NemertesResearchGroupInc.www.nemertes.com1-888-241-2685

EnterpriseBusinessValueMatrix

Q417

08Fall

ByRobinGareissPresident&FounderNemertesResearch

Nemertes’BusinessValueMatrixisdesignedtohelpITprofessionalsevaluatingvarioustechnologiesandproviders.ThisreportanalyzesAvaya’sperformanceinUnifiedCommunicationsandCollaboration(UCC)forenterpriseimplementations—thosewith1,000ormoreendpoints.Ourresearchincludesreal-worldcapital,implementation,andoperationalcostsforUCC.WealsoaskITprofessionalstoratetheirprovidersincustomerserviceandsupport,technicalinnovation,andotherkeycharacteristics,toprovideagaugeofoverallquality.Finally,weincludetheNemertesBusinessValueMatrix,whichprovidesanat-a-glanceviewofhowthevendorsstackup,comparatively.

AvayaUnifiedCommunications&Collaboration

TABLEOFCONTENTS

AboutTheBusinessValueMatrixResearch..................................................................................3EnterpriseUCCValueMatrixFindings..........................................................................................3

ProvidersIncluded...........................................................................................................................3Avaya’sPerformance...................................................................................................................4

EnterpriseCustomerRatings...........................................................................................................4EnterpriseCosts...............................................................................................................................5IndustryFindings.............................................................................................................................7ManagementTools.........................................................................................................................7

ArchitectureTrends.....................................................................................................................8Conclusion...................................................................................................................................9ResearchMethodology...............................................................................................................10Demographics.............................................................................................................................10

ByNumberofEmployees..............................................................................................................10ByIndustry.....................................................................................................................................11

TABLEOFFIGURESFIGURE1:ENTERPRISEUCCVALUEMATRIX..................................................................................................................3FIGURE2:USERSENTIMENTTABLE,ENTERPRISEUCC.....................................................................................................5FIGURE3:UCTCOFIGURES,AVAYAVS.AVERAGE.........................................................................................................6FIGURE4:WHYMOVETOTHECLOUD?........................................................................................................................8FIGURE5:SIZE,BYNUMBEROFEMPLOYEES................................................................................................................10FIGURE6:RESEARCHPARTICIPANTS,BYINDUSTRY........................................................................................................11

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AboutTheBusinessValueMatrixResearchNemertesconductedresearchonUnifiedCommunicationsandCollaborationplansandcostsduringthefirstquarterof2017.Weinterviewedorsurveyed723companiesfromvariousindustries,andranginginsizefrom50employeestohundredsofthousandsofemployees.(Pleaseseetheaddendumformoredetails.)Nemerteshasconductedthisresearchindependentlyfor12years;noonesponsorsit.InadditiontoaskingITprofessionalsdetailedquestionsabouttheircosts,wealsoaskedthemtoratetheirprovidersinsixcoreareas.Wethenplottedtheiraveragefirst-yearcostsontheY-axisofamatrix,andtheiraverageratingontheX-axis.Inthisreport,weexploreAvaya’sperformanceintheEnterpriseUCCValuematrix.(PleaseseeFigure1.)

Figure1:EnterpriseUCCValueMatrix

EnterpriseUCCValueMatrixFindingsProvidersIncludedITproviderscitedafewdozenvendorswhoprovideUCCcapabilities;sevenofthemreceivedenoughratingstobecountedindividually.Thoseincludedareamixofplatform

Alcatel'Lucent'

AT&T'

Avaya'Cisco' IBM'

Microso7'

Verizon'

High

%%Cost

%%Low

%

Low % % %Customer%Ra2ngs % % %High%

Enterprise%UCC%Value%Matrix%

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providers(AlcatelLucent,nowALE,Avaya,Cisco,IBM,andMicrosoft)andcommunicationsserviceproviders(AT&TandVerizon).NotallprovidersofferthesameUCCcapabilities.Thepointoftheresearch,however,wastomeasurewhomenterpriseITleadersconsidertheirUCCprovidersandhowtheyratethem—regardlessofwhatcombinationofservicestheyuse.

• Allprovidecollaborationcapabilities,suchasinstantmessaging,presence,web/audio/videoconferencing.

• TheCSPsofferhostedservices,andAT&TprovidesitsownBroadsoft-basedUCaaS.• IBMandMicrosoftalsoprovideemail/calendarplatforms.AllbutIBMprovidevoice

capabilities.• Alcatel-Lucent,AvayaandCiscoaretheonlyproviderswiththeirowncontact

centerplatforms.

Althoughwedidnotaskcompaniestoratetheircontact-centerprovidersinthisresearch,theirabilitytooffercontact-centercapabilitiesisrelevanttotheirUCCdecisions.ManyorganizationswanttointegratetheircorporateUCCsystemorservicewiththeircontactcenters.Thedriverismakinganyemployeeapotentialcustomer-serviceagent.WiththeappropriateUCCintegration,truecontact-centeragentscanfindpresencestatusonanyemployee,andjointheminacall,screenshare,videoconference,orothertypeofcollaborativecall.ITleaderssaytheycanreducethestaffingrequirementsbyleveragingtechnologyfromasingleprovider,vs.usingmultipleproviders.Indeed,37%alreadyusethesameprovider,apracticethatcorrelateswithcontact-centersuccessinourresearch.Avaya’sPerformanceAvaya’scustomersarepleasedwiththetechnology,responsetime,reliabilityandinteractionacrosstheboard.TheyalsohavelowTotalCostofOperations(TCO).Amongenterpriseorganizations,AvayaperformsbestwhenevaluatingbothcostandcustomerratingsamongUCCprovidersthatoffervoiceandcollaborationcapabilities—regardlessofarchitecture.Thisanalysisincludescloud,on-premises,andhybriddeployments.EnterpriseCustomerRatingsAvaya’stop-ratedareaamongenterprisesisreliability;thatratingisalsohighestamongallotherprovidersratedbyenterprises.Avayaalsoscoresaboveaverageintechnologyfeatures,responsetime,andaccountteaminteraction.(PleaseseeFigure2.)

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Figure2:UserSentimentTable,EnterpriseUCC

ReliabilityisanunderpinningofanyproductorserviceintheITspace.Afterall,whatvaluearesolidtechnologyfeatures,fastresponsetime,orinnovationiftheirproductsandservicesarenotreliable?Duringinterviews,ITleaderssaidAvaya’sUCCandcontact-centerplatformsaresolidintermsofreliability—keytodecreasingoperationalcostsbyreducingthestaffhoursrequiredtotroubleshootoutages.EnterpriseCostsAvayahasperformedwellhistoricallyinNemertes’UCCTotalCostofOperationsresearch,and2017isnoexception.Nemertesmeasurescapital,implementation,andoperationalcosts,andAvaya’scostsarelowerthanaverageineachofthoseareas.Wealsototalthefirst-yearcosts(sumofcapital,implementation,andoneyearofoperationalcostsperendpoint);at$473perendpoint,Avaya’soverallfirst-yearcostsalsoarelowerthanaverage,by16%.(PleaseseeFigure3.)

ProviderTechnology/Features

Response/Time Reliability Interaction Innovation

Digital/Transformation AVERAGE

IBM 3.57 3.43 3.43 3.57 3.29 3.43 3.45Avaya 3.41 3.06 3.44 3.06 3.00 2.81 3.12Cisco 3.25 2.98 3.25 3.00 3.06 2.90 3.08Alcatel;Lucent 2.78 2.89 3.11 3.00 3.33 3.33 3.07Microsoft 3.40 3.00 3.25 3.00 3.00 2.75 3.07AT&T 3.03 2.90 3.03 3.06 3.06 2.90 3.00Verizon 3.00 3.00 3.21 3.00 3.00 2.92 3.00AVERAGE 3.18 2.96 3.22 3.01 3.04 2.88 3.05

Nemertes/UCC/Management/User/Sentiment/Table

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Figure3:UCTCOFigures,Avayavs.Average

Nemertesgathersseveraldatapointstocalculatethecostsineachmetric.Hereishowwecalculatethenumbers:

• Capitalcostperendpoint:IncludesPBX,endpointdevicesandlicenses,servers,otherhardware.Insomecases,bundledlicensesincludecertainUCapps

o =Capitalcosts/numberofendpoints(handsets,softphones,etc.)• Implementationcostperendpoint:Includesstafftimeandthird-party

consultantsandintegratorso =((Stafftime*loadedhourlyrate)+third-partycosts)/numberof

endpoints• Operationalcostperendpoint:IncludesstafftimemeasuredasFullTime

Equivalents(FTEs),equipmentmaintenance,third-partymanagedservices,trainingandcertification(seedescriptionsbelow)

o =((NumberofFTEs*averageannualloadedsalary)+equipmentmaintenance+managedservices+training/certification)/numberofendpoints

$88

$213 $173

$473

$135

$225 $205

$565

$-

$100

$200

$300

$400

$500

$600

Implementation Capital Operational First Year Total

Avaya UCC Costs 1,000+ Endpoints

Avaya Average

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Extendingthefiguresoutforatraditionalthree-yearTCO,Avaya’senterpriseUCCrollouts(typicallywithAura)costitscustomers$818perendpoint,whichisthesecondlowestofallenterpriseprovidersmeasured.Operationalcostsarethemostimportantbecause,unliketheone-timecapitalandimplementationcosts,theycontinueyearoveryear.Avaya’soperationalcostsare15.6%lessthanaverage,whichisakeyreasonitsthree-yearTCOisimpressive.UCCoperationalcostsincludethefollowing:

• InternalStaffTime–Includesthefullyloaded(overheadforbenefitsandtaxes)salariesoffull-timeequivalentemployeesmanagingUCC.

• Third-PartyManagedServices–Includestotalcostsforthird-partymanagedservices.Thisdoesnotincludeinitialconsultingorsystemsintegrationassociatedwiththeimplementation.

• ITStaffTrainingandCertification–Includesinstructorfees,travel,coursematerials,andcertificationfees.

• UserTraining–Includesthird-partytrainingcostsand/orthefullyloadedsalariesforinternalstaffthattrainemployeesonUCC.

• EquipmentMaintenance–Includesannualcostsforequipmentmaintenance.Thiscanapplytoon-premisesorclouddeployments,asclouddeploymentstypicallystillincludemaintenanceonhandsetsandservers.

• CloudSubscription–IncludesmonthlysubscriptioncostsforcloudUCCserviceswhererelevant.

IndustryFindingsInevaluatingfindingsbyindustry,wedidnothaveenoughdatatoanalyzeeachproviderineachindustry.InAvaya’scase,wehadenoughcostdataforfinancialservices,healthcare,education,andmanufacturing.Avaya’sfirst-yearcostswerelowerthanaverageinmanufacturing,andataverageforhealthcare.Itsoperationalcostsarelowerthanaverageineducationandmanufacturing.ManagementToolsAnothernotableresultfromtheresearchisthatAvaya’sUCCmanagementtoolslandinthetoprightsectionoftheEnterpriseandMidmarketUCCManagementValueMatrix,meaningITleadersratethemanagementtoolsamongthebest.Otherprovidertoolsratedincludeadministration/operationsmanagement(Riverbed,Voss,andUnimax),performancemanagement(IR,Nectar,Riverbed),andUCCplatform(Avaya,Cisco).

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Additionally,Avaya’smanagementtoolsreduceoverallUCCoperationalcosts,primarilybyprovidinginsightthatreducesITstaffingrequirements.ThecostcomponentoftheUCCManagementValueMatrixdoesnotrepresentthecostofthetoolitself.Rather,itistheassociatedoperationalcostfortheUCCsolutionundermanagement.ManagementtoolsarearelativelysmallpartofoverallUCCcosts.What’smorerelevanttoorganizationsistheextenttowhichmanagementtoolscanreduceoveralloperationalcosts.ArchitectureTrendsMostorganizationsareevaluatingorplanningtomoveatleastsomeUCCappstothecloud.However,agrowingpercentage(15%,upfrom9%in2016)hasdecidedagainstcloudandplanstostayonpremises.(PleaseseeFigure4.)LargeenterprisesarenotaslikelyassmallandmidsizebusinessestomoveallofUCCtothecloud.ManyaregettingatasteofcloudthroughtheuseofusePlatformasaServiceandInfrastructureasaServiceforavarietyoffunctions.WithUCC,though,manylargeenterprisesremainhesitanttoputeverythinginthecloudimmediately,optingtomoveslowlywithappslikeemailandwebconferencingfirst.

Figure4:WhyMovetotheCloud?

Indeed,manyITleaderswhoparticipatedintheresearchsaidtheywereconcernedabouttheexclusivepushtowardcloudbyseveralUCCvendors.Theyexpressedinterestinworkingwithproviderswhodeliverviablesolutionsforon-premises,hybrid,andcloudarchitectures,vs.forcingcustomerstotheclouddespitepoliciesordecisionsthatpreventthemfromdoingso.Costreductionoftenisadriverformovingtothecloud,andindeed,companiesofallsizesrealizecostsavingswithIaaSandPaaS.Companieswithfewerthan500employeesrealize

4%

6%

10%

12%

12%

15%

16%

18%

18%

21%

29%

33%

Other

Acquired right tools/services to help with cloud migration

Can't get budget for IT staff, but can for services

Providers investing more in cloud than on-prem

Executive mandate

Not considering cloud at all

Must free IT staff for strategic initiatives

Can roll out services faster from the cloud

More features available in cloud services

Security concerns now addressed

Improved agility for IT

Perceived cost reduction

Why have you moved/are considering a move to the cloud?

Down from 49% in 2016. Cost savings not driving

companies to the cloud, as we find costs actually

increase!

Up from 9% in 2016. IT leaders more cautious

about moving to the cloud.

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savingswithUCaaS.However,ourresearchshowsthatlargerorganizationsactuallyincreasecostswithUCaaSbecauseofnewsubscriptioncosts,andthefactthattheyarenotreducingstaff.Rather,they’resimplyreassigningthemtootherpositions(cloudpartnerrelationshipmanagement,technologyintegration,UserAwarenessandAdoption,andbusinessliaisonroles).It’simportantforITleaderstomovetocloudUCformorecompellingreasons,includingagility,availabilityoffeatures,speedofrollouts,andfreeingITstaffsformorestrategicinitiatives.ConclusionWhenevaluatingoptionsforUCCproviders,considerthefollowing:

• Assessimplementation,capital,andoperationalcosts.Ofcourse,costisonlyoneofmanycriteriaforproviderselection,andthelowestcostisn’tnecessarilythebestchoice.But,makingsurethecostisbelowaverageshouldbeagoal—andparticularly,makingsureoperationalcostsarebelowaverage.

• Relyuponinputfromexistingcustomers,whetherthroughdiscussionswithreferralsorthoughresearchlikethisthattracksusersentiments.Alignthemostimportantcriteriaforyourorganizationwiththosewhoscorehighinthosemetrics.

• EvaluatethebenefitsofintegratingUCCwithcontactcenter.Improvingcustomerexperienceisoneofthetopbusinessgoalsofdigitaltransformationinitiatives.Byexpandingthepoolofpeoplewhocanservecustomers,organizationswillincreasethelikelihoodofmeetingtheirdigitaltransformationgoals.

• Managementtoolsmatter.Often,theyareafter-thoughtstoaUCCproviderdecision,buttherighttoolscanprovidequickinsighttotherootcauseofanyproblems.Thatreducesthemanual(andcostly)humaninterventionrequired.

• Workwithaproviderthatoffersthearchitectureflexibilitytheorganizationrequires.Manyenterpriseswanttocontinueusingon-premisessolutions,orperhapshybridastheycontemplateamovetothecloud.Don’tforcefitacloudsolutionbecausetheprovidernolongerinvestsinon-premises.

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ResearchMethodologyNemertesconductedits12thannualUnifiedCommunicationsandCollaborationTotalCostofOperationsfromJanuarythroughMarch2017.Weinterviewed14ITleadersandreceivedresponsesinelectronicsurveyformatfromanadditional709individuals,whocomefromNemertesinternallymanageddatabaseandaresearchpartner’s.WeaskedresearchparticipantsnumerousquestionsabouttheirUCCprovidersandassociatedcosts.Inordertobecountedindividually,eachproviderneededaminimumofapproximately10responsesor5%ofthetotal(whicheverwasless)ineachsizebandmeasured.Therefore,somehadenoughamongmidmarketorganizationsbutnotinenterpriseorganizations,orviceversa.DemographicsByNumberofEmployees

Figure5:Size,byNumberofEmployees

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Theresearchparticipantsspanarangeofindustriesandorganizationsizes.About43.7%oforganizationsaresmall,22.5%aremidsize,and33.7%arelarge.Nemertessegmentsthedatabycompanysizeand/orrolloutsizetonormalizedataortoillustratedifferencesbetweencompanysizes.Figure8showsthebreakdownofthesizeoforganizationsthatparticipatedintheresearch.ThisreportfocusesonthosewithUCCrolloutsof1,000endpoints,whichmaybroadlyalignwithemployees,thoughsomeorganizationshavemoreUCCendpointsthantheydoemployees,whileothershavesignificantlyfewerendpointsthantheydoemployees.ByIndustryTheresearchalsoincludesrepresentationfromseveralindustries,asshowninFigure9.Nemerteshasmoredetailedbreakdownsoflargerindustries.Forexample,infinancialservices,wehavedatafrombanking,investmentfirms,andinsurancecompanies.Professionalservicesbreaksdownintoseveralsub-industries,suchasaccounting,legal,consulting,realestate,etc.

Figure6:ResearchParticipants,byIndustry

1%

2%

2%

2%

2%

2%

2%

3%

4%

4%

6%

7%

7%

8%

10%

11%

14%

14%

Energy & Utilities Real Estate

Aerospace & Defense Telecommunications

Media & Entertainment Transportation

Hospitality Not-for-Profit Construction

Retail Healthcare

Government Software & High Tech

Other Education

Financial Services Professional Services

Manufacturing

Industry