Companies will develop a solution based on RingCentral technology
Collaboration solution provider RingCentral is now the exclusive provider of Unified Communications-as-a-Service (UCaaS) offerings for Avaya in an alliance that will include new products and programs for the partners and salesforces of both companies.
The Lowdown: The recently announced partnership fills a hole in Avaya’s product portfolio for a strong cloud-based offering and adds some clarity to what has been an uncertain future for the company, which over the past few months has been evaluating its strategic options, including being acquired by another company or private equity firm. As part of the alliance, RingCentral will buy $125 million in Avaya stock, acquiring a 6% stake in the company.
The Details: The two companies will develop Avaya Cloud Office by RingCentral, a UCaaS solution that will be based on RingCentral’s technology and will be sold by Avaya and it channel partners. In addition, RingCentral and Avaya will jointly create programs for Avaya’s global sales and partner network and automated technologies that will ease the transition of Avaya’s on-premises unified communications (UC) customers to the cloud-based offering.
Along with the $125 million stake that RingCentral is taking in Avaya, the company also will pay Avaya $375 million, primarily for licensing rights and commission for selling the Ring Central-based solution. That money will be paid mostly in stock.
The Impact: The partnership will give Avaya’s UC customers and channel partners – which span more than 180 countries – an easy way into UCaaS. But there are still issues that need to be addressed, including the fact that Avaya already sold its UC offerings on a subscription basis and made them available via public, private, and hybrid clouds. In fact, the company earlier this year revamped its channel program to give partners more incentive to sell cloud-based communications products and services and has been expanding its cloud-based product portfolio.
Background: The agreement with RingCentral helps ease some of the pressure on Avaya to find a way forward, though it doesn’t preclude Avaya from going private in the future through a future acquisition. The company last month said it needed more time to evaluate its options and said that “advanced” discussions were ongoing. Rival Mitel was one of the companies that had expressed interest in Avaya.
The Buzz: “This strategic partnership leverages the respective strengths of Avaya and RingCentral to provide a definitive differentiated solution,” said Vlad Shmunis, founder, chairman, and CEO of RingCentral. “We are excited to bring RingCentral’s leading UCaaS platform to Avaya’s installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both our companies.”
“Avaya and RingCentral’s joint investment and commitment to bringing Avaya Cloud Office to market creates an unprecedented opportunity to accelerate the transition to the cloud with attractive economics for our customers and partners,” said Avaya President and CEO Jim Chirico. “This also gives us the opportunity to unlock value from a largely unmonetized base of our business as it brings compelling value to our customers and partners. We believe this highly complementary partnership is a game-changer that expands the total addressable market for Avaya and creates meaningful value for both Avaya and RingCentral.”