Avaya and ALU Enterprise: Cloud in Their Past and FutureAvaya and ALU Enterprise: Cloud in Their Past and Future

What did analysts hear over and over again at both the Avaya and Alcatel-Lucent Enterprise meetings last week? Cloud.

Walking the halls of the hotel where Avaya held its contact center analyst meeting in New York last week, analyst relations senior manager Jane Biba and I spoke of the irony of Alcatel-Lucent Enterprise having its meeting just the day before. Jane and I started in the industry at a time when all or part of both businesses were part of the pre-divestiture AT&T.

The Lucent component of what is today Alcatel-Lucent was divested from AT&T in 1996, and at the end of fiscal 2000 had revenues of $41.4 billion and 157,000 employees. On the last day of that year, Lucent did a further divestiture--of the enterprise communications systems business--creating Avaya, with 31,000 employees and nearly $8 billion in revenues.

That was near the high-water mark for both Avaya and Lucent in terms of revenues and employment, as the Internet bust came immediately on the heels of the formation of Avaya. By the end of fiscal 2005, Lucent revenues were down by two-thirds to $9.44 billion, and just one-quarter of its year-2000 employees remained (30,500). Lucent was acquired by Alcatel in December 2006, and found itself part of a business that still retains its enterprise communications division, Alcatel-Lucent Enterprise.

But Alcatel-Lucent Enterprise has been under some strain in the last few years as well, as a very small part of a much bigger carrier-focused business. Until recently run by a former carrier executive, Alcatel-Lucent in 2011 publicly put its enterprise business on the block. The result was the sale of the seemingly more marketable Genesys component to private equity firms. This left behind the enterprise communications and data networking business units--generating just 5% of corporate revenues.

So what did analysts hear over and over again at both the Avaya and Alcatel-Lucent Enterprise meetings last week? Cloud. What the cloud strategy is, what cloud solutions have already been created and deployed; private clouds (mostly Avaya) and personal clouds (Alcatel-Lucent). How hybrid CPE/cloud deployments will exist.

And what is the primary go-to-market plan for each company? Partners. Both companies are working to get their enterprise communications portfolios into the data centers of, yes, carriers (as well as other types of service providers.)

Both Avaya and Alcatel-Lucent Enterprise face a formidable competitor in this cloud mission--Cisco has already signed 40+ (mostly tier one) service providers for its hosted enterprise communications offers. While not all are delivering services yet, Cisco has a clear short-term advantage. Avaya and Alcatel-Lucent find themselves describing their cloud deployment strategies as courting "tier-two carriers" or carriers looking for a second hosted solution to add to the portfolio.

One advantage that Alcatel-Lucent Enterprise may still retain is its ownership by a leading carrier supplier. Alcatel Lucent has a new CEO in place as of April 1st, the former CEO of Vodafone's European operations Michel Combes. A relatively young 51 years old, Combes has said he will present his plan for the company in June. He may see the promise that leveraging the carrier business to drive an enterprise cloud business can bring to customers of both.

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