Tuesday, November 27, 2012

Is the Customer Always Right?

Recently Cisco has become quite the headliner amongst different news sources in what seems an unexplainable discrepancy in a bidding process for California State University requested by the Director of Cyber Infrastructure at California State University, Michael Davidoff.  Business Insider posted an article: Here's How Cisco Execs Explained A $100 Million Foul-Up” which substantiates Davidoff’s claim that Cisco ran a bad sales cycle by way over bidding (450% higher than the winner Alcatel-Lucent). Is it possible that the customer was wrong in this situation? If HP's bid came in at the same range(HP was 86% higher than Alcatel-Lucent), I wouldn’t have much of an argument, but something went awry in the interpretation of those bids to have such a major discrepancy.  Maybe the seller isn’t wrong here but the buyer is to blame. At the very least, we should evaluate where to point the fingers and not just go straight to Cisco.

How is it possible that Alcatel-Lucent came in at 22 million, HP at 41 million and Cisco at 123 million? Take a second.  This is a huge disparity. Why did this happen?  Is this a question of a bad-selling process or a bad-buying process? Davidoff would blame the selling process, but it might be worth considering that the buyer might be to blame.  Do we blame Cisco for way over shooting?  Or is this a question of the buyer, in this case, Davidoff, for not understanding what he is actually paying for in the bid?  Let’s take a step back.

To begin with, there is no way that Cisco had only two people who are responsible for putting together a bid that is worth over 100 million dollars?  In millions of dollar deals there are teams of people that are sitting at the table giving their input: Pre-Sales, Product Specialists, Account Supervisors, Product Managers, Sales Managers, VP of Regional Sales Managers, Competitive Analytics teams—just to name a few.  Here is what it isn’t: two folks sitting at a table over the weekend throwing around 100 million dollars—not at this level.

There is also no way that Cisco wanted to lose this deal?  So, if Cisco knew what it would take to deliver the services and the products that California State University required, what did Davidoff not understand?  And what were the other companies leaving out of their bids that Davidoff might realize he needs later on during implementation. Were there assumptions of services needed?  The reason it is important to ask these questions is because you have three major companies that surely have an idea of their competitor’s prices, but come out with a bids in wildly different ranges – to be exact: HP was 86.36% higher than Alcatel-Lucent, Cisco was 459% higher than Alcatel-Lucent and Cisco was 186% higher than HP.  

Let’s think about this on a smaller scale: you want a new car.  You research what you want and then go to different dealers looking for the best price.  You know the range that your new car is going to cost you, so if one of the dealers gave you below market value and two that were far above market value, wouldn’t a big red flag go up and you would start asking questions?  You wouldn’t just blindly go with the cheaper one. So instead of Davidoff beating his chest and pointing fingers at Cisco wouldn’t you like to know what questions Davidoff asked, if any?

Time will tell (and realistically, we might never know), but a cheaper deal isn’t always a better deal.  Like probably all of our grandfathers told us at one point; “You don’t get somethin’ for nothin’” So, what is the something that Davidoff is going to be missing? Did Davidoff just lose because he didn’t question the disparity?

What do you think?

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