Quick Take
Event Summary
Avaya launched a new line of compact Fast and Gigabit Ethernet switches for SMBs, SMEs and remote branches that promise lower operational costs, offer aggressive pricing and deliver integration with Avaya’s IP Office collaboration offering. The six new ERS 3500 switches also support more flexible and scalable stacking to allow customers to start small and easily expand.
Analytical SummaryPerspective
• Positive on Avaya’s new ERS 3500 compact Fast Ethernet and Gigabit Ethernet switches, because Avaya has created a compelling package of aggressive pricing, enterprise class features, good integration with its IP Office collaboration suite and greater stacking capacity and performance in the new switches. That combination of benefits should help it gain the attention of new prospects, and it gives IP Office users a compelling reason to use Avaya switches, rather than rival switches.
Vendor Importance
• Moderate to Avaya, because the new ERS 3500s complete Avaya’s Ethernet switching portfolio refresh and adds a compelling alternative for SMBs and SMEs compared to more costly market leaders. At the same time, Avaya is finally creating synergies between its compact switches and Avaya’s IP Office collaboration suite.
Market Impact
• Low on the compact Ethernet switch market, because Avaya does not have as large a presence there as some rivals, and it is still taking time and will require consistent execution to recruit its IP telephony-focused channel partners to take on selling its Ethernet switches. In addition, rivals have moved fast to refresh their compact switch lines, and there has been good innovation in the space over the last 18 to 24 months.
Competitive StrengthsCompetitive Positives
• Avaya included enterprise class features in the new ERS 3500s at an aggressive price point, making it between 30% to 50% less than some comparable switches by Avaya’s reckoning, and over 50% less than Cisco Catalyst 2960 C switches.
• Avaya in the next software release for the switches will have very compelling stacking capabilities with the new ERS 3500 switches, enabling four times the performance and capacity available with Cisco’s stacking, and it won’t require a separate license to take advantage of it. The Resilient Stacking feature will allow up to eight units to be stacked for a virtual backplane capacity of 80 Gbps, delivering high performance in a compact form factor.
• Avaya has created a compelling bundle combining the IP Office collaboration suite and the new compact switches, making deployment of both very quick and simple. A built-in configuration script allows a simple “Run IP Office” command to enable the Avaya IP PBX and VoIP phones to be discovered and configured, along with the appropriate QoS services on the switch ports. The combination has also been pre-validated for interoperability and includes a solutions guide for best practices to make it easier for voice-focused channel partners to add switching to their sales and expand their share of wallet.
• The ERS 3500 switches deliver great flexibility, enabling chassis-like features for a fixed form factor price, and the ability to operate in fanless or fan mode, depending on the power budget (60 watts or greater requires a fan, less than 60 watts doesn’t).
• Initial interest in the new ERS 3500 compact switches appears to be stronger than Avaya initially anticipated, but the company is prepared to meet that demand. This likely reflects a market need greater than being satisfied today by the vendors in this space.
• Avaya in the next software release for the switches will have very compelling stacking capabilities with the new ERS 3500 switches, enabling four times the performance and capacity available with Cisco’s stacking, and it won’t require a separate license to take advantage of it. The Resilient Stacking feature will allow up to eight units to be stacked for a virtual backplane capacity of 80 Gbps, delivering high performance in a compact form factor.
• Avaya has created a compelling bundle combining the IP Office collaboration suite and the new compact switches, making deployment of both very quick and simple. A built-in configuration script allows a simple “Run IP Office” command to enable the Avaya IP PBX and VoIP phones to be discovered and configured, along with the appropriate QoS services on the switch ports. The combination has also been pre-validated for interoperability and includes a solutions guide for best practices to make it easier for voice-focused channel partners to add switching to their sales and expand their share of wallet.
• The ERS 3500 switches deliver great flexibility, enabling chassis-like features for a fixed form factor price, and the ability to operate in fanless or fan mode, depending on the power budget (60 watts or greater requires a fan, less than 60 watts doesn’t).
• Initial interest in the new ERS 3500 compact switches appears to be stronger than Avaya initially anticipated, but the company is prepared to meet that demand. This likely reflects a market need greater than being satisfied today by the vendors in this space.
Competitive WeaknessesCompetitive Concerns
• Avaya is battling the perception that it is becoming irrelevant in the Ethernet switching market. Vendors that are natural rivals say they never see Avaya in competitive deals, and at least one quantitative analysis house claims that Avaya has lost market share over the last couple of years. Avaya claims otherwise, but the dispute is not helping it.
• Avaya has been slow to create synergies between its data networking and UC products, and it is just now promoting combined solutions bundles a good two years after the Nortel acquisition closed.
• Avaya has seen some significant churn in the executive ranks, and it’s caused some real concern and hesitancy among channel partners, who worry about whether the current strategy will remain in place. At the same time, partners have not been happy with the margins that Avaya has enabled, and the company pared back a number of channel partners, even while it was looking to recruit in other areas.
• Market leader Cisco sells a broader portfolio of compact switches, with separate lines for small businesses and SMEs, allowing it to segment the market to a greater extent. Cisco’s compact switches include a robust feature set, including innovative power pass through capabilities that enable downstream devices to take advantage of power available in other switches to power wireless APs, surveillance cameras and VoIP phones.
• Avaya’s existing UC/VoIP customer base relies fairly heavily on HP switches, which are also aggressively priced, and it won’t be easy to displace those switches.
• Avaya has been slow to create synergies between its data networking and UC products, and it is just now promoting combined solutions bundles a good two years after the Nortel acquisition closed.
• Avaya has seen some significant churn in the executive ranks, and it’s caused some real concern and hesitancy among channel partners, who worry about whether the current strategy will remain in place. At the same time, partners have not been happy with the margins that Avaya has enabled, and the company pared back a number of channel partners, even while it was looking to recruit in other areas.
• Market leader Cisco sells a broader portfolio of compact switches, with separate lines for small businesses and SMEs, allowing it to segment the market to a greater extent. Cisco’s compact switches include a robust feature set, including innovative power pass through capabilities that enable downstream devices to take advantage of power available in other switches to power wireless APs, surveillance cameras and VoIP phones.
• Avaya’s existing UC/VoIP customer base relies fairly heavily on HP switches, which are also aggressively priced, and it won’t be easy to displace those switches.
Response & Recommendations
• Avaya needs to stop changing horses in mid-stream. The executive turnover is unsettling for channel partners, and gives them a reason to hesitate, rather than embrace the combined IP Office and ERS 3500 switch sales they’re promoting among partners and prospects.
• While Avaya claims that it is growing its data networking business, at least one quant house does not seem to agree. If that organization is incorrect in its figures, Avaya should work with them to correct the mistake. The perception that it is losing “relevancy,” as one trade publication put it, is damaging to Avaya’s reputation and momentum.
• As Avaya promotes cross functional selling among its voice partners, it should also demonstrate its commitment to their profitability. Partners have complained of squeezed margins, even as Avaya has worked to expand its channel. Channel partners have other alternatives, and their profitability should not be sacrificed for a planned IPO or debt reduction to private investors.
• Avaya is gunning for Enterasys’ sweet spot with these switches, and they could have a significant impact if Avaya is successful in getting its VoIP partners to sell the bundled solutions that include these new switches. Enterasys meanwhile has done little to create synergies with its Siemens Enterprise joint venture. The combined companies may want to create more cross-selling opportunities.
• HP has the second largest market footprint in this segment of the market and offers an aggressively priced portfolio of comparably featured products as well. HP should take action within its sizable channel to fend off this new competitive offering and ensure it achieves feature parity where it may be slightly deficient in order to strengthen the offering and eliminate an insertion point.
• While Avaya claims that it is growing its data networking business, at least one quant house does not seem to agree. If that organization is incorrect in its figures, Avaya should work with them to correct the mistake. The perception that it is losing “relevancy,” as one trade publication put it, is damaging to Avaya’s reputation and momentum.
• As Avaya promotes cross functional selling among its voice partners, it should also demonstrate its commitment to their profitability. Partners have complained of squeezed margins, even as Avaya has worked to expand its channel. Channel partners have other alternatives, and their profitability should not be sacrificed for a planned IPO or debt reduction to private investors.
• Avaya is gunning for Enterasys’ sweet spot with these switches, and they could have a significant impact if Avaya is successful in getting its VoIP partners to sell the bundled solutions that include these new switches. Enterasys meanwhile has done little to create synergies with its Siemens Enterprise joint venture. The combined companies may want to create more cross-selling opportunities.
• HP has the second largest market footprint in this segment of the market and offers an aggressively priced portfolio of comparably featured products as well. HP should take action within its sizable channel to fend off this new competitive offering and ensure it achieves feature parity where it may be slightly deficient in order to strengthen the offering and eliminate an insertion point.
Buyer Actions
• The once-moribund campus edge switching market has seen significant new innovations over the last 18 months, and any enterprise looking to refresh the edge of these networks would do well to try to future proof those locations by taking advantage of the new innovations being made in compact switches.
• Enterprises using unmanaged switches on an ad hoc basis because of cost sensitivities would do well to evaluate the new Avaya 3500 series compact switches. Boardrooms, movable classrooms and other locations could benefit from using a low cost managed switch with enterprise features by reducing operational costs without sacrificing policy control or security features (among others).
• Avaya VoIP and UC customers using HP (or other vendor) compact Ethernet switches may want to examine the benefits of the solutions bundles Avaya is creating around the new ERS 3500 switches. Avaya has priced them aggressively, insured interoperability and made it simpler to deploy them together.
• Enterprises using unmanaged switches on an ad hoc basis because of cost sensitivities would do well to evaluate the new Avaya 3500 series compact switches. Boardrooms, movable classrooms and other locations could benefit from using a low cost managed switch with enterprise features by reducing operational costs without sacrificing policy control or security features (among others).
• Avaya VoIP and UC customers using HP (or other vendor) compact Ethernet switches may want to examine the benefits of the solutions bundles Avaya is creating around the new ERS 3500 switches. Avaya has priced them aggressively, insured interoperability and made it simpler to deploy them together.
Analytical Perspective
The introduction of the new ERS 3500 compact switches for SMBs, SMEs, and branch offices completes a total refresh of Avaya’s entire switching portfolio over the last two years, demonstrating from a product portfolio perspective that Avaya is solidly committed to competing in the space and regaining its former standing as a top tier contender. The ERS 3500 line of six switches, ranging from ten to 24 ports and promising much greater stacking capabilities than more expensive market leaders, extends more enterprise-oriented features to smaller businesses while offering lower costs than leading rivals in the segment. From a price, performance and features standpoint, it has given prospects every reason to consider the Avaya compact switches along with much more widely recognized competitors. At the same time, it is finally creating product and sales synergies between its lower end switches and its IP Office products, enabling it to push Avaya VoIP channel partners to actively sell Avaya switching (and wireless) products as a bundle with the VoIP solutions. But it will have to do a better job of convincing channel partners that it is committed to its strategic direction, and to their profitability. Too much churn over the last two years in Avaya’s executive ranks has caused resellers to worry about whether initiatives begun by a predecessor would carry over with a new regime. Early this year Avaya appointed a new general manager of its data networking unit, naming former Cisco executive Marc Randall to the post, while it executed a reorganization that reduced the number of operating units from seven down to three. And as Avaya investors angled for an IPO, channel partners have seen their margins erode.
Still, Randall believes Avaya has the opportunity to grow its data networking business, and his aim is high: he was recently quoted as saying he’d like Avaya to be the third largest networking company in the world.
Still, Randall believes Avaya has the opportunity to grow its data networking business, and his aim is high: he was recently quoted as saying he’d like Avaya to be the third largest networking company in the world.
