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Competitive Focus

From Defense to Offense Winning strategies to increase your revenues, profitability and accelerate your time to cash November, 2012 Enzo Signore – VP, Competitive Strategy & Marketing.

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Competitive Focus

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  1. From Defense to Offense Winning strategies to increase your revenues, profitability and accelerate your time to cashNovember, 2012Enzo Signore – VP, Competitive Strategy & Marketing Notice: Avaya obtained this information from industry consultants, customers, published research, trade journals and internal research. To the best of our knowledge, this report is based on the most current information available as of the date of printing. Although reasonable efforts have been made to assure freedom from errors, Avaya Inc. is not responsible for the accuracy of the information contained in this document.”

  2. Competitive Focus • #2 in WW Telephony revenue behind Avaya, but #1 in line share at 16.07% • +55% in Jabber licensing volume • Improvements to Hosted Collaboration Solution (HCS) and WebEx Premise • TelePresence weakness (-8% YoY) • Claims of rapid growth, but still <1% Voice • Claim “free” solution with aggressive licensing • T3i Lync Impact Report (Feb’12) 65% evaluating/plan to evaluate(2) • Lync 2013 RTM, projected availability in 1CQ13 Barry O’Sullivan O.J. Winge Rowan Trollope (4) • Announced Oct 12th but not GA • Royalty Free SVC – MSFT Lync • Software-based MCU • RealPresence Collaboration Server 800s • SVC support for the RMX • RealPresenceCloudAXIS Suite VC in a browser • New room systems and an executive desktop system • New mid-market video solutions • Stock lost two-thirds of its value over the past year and a half.(3) • +23% YoY to $246M FY12 from $200.1M FY11 • ShoreTel 13 released Summer 2012 • 17 straight Qs of unprofitability • Less than 2% Market Share(1) • 52 week low Stock Price in Aug 2012

  3. Going from Defense to OffenseCompetitive Strategy & Marketing Team Mission Strategy • Develop thorough, fact-based competitive analysis, with primary and secondary research, to intimately understand key competitors in each major segment • Help set the industry agenda via the development of a compelling, differentiated competitive strategy, market positioning and marketing tools • Directly collaborate with sales and business partners to beat the competition and acquire new customers Improve win rate & positioning of Avaya’s business solutions, and influence future solutions offers via the development and communication of fact-based competitive analysis and winning strategies

  4. Comprehensive & Integrated Competitive Assets Deliverables& Assets Competitive Lab Tracking & Measurement Competitive Analysis War Rooms Trap Management Competitive Training Battle Cards Competitive Pitch FUD Management

  5. ShoreTel Business Communications Solutions • IP Telephony • Cloud based UC as a Service • Unified Communications • Instant Messaging • Conference and Desktop Collaboration • Unified Messaging • Contact Center and Call Center • Mobility Applications • Mobile UC Applications for Smart Phones and Tablets http://media.shoretel.com/documents/SOLUTION_UC_Platform_050310.pdf

  6. Why Avaya IP Office? 25% Lower TCO* 100% Resilient 75% Less Complex *Based on a 2010 Tolly Group report comparing IP Office and ShoreTelsystems. Revised 2012 study coming in December

  7. Position the Value of Avaya IP Office • Simple • Scalability. • Users, servers and capabilities scale with ease including resiliency • Track record of bridging technology • 3 year manufacturer support policy • User-centric, easy to deploy • Built-in Innovation. • HD Multi-Party Video & 128 party audio conferencing • Remote & mobile worker apps • SIP trunking support • Automatic Call Distribution • Call recording • Flexible • Solution. • Compliant with 300+ 3rd-party Avaya-certified applications. • Hybrid - add digital, analog, SIP or any combination • Remote support offer and future software upgrades • Integration with choice of desktop (ACA via Lync) * Tolly Group Study 2010

  8. Simple and Low TCO? Really? 2x More $ for SIP* 6x More Redundant Hardware 4x More $ for Conferencing Let us show you the facts!

  9. What Shoretel doesn’t want you to know • Hidden Complexity. • 4x more boxes for scale and applications • 6x more boxes for disaster recovery • N+1 architecture • Conferencing, Mobility, SIP Trunking, and Call Recording each require additional hardware • Limiting Possibility. • < 100 3rd party applications • No networking portfolio • No hybrid IP/digital phones • Lacks multi-party video conferencing • Nickel & • Dime. • InGateSIPerator ($6,000 vs. Avaya SBC at $2.5K) • Audio conferencing up to $399/port • Call recording separate professional service app $$$ • Higher energy consumption

  10. Brilliantly Simple. Low Cost High Availability. “Avaya products can struggle to provide the availability many organizations require. With Avaya IP Office, the failure of a control unit at a remote site can render phones inoperable…. implementing Avaya redundancy options could be costly and add to architectural complexity” - ShoreTel Whitepaper FALSE FALSE

  11. Disaster Recovery increases complexity 6x! 16U rack space 24 IP Addresses 24 Switch ports 24 Power supplies 4 24 Add 1 more gateway FREE resiliency all users Active / Active vs. PSTN DC2 DC1 PSTN Voice Switch T1k Voice Switch T1k DC1 DC2 ShoreTel Service Appliance ShoreTel Service Appliance Avaya IP Office 500v2 Avaya IP Office 500v2 +500 users +500 users Avaya IP Office Server Primary Avaya IP Office Server Secondary Shoretel Mobility Router Shoretel Mobility Router Voice Switch220T1A Voice Switch220T1A ShoreWare Server ShoreWare Server 11

  12. ShoreTel’s pesky PR Problem ShoreTel Backup Facility Wasn't Ready In Time For Superstorm Sandy - November 05, 2012    Chad Berndston CRN News Is Shoretel the right vendor for the job? January 2012 November 5, 2012 ???? "Unfortunately, it is coming online early in 2013, too late to have helped us in the past few days," “back-up option to another geographically located data center was not yet operational in time for the storm” “began work on a project to update its "geographic redundancy”

  13. IP Office Server EditionWins on Price/Value & Functionality • A revised Tolly TCO report comparing IP Office and ShoreTel will be available in December • Initial analysis shows Partner margins 2x with IP Office for same price • Support services is significantly less • AV: Core element priced per server starting at $215/list • ST: All billable elements increase service price as % of list

  14. When is simple too simple? 400+ employees; privately-owned medical research firm; Beverly, MA • Correct serious call center issues with 12-month-old ShoreTel system – over 70 agents (scientists) provide critical medical research • Enable mobile agents to stay connected throughout facilities via wireless devices • Streamline/standardize on single platform for centralized management and reporting Challenge “This is an outstanding example of how well IP Office serves the midmarket: simplified, centralized, scalable. We solved a critical call center issue and at the same time delivered a comprehensive, all-IP solution that simplified how they manage their communications.” David Dart, Vive Communications , Avaya authorized partner • IP Office Server Edition reduces complexity and costs (centralized management and licensing) • Ensure reliable call center ops (eliminate ShoreTel issues); provide critical call reporting • IP Office Support Services (IPOSS) delivers exceptional remote support/training Value

  15. Introducing the Shoretel War Room We are here to help! • Quick access to the experts that can increase your success in competitive situations. • Cross-functional support that addresses a wide range of issues. • Proactive learning that improves our tactics • Assisting the field: 16 deals, 2 hours response, Average $30k-$150k

  16. Winning Formula against Shoretel • Know the competitive pitch • Simple Scalability vs. Hidden Complexity • Built-in Value vs Nickel & Dime • Flexible Solution vs. Limiting Possibilities • Demo Early and Demo well • Avaya IP Office – Designed for Small to Midsize Businesses • Leverage the IP Office Toolset • Leverage War Room for more information and tools • Show Them the ROI and TCO

  17. Microsoft’s Enterprise UC&C Portfolio Microsoft Active Directory Slide Comments --------------------- Microsoft Exchange Microsoft Sharepoint Enabling Collaboration Microsoft Lync

  18. The Microsoft Lync Penetration Strategy “Lync is Self-Funding” “Lync Integrates” Embrace, Extend, Extinguish Business Level Discussions Slide Comments --------------------- User Licensing IM & Presence Voice & Video 3rd Party Apps Conferencing “Lync is Free” “Good enough” “Locked into Lync” Risk to Enterprise

  19. Competitive Strategy Open Collaboration PlatformFor all of your users Everyday productivity experienceMisses key use cases Purpose BuiltEnterprise Collaboration • IT Deployment Confidence Enterprise-ready UC?Immaturity adds risk to your business Integrate & Surround

  20. Open Collaboration Platform For all of your users • Immersive Video • Best in Class Mobility • Natural Experience • Choice at Desktop • High Quality HD • All major mobile & desktops • No firewall issues • Easy download • Optimized over public networks • Excellent meeting controls • Integrates with voice & video • Leader in the 2012 IDC MarketScape vendor assessment for Mobility • Mobile VoIP over WiFi/3G/4G/Video and collaboration and IM&P • Supports all leading OSs • Rich document sharing and collaboration • Thick client or browser based • Multi-party Audio, Video • Seamlessly communicate your existing phones and PC without having to re-buy expensive phones • Rich telephony features you are used to • Integrated Lync interface with IM&P • Integrated into your Office applications for click-to-call Power Collaborator Mobile Collaborator Knowledge Worker Task Oriented

  21. Purpose Built for Enterprise Collaboration IT deployment with confidence • Predictable TCO • Consciously Open • Platform for Innovation • Engineered & Supported for Real-time • 2x lower overall cost (Nemertes) and 3x lower OPEX • Leverage Avaya telephony • Leverage IT environment • End-to-end support included • 33% lower BW HD video(2) • Avoid unnecessary CALs and 3 year lock in • Track record ofinteroperability • Flexible licensinggrowswithadoption • Rich web-based API ecosystem • The most open, interoperablesolution • 12-18 monthsR&Dcycle • Avaya Aura 3-tier SIP architecture • Single management solution • Mature implementationpractice • RapidROIs, match need & adoption • 10x better availability - rated 5 9s to 6 9’s. 5 9s = 5.26 min per year downtime(5) • Full survivability in the event of failure • High scale to 250K users • Single pointofsupport, award winning, J.D.Power(3) • Robust Management tool

  22. Everyday Productivity ExperienceMisses key use cases • Incomplete Video • Lacks Fixed Mobility Integration • Ad-Hoc Focused • PC-centric • Lacks immersive HD, multi-party video, limited: 6 parties CVP • Few advanced meeting controls • Requires 3rd parties for integration for room systems • Dependent on CPU and network for quality • No Multicasting • No central recording • Lacks bridged mobility for seamless desk to mobile integration • No call recording • No mid-call control • Requires PC uptime or else • Or expensive new desk phone or USB speakerphone • Headsets are not always on • Ad-hoc oriented experience works for internal meetings • Click to join from web business applications limited Power Collaborator Mobile Collaborator Knowledge Worker Task Oriented

  23. Enterprise Ready UC? Immaturity adds risk to your business • Hidden Costs • Closed Track Record • Monolithic Architecture • Immature Solution • 6x Operational costs • New phones, gateways, network • Upgrade PC, Win7+, SQL, Exchange • 3rd party vendor support, T&M cost extra • High BW HD video costs 1.5x more(2) • Unknown license policy: tablets & smartphones • History of deprecating API’s • 3 year up-front EA commitment, all users • Web-based API • 36 month R&D cycle • 2-tier architecture monolithic • 3rd party heavy solution, hard to manage • Unproven implementation vendor • Unpublished availability- estimated 3 9s – 4 9s (4). 4 9s = 52.56 min/year (5). Every “9” downtime costs $200K - $15M over 3 years (5,6) • Partial survivability (lose contacts, presence, conferencing,) • Scale unproven • 3rd party support required

  24. NEW! Independent 2012 Research Avaya has Lower TCO Versus Microsoft Lync The Full Report will be accessible in ~1 month In-depth interviews and surveys with 211 organizations Avaya Lowest TCO Results Source: Nemertes Research: DN2382 Nemertes UC Cost Model Charts and Tables.pptx, Oct 2012

  25. Microsoft Lync drives a higher TCO than Avaya Microsoft Lync is 2x higher than Avaya to acquire & support first year for IPT $2,482/user Microsoft Lync $1,182/user Avaya Overall median all vendors $1,305/user 2x Source: Nemertes Research: DN2382 Nemertes UC Cost Model Charts and Tables.pptx, Oct 2012

  26. Driven by 6x higher recurring OPEX Costs All user sizes Key message: Microsoft startup costs for IPT are comparatively low, but ongoing Opex is up to 6x higher. 6x higher Source: Nemertes Research: DN2382 Nemertes UC Cost Model Charts and Tables.pptx, Oct 2012

  27. Driven by 8x more costly internal staff requirements All user sizes $1,411 Breakdown of per-Unit Costs for OPEX (Median) $176 Source: Nemertes Research: DN2382 Nemertes UC Cost Model Charts and Tables.pptx, Oct 2012

  28. What Microsoft Doesn’t Want You to Know What Customers Say "I have serious issues with Microsoft. When I declined to deploy Lync, Microsoft threatened to audit us for ANY infractions on our current deals and would be sending us  a bill if we did not trial it" - Major financial services company. Aug 2012 “We believe that Microsoft will increase the per-user list pricing by 15% which will also raise the service assurance pricing.” – multiple sources, Nov 2012 "Microsoft is very aggressive. When we indicated that we were not interested in running the Lync proof of concept, Microsoft threatened to talk directly with my CFO to audit our existing licenses." - COO of Infrastructure, a premier National Cancer Institute, Oct. 2012 “It’s like the early days of VoIP.  They lack the features found in other systems”. Customer quoted from Nemertes Webinar, 1/17/2012

  29. What Microsoft Doesn’t Want You to Know What Analyst say "Lync is Microsoft’s problem child. 99.9% of companies deploying Lync keep their PBX". Bern Eliot, Gartner UC Lead Analyst. 10/24/2012 “Lync’s 1 year TCO is the highest in the industry, close to 80% higher than the median– Nemertes, UC cost analysis – Oct. 2012

  30. Integrating with Microsoft Lync Remote Call Control (RCC) Enable Avaya Signature Media Standard SIP Integration Communications Core SIP Trunking Complete Mobile Solution Avaya Client Applications (ACA) Session Management Utilize Microsoft Lync Desktop Client Client Plug-In APIs Secure Remote Worker Support

  31. Integrating with Microsoft LyncAvaya Client Applications (ACA) – Available Dec’ 2012 Avaya Aura 6.2.1 and IP Office 8.1 FP1 Microsoft Lync Client n Integrates with existing phones Avaya Real-Time Toolbar Avaya Feature Control No VoiceCAL required saves $87 to $107 per user Avaya Media Experience Microsoft Lync Conversation Window

  32. Integrating with a Microsoft Environment Click-to-Call Click-to-Call Click-to-Call Click-to-Call Click-to-Conference Microsoft Internet Explorer Integration Microsoft Office Suite Integration Microsoft Outlook Integration Microsoft Dynamics Integration

  33. Increase customer value, reduce enterprise risk Value Risk “Integrate Desktop Leverage Investment” “Vendor Flexibility” IPT, Messaging & CC ACA Lync Plug in 3rd Party Apps User Licensing IM & Presence Video & Voice Conferencing Mobile Collaboration “High Value Video & Voice Conferencing” ”Mobile Convergence”

  34. Microsoft Compete Training Coming! • Strategy, Tactics and Tools to compete • December: SME Training • Calendar Q1: Avaya AM/SE and Partner Training

  35. NEXT STEPS Calendar Q1+ December 2012

  36. Competitive Information on the Portal https://avaya.my.salesforce.com/apex/sp_GeneralDetailHome?Id=a3j30000000L7UqAAK Updated Content Coming Sales Portal > Competitive Intelligence

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