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Poetic justice for Cisco in San Jose City Hall deal

Posted by: Peter Burrows on March 16, 2005

OK, there’s no comparing this to the Bernie Ebbers’ conviction, or even to Congress’ pursuit of baseball’s bigshots in the steriod scandal. It may pale even next to that other obvious outrage, that the flick “Sideways” pretty much struck out at the Oscars. But by granting a closely-watched networking equipment contract to Nortel on March 16, I say the folks in in the city government of San Jose, Calif. struck their own blow for fair play. That’s because the winner was not networking giant and hometown favorite Cisco Systems.

Here’s why. Back in 2003, IT officials in San Jose city government wrote a request-for-proposals for a cutting-edge new network to be installed in a fancy new City Hall now under construction. Rather than create a level playing field, the document specified the use of 18,000 Cisco products—no surprise, given that a city investigation later showed that Cisco had had a major hand in writing up the specs.

When the scandal broke in mid-2004, San Jose's city council decided to cancel the $8 million contract that had been awarded to Cisco, and rebid the deal. That brings us to the news of the day, in which Nortel was named the winner--and with a bid that will cost the city $1 million less than it would have spent with Cisco. What's more, a spokesman in the mayor's office says that in the end, all this fuss won't delay the date at which city workers can move in to their new digs. That's because Nortel has committed to have the job done by June 9--or else pay $20,000 a day in penalties until it is.

Now, I'm not saying Cisco is guilty of anything. They were, in fact, never accused of wrongdoing. Indeed, some officials were quick to praise Cisco for being extremely helpful in the investigation. If guilty of anything, they say, Cisco's only crime was having too good and too proactive a sales team--one that took advantage of an opportunity created when a government sector customer agreed to skirt proper procurement laws. Indeed, Cisco says it investigated the incident, and found no reason to take any disciplinary action on any of its own.

Still, in a week in which justice seems to be on the march in the good ole USA, I can't help but think that Cisco deserved to lose this one. For as well-managed a company as Cisco is, someone there should have known they were treading dangerously close to the edge of good ethics on this one. Too close, in my estimation.

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Reader Comments


August 25, 2006 11:42 AM

This story could use an update. A story by Javier C. Hernandez in today's Mercury News says the system is very flawed and ongoing support cost to Nortel has eaten up any savings over Cisco. Sometimes bids are slanted to a particular vendor because they have a good track record, relationship with the customer and the user's techs know the products. Looks like that was the case here. Some of Javier's comments are:
" . . the systems have failed in part because of network and fire-wall problems -- components that were purchased under a $5.6 million contract with Toronto-based Nortel Networks last year."

". . . But a major Nortel component of the call center that helps reduce the number of callers placed on hold appears to be failing.

After receiving several complaints from residents, the Mercury News performed eight tests of the Nortel voice recognition system over the past several days using different phones and different voices. The system failed to work properly in each trial."

Looks like a media uproar forced San Jose to take a cheap bid that ended up saving nothing and is not performing well. Where's the justice?

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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