The Cisco, CSU, and ALU drama


Cisco has been taking a PR beating recently (Dave Michels wrote a good rundown) with news of its failed bid to win a networking contract for California State University (CSU) system. This would’ve been a sale of many, many big expensive networking boxes to 23 campuses in an eight-year project schedule. The newsworthy part of this story? Cisco’s bid was $122 million compared to the winning bid from Alcatel-Lucent at $22 million. Who can blame CSU for wanting to save a cool $100 million, right?

To make matters worse, an internal Cisco memo regarding this bid was leaked to Brad Reese, an industry blogger. Now a Cisco exec is on a mission to hunt down the leaker.

Anyway, out goes the Catalysts and in comes the OmniSwitches. This is a huge coup by ALU to knock off the incumbent – of course the winning team had to brag a bit.

Let’s face it though – Cisco didn’t become the data networking leader by offering cheap deals. Traditionally its price tag has been higher simply because of its leading brand. It’s the same thing when you go out to buy a pair of Nike shoes, a Coach handbag, a BMW, or an Apple Mac. So it’s no surprise (at least to me) that Cisco’s bid came in on the high end. One could argue that it was way too high, but that might just be a cultural thing…

After all, Cisco dominated the market space early on and weathered the dot-com era, it’s always thought of itself as the top brand in data networking. In fact, data networking wasn’t enough and it branched into consumer networking, collaboration, video, and contact center. Maybe because of these “distractions” its networking competitors managed to catch up and start chipping away at its market share.

Interestingly, there’s one campus that ALU didn’t win over. San Jose State University (SJSU) decided to stick with Cisco for some reason. Doesn’t that defeat the purpose of going with a single vendor for cost savings? According to SJSU President Mohammad Qayoumi:

“I don’t know, but I don’t believe we participated in the CSU systemwide evaluation,” he said. “I don’t know what kind of committee system the chancellor’s office had set up for evaluating Alcatel.

“If you look at the overall solution … you might make savings in one particular aspect, whether it’s hardware, software or servers,” he said. “But our view was, how does it really meet the needs of all of our students and the needs of our faculty and staff. That was the most critical element for us.”

A multi-campus IT project worth over $20M and one school president had no idea about the vendor evaluation process? Maybe Cisco wasn’t the only dysfunctional party  in this whole ordeal…

Well, on a brighter note Cisco reported mostly good news in its 1Q2013 earnings: increased net sales, increased net income, increased EPS.

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