Legacy communications providers Avaya and Mitel have both completed restructuring to strengthen their positions in the unified communications space.
While the restructuring presents the opportunity to show customers and partners that their companies are much more substantial, some continued doubts could bode well for their cloud competitors.
Avaya has emerged from bankruptcy twice in six years. In September 2024, the company appointed Patrick Dennis, former CEO of cybersecurity firm Venafi, as CEO to guide its next phase of growth. Dennis vowed to continue the "innovation without disruption" vision of former CEOAlan Masarek, who retired at the end of 2024.
All that was done against a volatile backdrop for the firm, as its financial debt situation was dire. Avaya had roughly $3.4 billion in debt when it filed for Chapter 11 bankruptcy in 2023. In restructuring, the company successfully eliminated more than $3.75 billion in debt and now reports stabilized finances.
Mitel more recently filed for Chapter 11, addressing a debt load of $1.3 billion. Mitel did, though, swiftly restructure, nixing $1.15 billion in debt and emerging financially decisive.
Both Avaya and Mitel are leaders in their respective markets, according to Gartner. But what does a collective total of three Chapter 11 filings mean for two of the most sizable UC players?
Anurag Agrawal, founder and chief global analyst at unified communications (UC) analyst firm Techaisle, said he sees the UC market at a climactic juncture.
"While unified-communications-as-a-service (UCaaS) adoption is significant, it's crucial to recognize that on-premises UC remains highly relevant for many organizations," Agrawal said.
While unified-communications-as-a-service adoption is significant, it's crucial to recognize that on-premises UC remains highly relevant for many organizations.
Anurag AgrawalFounder and chief global analyst, Techaisle
According to Techaisle research, 92% of businesses prioritize hybrid communication systems, indicating that a complete shift away from on-premises unified communications infrastructure is not the dominant trend.
Agrawal argued that the financial restructuring of Avaya and Mitel, though frequently cited as evidence of on-premises UC's downfall, oversimplifies the underlying issues.
"Their challenges stemmed largely from substantial debt burdens due to leveraged buyouts and acquisitions, compounded by slower transitions to new consumption models and intense competition -- not solely the rise of cloud," he said.
Agrawal said that while cloud adoption added some pressure to Avaya, prior debt from acquisitions significantly hampered Avaya's financial stability, which he said amounted to "a slow pivot to new models and fierce market rivalry."
Making the case for hybrid deployments
Despite some initial uncertainty for customers and partners, vendors typically become more agile following their emergence from a Chapter 11 filing, Agrawal said. They invest in innovation and solidify their commitment to supporting existing on-premises customers while also offering pathways to hybrid and cloud models.
Both Avaya and Mitel have leaned into hybrid deployments over the last few years. Avaya, for example, formed a partnership with RingCentral, and Mitel partnered with Zoom.
"The hybrid UC architecture is the preferred strategic consideration for organizations hesitant to perform full-on cloud migration," Agrawal said. A hybrid architecture integrates traditional and cloud-based technologies and provides a consistent UX while addressing back-end needs like compliance, resilience and security, he said.
According to Techaisle, the hospitality, construction and finance industries share a strong prioritization for hybrid systems, with adoption rates ranging from 91% to 97%.
"These kinds of organizations value data control, deep integration with existing infrastructure and granular customization -- features often challenging to achieve with pure public cloud UCaaS," he said.
On-premises unified communications grows costly
However, on-premises communications is becoming too expensive to manage, according to Steven Karachinsky, who runs the UCaaS MSP practice, Ziro.
Managing these systems is becoming increasingly expensive due to their complexity, which involves aging hardware, constant upgrades, licensing and end-of-sale/end-of-support notices, as well as the fact that much of the equipment is no longer manufactured, Karachinsky noted.
"It's also hard to find people who know legacy systems, so you're exposed when something breaks, " he said. "Add to that the lack of integrations, zero flexibility and the reality that most vendors are either sunsetting their systems or getting out of the space altogether, cloud PBXs make more sense."
Karachinsky credited their agility, modernity, scalability, cost-effectiveness and ability to connect with everything else customers are using. As far as long-term considerations go, Karachinsky said it is key to understand what keeps organizations on-premises.
"If there's no mission-critical reason, it's time to evaluate the cloud," Karachinsky said. "Then look at the numbers, total cost of ownership, support contracts, head count and hardware."
He added that it is paramount to also consider the employee experience and ask if your present tools are consistent with how the rest of your organization collaborates.
"If you're in the cloud for everything else, staying on-prem for UCaaS is just dragging you down," Karachinsky said.
Avaya and Mitel declined to comment for this article.
Moshe Beauford is a writer with nearly a decade of experience covering enterprise technology, including AI, unified communications and customer experience.
