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Navigating the Avaya Bankruptcy

by | Feb 1, 2017 | Uncategorised

You may have heard the news.  The second largest PBX vendor, Avaya, has declared bankruptcy. 

Based on my years of experience, at least 50% of Typex’ blog readers are currently using Avaya (which includes Nortel, BT Meridian, etc.) somewhere in their infrastructure and will be wondering what to do next. The rest of you will be thinking ‘Could this happen to my vendors?’. This post is for both of you.

The Avaya Bankruptcy Facts

Avaya Inc. has gone into a US bankruptcy process known as Chapter 11. This process directly affects only the US operation but when the head office goes bankrupt there must be repercussions lower down the tree. The causes of the Avaya Bankruptcy are multiple including declining revenue. They have $312M in cash but a 2017 call on $600M of debt and 2018-21 payments of $5.3B that they probably can’t refinance since Moody’s downgraded them.

Avaya’s Next Steps

So, what might Avaya do next? They need to appease their creditors and generate cash. This might involve any or all of:
– Converting debt to equity
– Selling a division, e.g. Contact Centre or Networking
– Reducing expenditure (likely to affect R&D and support)
– Consolidating the product set (drop support for certain lines)
– Trying to force customer upgrades
– Putting up the maintenance charges

They might then come out of Chapter 11 significantly weakened and go through the whole process again.  There is a possibility that someone might acquire the whole company but this could run into competition issues.

Your Next Steps (Avaya Customer)

– Inventory your Avaya investment including support renewal dates
– Don’t let support contracts auto-renew until you have a plan

Your Next Steps (Everyone)

– Consider your exposures to compliance issues and business risk
– Look at a low cost ($10K), non-Avaya, stand-by IP-PBX which routes calls to staff mobiles
– Consider your future IT & UC architecture
       – Physical or Virtualised?
       – On-Premises, Cloud or Hybrid (Hint: ask yourself what you are doing with your collaboration and line-of-business apps)
       – Desk handsets, PC softphones and/or mobile end points?
       – Develop PBX/application integrations that are platform-independent
– Plan a modular migration that reduces your dependency on a monolithic PBX/ISDN installation
       – Federate any multiple PBXs (IP and TDM) to a single call plan
       – Move to SIP Trunking (reduces dependency on gateways, saves money)
       – Swap out old, expensive TDM-based PBXs (pays for itself)
       – Choose a PBX vendor that will not do the same as Avaya (see next section)

Vendor Stability

Here are some financial figures for the top four PBX vendors (alphabetical order) that might be of interest: 

Company Debt
Avaya $5,300,000,000
Cisco $28,643,000
Mitel $586,000,000
ShoreTel $243,000

Quick Actions

– Send us your phone and maintenance bills to see how much you can save
– Request a quote for a warm stand-by system
– Call us or ask your question in the comments below if you have any urgent issues or just want reassurance on the Avaya bankruptcy