Cisco lost a big, fat contract with the California State University system by submitting a bid that was $100 million more than the other guys.
Now, an internal email makes Cisco look like it has its head in the sand.
The staggering price difference of a Cisco network compared to its competitors was reported by Jim Duffy at Network World.
Industry tongues have been wagging about it because there's a phrase among IT professionals called "ABC"—and it means "anybody but Cisco." People in the ABC camp believe that Cisco charges its customers too much. This bid seems to validates their criticism.
The winner of the contract, Alcatel-Lucent, bid $22 million. Runner up HP bid $41 million. Cisco bid $123 million, Duffy reported.
Okay, companies often lose bids. But to make matters worse, Brad Reese, a blogger who frequently writes about Cisco, posted an internal email by two execs involved in the bid.
Astoundingly, their explanation was a flat-out denial.
"Put simply, there is no way that Cisco's bid was six times higher than the competition," the email said. It was written jointly by Kim Majerus, vice president for Cisco's education sales, and Larry Payne, a regional vice president of sales, Reese reports.
Those numbers came from the guy who collected the bids, Michel Davidoff, director of cyberinfrastructure at CSU.
"All the vendors had to propose exactly the same solution," Davidoff told Duffy. Each of them were given the same spreadsheet that listed all the network gear CSU wanted to buy.
Cisco's was simply $100 million higher, according to Davidoff, who said that Cisco provided the list and discount pricing for the requested equipment.
UPDATE: A reader pointed out one reason why Cisco's bid was so much higher. Cisco was already the supplier to one CSU school, San Jose State University and had recently won a $28 million project from SJSU, the internal email pointed out. Duffy reported that SJSU didn't put that project out to bid. The university merely "looked at the industry at what was available," said SJSU President Mohammad Qayoumi. That put Cisco in a rock-and-a-hard place. If its bid came in too, low, what would that say about what it was charging SJSU?
This is a very tricky position for Cisco. Its salespeople are clearly getting questions from customers and need answers. But the answer—that a customer's assertion about pricing data it provided in a bid simply isn't true—seems like a very dangerous position for the company to take.
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