The Price of Monopoly: $100 million

Recently, California State University made a deal for Alcatel-Lucent networking components that was $100 million less than a proposal from Cisco Systems. Cisco’s proposal was six times the price of Alcatel-Lucent’s …

“Everybody had to comply with this spreadsheet," he said. "Every campus had two border routers, two cores, and two server farm switches. All the vendors had to propose exactly the same solution" based on the average number of servers deployed at each CSU campus. "All of this is based on exactly the same data to all of the vendors. It’s exactly the same formula for all of the vendors."

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.”

via Cisco network really was $100 million more.

Now Cisco does not have the same kind of monopoly as M$ does on the desktop but the effect that prices are artificially higher when Cisco gets the inside track is the same. I have worked in schools that had a budget of $2K for toner and nothing else but emergency purchases of replacement parts who had Cisco switches. At one place, I had a Cisco switch but no gigabit/s ports. I read the manual and found there were two with Cisco’s proprietary connectors, not RJ-45… It would have been extra cost to use those ports. Also, I needed to turn off some features. You guessed it, another strange connector was needed. I eventually bought a 26port switch with two gigabit/s ports for ~$100 and ignored Cisco with its $1K+ devices which were more difficult to use. The first place I used LTSP in a school, the server the students and I built tapped into a gigabit/s port on a Cisco switch that cost the school division more than $1K. Meanwhile, they stapled CAT-5 cables to the furniture…

Really, Cisco makes good products but in this age where almost all IT comes from China at commodity prices, is there any room for being a “Cisco-only” shop?

The same thing applies to software. Is there any room for being a M$-only shop? No. If you unbundle the OS and the office suite and look at the prices, you will see the same ratios, M$’s stuff costs five times the price of GNU/Linux and LibreOffice, considering the price of Free Software to be about $20 for installation. M$’s bundled price is ~$100 and M$’s Office Suite is $hundreds per seat. One can buy a PC bundled with M$’s stuff for less than five times the price of an identical unit with GNU/Linux but that’s why M$ enforces the bundling and why it’s so difficult to find identical units in many places. It’s camouflage.

Cisco didn’t have anywhere to hide when unit prices are laid out. It’s time the practice of bundling the price of the OS with the PC was banned or retailers explicitly made to offer choice. Certainly the big guys like Dell have no problem offering choice but mostly they offer it to large customers. It’s time everyone, even consumers had choice of OS with a PC.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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