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Cisco Pricing Undercut By $100M In Big Cal State University Network Project 220

Posted by Soulskill
from the added-an-extra-zero dept.
alphadogg writes "The $100 million price differential between the Alcatel-Lucent and Cisco proposals to refresh California State University's 23-campus network revealed earlier this week was based on an identical number of switches and routers in various configurations. CSU allowed Network World to review spreadsheets calculating the eight-year total cost of ownership of each of the five bidders for the project. 'Everybody had to comply with this spreadsheet,' said CSU's director of cyberinfrastructure. 'Alcatel-Lucent won the project with a bid of $22 million. Cisco was the high bidder with a cost just under $123 million. Not only was Cisco's bid more than five-and-a-half times that of Alcatel-Lucent's, it was three times that of the next highest bidder: HP, at $41 million.'"
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Cisco Pricing Undercut By $100M In Big Cal State University Network Project

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  • Cisco what? (Score:5, Insightful)

    by EmperorOfCanada (1332175) on Saturday October 27, 2012 @05:04PM (#41791683)
    I have always felt that Cisco had the same sort of following as Novell. Senior IT people certified up the wazoo yet unable to explain to me why Cisco was so much better. The bits that leak out of big data people like Facebook and Google seem pretty lacking in the big names. I don't see gear from HP, IBM, Dell, Cisco, etc. What I do see is white boxish or custom gear that they seem perfectly happy with.

    Just a guess but my bet is that much of the business that big old companies like Cisco come from single skill IT people combined with kick ass sales people. Salespeople who sell to upper management not to the non Cisco IT people who might fact check.

    So good job to the people who didn't blow an extra $100 Million.
    • Re:Cisco what? (Score:5, Insightful)

      by kqc7011 (525426) on Saturday October 27, 2012 @05:29PM (#41791899)
      Sometimes a company will place a extremely high bed because they really do not want the contract. But they have to bid to stay on the list for future proposals. And if they do get the bid all they have to do is sub it out to a lower bidder and keep the carry.
      • by Sepodati (746220)

        That's what I was thinking, too.

      • Is that true for most public entities, and this one in particular? The state of Alaska, on highway projects for example, simply publishes bids for any comer. There is no list of qualified bidders, though for design work, you need an appropriate person with an Alaska PE. Here's [adn.com] an advertisement for airport facilities in Northway, AK, if you're interested. (The preceding link probably broke sometime after 15 November, 2012, if you're reading this later.)

      • by Mal-2 (675116)

        Sometimes a company will place a extremely high bed because they really do not want the contract.
        But they have to bid to stay on the list for future proposals.
        And if they do get the bid all they have to do is sub it out to a lower bidder and keep the carry.

        This is known as a TTFO quote, as in "told to f*** off". It is technically a quote, but you don't expect to win. Rather you look to send a signal that you don't want this piece of business but if someone INSISTS on throwing it your way, you'll do it at your stupidly inflated rate.

        This is very often done by finance companies so they can say with a straight face that they offer financing to EVERYONE.

    • by larien (5608)
      Facebook & Google have networks/systems designed to work around failure and data loss is a minor inconvenience. They expect to lose a data centre at various times and continue to Just Work. In those environments, cheap grey boxes are fine provided you design appropriately. If you are designing a critical 24x7 system which cannot spread around in the same way (e.g. financial institutions) may have different requirements.

      Now, while I'm not saying that Alcatel is less reliable than Cisco, Cisco generally

    • by shentino (1139071)

      Kinda like how microsoft woos PHBs into shoving their crap down IT's throat.

    • Re:Cisco what? (Score:5, Interesting)

      by bertok (226922) on Saturday October 27, 2012 @06:38PM (#41792319)

      Unable to explain to me why Cisco was so much better

      There are some advantages to going "All Cisco", similar to the advantages of going "All Microsoft" or whatever:

      - Huge pool of highly trained talent to pick from. Cisco certified people are easy to get, at both the low end and the high end.
      - Good consistency in their products. Excluding their most exotic stuff and the cheapest consumer stuff, pretty much everything Cisco makes uses IOS or is IOS compatible to a degree that you can't tell the difference. You learn it once, and that's it, you know all their products.
      - Complete product line. You can start with an entry level firewall and router, and upgrade to multi-terabit telco grade routers without ever having to throw out your knowledge or tools and start over. If it's a digital cable that you can plug into a router, Cisco almost certainly sells a module for it. If they don't, someone sells a compatible one.

      From what I've seen, their competitors try to undercut them on price, often successfully, but then the IT department needs two or three vendors to meet all their networking needs. For example, Cisco sells blade-chassis IO modules (integrated switches), and even VMware vSphere "virtual switches"! If you have VMware on HP Blades (very common), then you either go Cisco, or live with the inconsistency. A lot of vendors will sell switches and routers, but not firewalls, VPN concentrators, WAN accelerators, or something. Suddenly, you need IT guys trained ina bunch of vendors' network equipment, you need three different management and monitoring tools, and your op-ex is through the roof. When you call support with a problem, the vendors will all point at each other, and meanwhile your links are down and your users are screaming at you.

      On the other hand, $100M seems a bit much, even for Cisco. Sounds like they put a half-assed effort into the bid, and didn't pick the most cost-effective devices or just didn't give the right educational discount or something.

      Facebook and Google seem pretty lacking in the big names

      They're special, and aren't even remotely representative of a typical business. The way they build infrastructure has more in common with supercomputer design than business data centre design. For example, Google was using 100 Mbit switches when everyone else was starting the upgrade to 10 Gbit!

      • by carleton (97218)

        Was that a typo? The 100 Mbit switches when everyone was starting to upgrade to 10 Gbit? I would have expected Google to be using 100 Gb when everyone else was starting to upgrade... if it wasn't a typo, could you explain why?

        • Re:Cisco what? (Score:5, Insightful)

          by Revotron (1115029) on Saturday October 27, 2012 @09:02PM (#41793377)
          It's not a typo. Google's entire data model is designed around "cheap and disposable" instead of "expensive and bleeding-edge." The general notion is that they can get 10 custom-built consumer-grade systems for the same price as one enterprise-grade server, and have more processing power and better uptime by distributing their workloads to avoid single points of failure.

          That's why they use consumer-grade SATA hard drives. If one breaks, they let it sit there until their next walk-through. Meanwhile, the load is distributed onto a bunch of other similarly-inexpensive servers. You'd be surprised how long an el-cheapo hard drive can last when it never stops spinning.

          I have a feeling if Google deployed 10GbE to each server, they'd probably double their hardware costs.
          • Re:Cisco what? (Score:4, Interesting)

            by HockeyPuck (141947) on Sunday October 28, 2012 @03:51AM (#41794921)

            Right. But you forgot to mention that they have developed on their own and implemented a very custom software stack.

            Not every enterprise out there has the development staff that google does to create such a software layer to be able to commoditize the hardware layers.

            Take any established company. Kaiser Medical, Caterpillar, JPMC... while they may have solid IT staffs, the company's core competency is not IT. It's Healthcare, Industrial Machinery or Financial Services. So for them paying for EMC storage or IBM mainframes or Cisco routers and switches is worth their time and money. So they can focus on their core business.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            Do you have any evidence to back up the "100mb in the datacenter" statement?
            (not all statements are directed at revotron; some are just directed at weird comments elsewhere)

            1) they make (some) of their own network gear, and have since at least 2007 [1]
            2) when they buy name-brand, they appear to use force10 [2]
            3) IOS isn't used in any "modern" cisco gear. They use nx-os, which is derived from their SAN gear and really not much like IOS. [3]
            4) let's suppose that google doesn't use 10gb in their DC -- why on

      • by PopeRatzo (965947)

        There are some advantages to going "All Cisco", similar to the advantages of going "All Microsoft" or whatever:

        - Huge pool of highly trained talent to pick from. Cisco certified people are easy to get, at both the low end and the high end.
        - Good consistency in their products. Excluding their most exotic stuff and the cheapest consumer stuff, pretty much everything Cisco makes uses IOS or is IOS compatible to a degree that you can't tell the difference. You learn it once, and that's it, you know all their pr

      • by amorsen (7485)

        Suddenly, you need IT guys trained ina bunch of vendors' network equipment, you need three different management and monitoring tools, and your op-ex is through the roof.

        The challenge with Cisco is that you still need three different management and monitoring tools... IOS and IOS-XR and ASA-OS and NX-OS are similar in that you type commands and things happen...

        Disclaimer: I'm a Juniper fan boy.

    • Re:Cisco what? (Score:4, Insightful)

      by djlowe (41723) * on Saturday October 27, 2012 @10:28PM (#41793833)
      Hi,

      I'm going to get pounded for this post, but that's OK - this is a subject with which I am familiar, and I'd like to share my perspective nonetheless.

      I have always felt that Cisco had the same sort of following as Novell. Senior IT people certified up the wazoo yet unable to explain to me why Cisco was so much better.

      Your current "+5 Insightful" upmods notwithstanding, the fact that you need someone else to explain this to you tells me that, by your own admission, you don't have the knowledge required to make these decisions yourself. That alone makes me wonder why your post got upmodded... but, this is Slashdot in the 21st century, so what can you do, right?

      If you had the requisite knowledge, I imagine that you'd be posting from that viewpoint, e.g. "I evaluated Cisco's offerings for my company, and after comparing them to other vendors, decided that they weren't worth the premium price for us." Or something similar, rather than stating: "I have always felt that"... this isn't something subject to feelings. IT/MIS is a technical profession, and cost/benefit analysis with regards to network and computer infrastructure is something that is done every day in the real world, though apparently not by you.

      The bits that leak out of big data people like Facebook and Google seem pretty lacking in the big names. I don't see gear from HP, IBM, Dell, Cisco, etc. What I do see is white boxish or custom gear that they seem perfectly happy with.

      What you don't appear to understand is that Googles and the Facebooks of the world are basically large enough to be OEMs (Original Equipment Manufacturers) in their own right, and have the money and technical resources to pursue that path, and so your attempt to apply their approach to this particular case is flawed. Certainly CSU is large, but they aren't "Google large", when it comes to network infrastructure and servers, and you'll note that they went with a name-brand vendor, rather than rolling their own solution, which makes your statement doubly inane.

      Just a guess

      You appear to be good at that.

      but my bet

      What bet? How much? What are the terms? I'm sorry to sound confrontational, but you do realize that such is a null statement? It costs you nothing to say, and there's no penalty if you're wrong. Why not replace it with something more honest, such as "I think that", or, better, in your case: "I believe that"?

      much of the business that big old companies like Cisco come from single skill IT people combined with kick ass sales people.

      Actually, much of Cisco's success, and sales, come from corporations with mission-critical networks, regardless of scale. They pay a premium for Cisco's hardware, and pay for SmartNet contracts, to ensure their network operations. This may not be worth it to you, but, I have to tell you, their support and logistics when it comes to SmartNet are amazing, and "4 hour parts on site"? The last time I opened a Cisco TAC case for a device so covered, I had a callback in 10 minutes from the person assigned to the case, parts dispatch was under an hour, and the longest delay was on our side: The person that was on-call to open the office (It was a Sunday) didn't answer her cell on the first try, and I left a message with the engineer's cell number, and called him back and gave him her number so he could call her directly to arrange to meet at the office. Once he got onsite, I emailed the backup copy of the router config to him, and he took care of the rest.

      Total time was just over three hours, and the following Monday morning everyone came to work and the network was working.

      THAT, in my opinion, is worth paying for, when needed, as it was in this case: That office is in Washington State and I'm in New York State.

      Now, many companies don't need that, and that's fine. And, based just

  • by Anonymous Coward on Saturday October 27, 2012 @05:04PM (#41791689)
    I bet Belkin could do the job for a cool 1 million. Of course it wouldn't work, but look at the savings.
  • On big projects like these, the contractors try to find out how much the customer has budgeted or is willing to pay. Like, by inviting customers to strip joints, etc.

    Once they have an idea of how much money the customer has, they adjust their bid to fit it.

  • by blind biker (1066130) on Saturday October 27, 2012 @05:13PM (#41791763) Journal

    ...unlike those other companies, Cisco's products are carefully and lovingly fabricated in..... China?

    Oops..

  • by hawguy (1600213) on Saturday October 27, 2012 @05:17PM (#41791799)

    I wanna see the final cost after the project is done and everything is working.

    $22M sounds low for a project this of this size, so I wonder if Lucent is planning to make up the difference with consulting fees.

    Or maybe I'm just jaded from paying Cisco prices for so long... and also from seeing low-ball bids costing a lot more in the end.

    • by imikem (767509) on Saturday October 27, 2012 @06:47PM (#41792377) Homepage

      This. A disparity this size suggests there is more to the story. Cisco is expensive, yes, but Lucent isn't free. Hard to see how they intend to make money on the project.

      What Cisco brings to the table is their support organization. If you spend as much time with networking as I do, responsible for upwards of fifty switches, multiple firewalls, IPS, wireless, etc., you learn to appreciate being able to open a case and get a knowledgeable person on the line inside of 15 minutes, and replacement hardware next day without jumping through hoops.

      I've tried HP and Dell network hardware at various times, and came away unimpressed. Servers sure, but they should stick with that IMO. Haven't dealt with any Lucent gear since 2000 (some modem aggregator IIRC), so can't speak to them directly.

    • There's a big difference between being cheaper and being a fraction of the price. Maybe it means that you are getting screwed by the expensive vendor, but it can mean you are getting screwed by the cheap one instead.

      There are big, big differences in the quality of supposedly "high end" network gear. Some of it is crap. It can't handle the big loads it is supposedly designed for, its software is buggy, hardware prone to failure, support sucks, etc.

      Not saying this is the case with Lucent stuff, I dunno, just

  • Huawei (Score:5, Funny)

    by Art Challenor (2621733) on Saturday October 27, 2012 @05:27PM (#41791883)
    What was the Huawei bid?
  • Who wrote the offer? (Score:5, Interesting)

    by garry_g (106621) on Saturday October 27, 2012 @05:52PM (#41792035)

    Wondering, was the offer directly from Cisco? Did the person who designed/selected the gear know what they were doing?
    Just by selecting the wrong gear, prices between different Cisco gear can already differ by a factor of 2-3 ... e.g., we just had a project in which a company campus with something like 20 Gigabit switches (24/48 ports, access layer) and a core with 10G ability to feed to those as well as cover the DC with redundant 1G ports ... going with the usual suspect (6500) as core switch with line cards to supply up to 16 10G ports and 96 1G copper ports would have been more than twice the price than the alternative we chose, Nexus 5548 w/ two 2248 FEX chassis.
    Also, instead of using overpriced (to say the least) Cisco SFP/SFP+ modules would have run the total bill up even more ... (total of 44 SFP+, 42 SFP, with original Cisco SFPs that would add up to around 50k€ - would have been a third of the whole project budget. Using OEM/compatible modules was around 5k€). Assuming a large quantity of fiber ports in such a project, the optics alone may quickly add up to the factor mentioned above ...

  • I'm surprised at the price disparity. It's not like Alcatel-Lucent is a cut-rate supplier.

    My employer recently bid construction of a project I designed, and all of the bids were within 50% of the low bidder. When I was working as a consultant, I recall losing to the low bidder by 100s on a project worth $80,000. Do others see a price spread as wide as this one?

    Perhaps somebody at Cisco misread a spec?

    • by gagol (583737)
      I managed a website project where off-the-shelf customized would cost us around 10K$ but the boss went with full-custom-tied-to-one-supplier for 60K$... go figure.
  • Cisco, you can get better but you can't pay more.

  • I'm partial to HP gear, and I always claimed that it has quite decent TCO even in very small scale deployments (we have 5k worth of gear, not 40M). People who buy Cisco must be getting a lot of free pussy or something.

    • by hawguy (1600213)

      I'm partial to HP gear, and I always claimed that it has quite decent TCO even in very small scale deployments (we have 5k worth of gear, not 40M). People who buy Cisco must be getting a lot of free pussy or something.

      Yes, in a small deployment, HP is very cost effective and works well. Even Netgear works well if your budget is $5K.

      But in my experience, Cisco does win in manageability and scalability of larger networks. And if things stop working, you can get a knowledgable engineer on the line quickly. We're a pretty small customer (~200 switches), and when we ran into a weird problem with some switches in our environment caused by an IOS bug, we got a custom patch for the problem, which Cisco rolled into the next IOS r

    • by amorsen (7485)

      My experience with HP Procurve gear is that it does exactly what it says it does in the spec sheets. The software is rarely buggy, at least not uselessly so, and the hardware is very reliable -- and if it does have problems, they tend to show up from the start, not a year later. The challenge is that there are so few features. I haven't tried the 3com stuff that HP bought yet; back when it was 3com it was quite lousy.

  • by kilodelta (843627) on Sunday October 28, 2012 @10:07AM (#41796103) Homepage
    To price itself out of the market. I recall when I worked at the RI Sec of State's office we did a major move of several units within the department to a new space in a different building. I had to go out and spec pricing for switches, routers, and security gear. For basic core networking I looked at Cisco and HP. For the features I required, namely easy management, VLAN, etc. both offered it but the Cisco gear was 3 times the price of the HP. Cisco essentially thinks that because it is the predominant vendor for networking hardware that they can charge a heavy premium. They have also bought up competitors whenever they could to limit the market.
  • by Above (100351) on Sunday October 28, 2012 @10:30AM (#41796241)

    Reading the article it's easy to see that there was a huge discrepancy in capabilities, at least to anyone familiar with the various product lines. Cisco proposed a very high end solution, for instance offering up their Nexus solution for the data centers. Alcatel-Lucent simply doesn't have anything similar, although they could build a fine data center solution with slightly less bells and whistles. HP, well, they make some great switching devices, but their L3 routing capabilities are woefully short of both Cisco and Alcatel-Lucents. In fact, that's my biggest clue something went wrong here, if an HP solution is being compared to Nexus, well, that's about as far on opposite ends of the networking spectrum as you can get.

    These bids were not at all for the same thing, which tells me the university did a very bad job of writing the RFP. If you put out an RFP saying "I need a car that can take 2 people 100 miles" that spec can be met by a Lamborghini Aventador and a Nissan Versa. The reality is probably neither are appropriate for someone who wants a good value, middle of the road solution.

    I have no doubt Cisco could offer up a solution with the same capabilities as Alcatel-Lucent or HP for a competitive price, and no one knows why they didn't do that here. Also, even with similar hardware capabilities speced Cisco software has a lot of features the other vendors simply do not have. Are they worth millions extra? Probably not, but they are worth some extra. If the university had competent people writing the RFP they could have pointed to features that reduce manpower needs and gotten more appropriately priced equipment.

    Having written and reviewed a number of RFP's, one of our criteria was the spread on the responses. When it is this large something has likely gone wrong with the RFP process, and it needs to be rebid with better specifications. Back to my car example you can throw in things like it needs to run on regular gas (no more Aventador, or other high end cars), or that it needs to have at least 15 cubic feet of trunk space (no more Versa), and put yourself in a much more reasonable range.

    Rather than picking the low bid here the university needs to take a serious look at their requirements, and put out a revised RFP.

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