University exposes IT overcharging

It would appear that big companies like Cisco are losing lucrative government contacts because they want too much cash.

In a recent case, California State University found that Cisco’s proposals to refresh its 23-campus network were $100 million different to an offer from Alcatel-Lucent.

According to Computerworld, the difference was based on a project which required an identical number of switches and routers in various configurations.

Alcatel-Lucent won the project with a bid of $22 million. Cisco was the high bidder with a cost just under $123 million while HP wanted $41 million. Juniper offered $31.6 million, and Brocade offered $24 million. All of the prices included discounts and the price delta between Cisco and the other bidders widened after the discounts were applied, Davidoff said.

Cisco is the university’s current vendor and should have had a foot in the door. It isn’t clear why it put in a bid which was so high.

With the outfit not commenting, it does leave the field open to speculation. With the University being up front and saying that the spec was identical, one has to wonder why Cisco, with its knowledge of the technology, bid so high.

One scenario is that the bigger company names such as Cisco, Juniper and HP believed that they could slap in a bid to an education facility and charge what they liked. This might even have been true in the good old days when spec and corporate names mattered more.

It might just be that Alcatel-Lucent was quicker to respond to the market and discovered that it could pick up contracts by, er, offering lower prices.

Another scenario is that Cisco knew more of the true cost of the project because of its local knowledge. If this is the case then Alcatel-Lucent will have some explaining to do when its low bid faces huge cost overruns.

Of course it is also possible that the big networking companies have seen the government and education contracts as a gravy train for so long that they have been caught out when someone else breaks ranks and provides a contract for what it is worth.