 said in a statement to UC Today.
Former CEO Alan Masarek spent two years attempting to steady the ship before Patrick Dennis stepped up as the new chief in September. While layoffs and restructuring will always prompt criticisms, a devil's advocate position might suggest that Dennis's aggressive refocusing of the company might be its best—or possibly even only—path forward towards long-term profitability.
"It's an interesting sort of ongoing situation," Zeus Kerravala, Founder and Principal Analyst at ZK Research, told UC Today during the latest Big UC News show. "First of all, one of the reasons you see so many rounds of layoffs is because, geographically, you do have to handle things differently. But more than that, I think with the new leadership coming in, Patrick Dennis is now running the company. He's trying to accelerate what Alan Masarek put in place."
Kerravala outlines that Avaya's focus is now the Global 1500 pool of large businesses. "Actually, what (Dennis) explained was that's actually more like 4,000 companies. So if you think of a brand like Unilever, right, there's a whole bunch of sub-brands that sit underneath that," he pinpointed.
"The company isn't as concerned today about top-line growth but about profitability," he continued. "So, managing that bottom-line growth, increasing revenue or increasing profitability to the point where it can actually make some money, because historically, even though it might've had a couple of quarters where it raised revenue, it didn't do that."
"The focus now is that top 1500 or 4,000, if you want to decouple it. If you're not aligned with that, that function doesn't need to exist. If you think of the roots of Avaya, spun out of AT&T. It served literally every type of company, from a one-man company all the way up to the biggest of the big. As it started to lose some share, it continued down the path of trying to be all things to all people, and frankly, it did a pretty poor job of that. That's why they're in the position they're in now."
Kerravala drew a parallel with Broadcom, which focuses on the largest customers when it buys a company. If Broadcom happens to lose companies underneath that, that's acceptable because those weren't profitable anyway. Avaya's focus will likely be similar.
"I think along with that, you will see a lot of changes," Kerravala said. "They won't need to be as active at industry events because if you're marketing to your top 1500, you have an intimate relationship with them, and they should know what you're doing. You don't have to bring them to an event. I would think they're going to scale back their own events."
"From an outbound PR perspective, I think you'll see a lot less from them because who are they messaging? Right. They're not trying to convince a broader audience to buy their products, so they are dialled in on the top 1500. It's unfortunate that a lot of good people had to go."
"I do think this is something that's long overdue at Avaya," Kerravala stressed. "They've talked about trying to be more focused. They just never really executed on it. Patrick's a VC, a private equity guy, and he's coming and doing private equity things. I don't think this should have been that big a surprise."
"So what do you think is going to happen to their smaller customer base? Are they going to be sold off?" asked Blair Pleasant, President & Principal Analyst of COMMfusion LLC.
