Anti-Competition Concerns in US Government and Fortune 500 Request For Proposals (RFPs): Cisco SMARTnet

Overview

Antitrust law is the bedrock of ensuring a properly functioning capitalist competitive open marketplace that fosters innovation and ensures end-customer and consumer value. Oversight and regulatory bodies in the United States, Europe and other nations take these matters very seriously as evident by the 1984 breakup of the original AT&T (Ma Bell) monopoly, the 1990's Microsoft case, and the very recent inquiry into the Google-Yahoo advertising agreement.

Problem

Several US government agencies and Fortune 500 corporations publish Request For Proposals - RFPs (also referred to as Request For Quotes - RFQs) for maintenance of Cisco Systems networking equipment and specifically request for “ Cisco SMARTnet only” (“SMARTnet” is Cisco Systems' brand name for its network maintenance service) and request that companies that participate in their RFPs must ensure they purchase the service from “Authorized Cisco Resellers” or from “Cisco Directly” Additionally, they require the vendor to provide a letter from Cisco that the vendor is authorized to sell the products required in every bid.

An example of such a request is below:

“Authorized Partner: With its bid response, the Vendor must provide a letter from Cisco Systems, Inc. that references this bid number and confirms that the vendor is authorized to sell the products required in this bid. ...Failure to provide the Cisco letter with bid proposal will render bid non-responsive and will not be evaluated further.”

Here is another example:

“Products offered in response to this RFP for maintenance services must qualify for Cisco Systems SMARTnet services. If inspection of products is required by Cisco for qualification of products for SMARTnet services, the Vendor shall be responsible for all costs associated herewith. Furthermore, if after inspection Cisco determines that products do not qualify for SMARTnet services, the Vendor shall be responsible for all costs associated with qualification of the product.

These requests for exclusive dealing are helping to perpetrate illegal anti-competitive behavior that continues to plague the networking equipment services industry. While it is difficult to pinpoint the exact cause of these actions, we speculate that the request for only Cisco authorized resellers and Cisco branded services is grounded in either:

1. A misconception perpetuated by the dominance in the market by one major company (Note: the wording in RFPs requesting a “letter from Cisco” is consistent across several local, state and federal RFPs in the US, which would suggest that this might be a concerted premeditated action possibly driven by the manufacturer in its bid to monopolize the market?), or perhaps;
2. Simply from ignorance by enterprises and government agencies of the fact that non-Cisco affiliated independent network service provider organizations are highly capable of providing services for Cisco products and such services are comparable or superior to Cisco's own services much the same way that certain independent auto mechanics service automobiles as well or better (and most at less cost) than many of the auto manufacturers' own dealerships.

Proposed Solutions

Below are some proposed solutions to discontinue this anti-competitive behavior:

• Enterprises and government agencies should re-educate their procurement and operations teams and allow independent non-Cisco affiliated network service organizations an equal opportunity to participate, win and benefit from all RFPs; and
• Enterprises and government agencies should amend all active and future RFP requests for services on Cisco equipment (and all other networking equipment manufacturers) to accommodate independent network service organizations by requesting for “Cisco SMARTnet or similar maintenance services on Cisco equipment.”

It is the duty of all good corporate and Government citizens to discourage and discontinue any practice that is anti-competitive so as not to be party to an illegal act that is counter-productive to the values of free open market societies. Listed below are additional benefits of an open competitive marketplace:

• Choice
• Competitive pricing
• Cost savings
• Innovation
• Better quality products and services
• Better overall value
• Judicious expenditure of tax payer and stakeholder dollars

About the Author

The Multiven Dossier is compiled periodically by the Multiven Consumer Advocacy Group, a unit of Multiven - the networking industry's first vendor-neutral provider of premium multivendor IP network services - to educate, enlighten and empower consumers, corporations and government agencies about ethical issues within the networking industry.

• Download a complimentary copy  Download PDF( 640 KB )
• Join the blog conversation at www.multiven.wordpress.com.

Multiven, the Multiven Dossier and the Multiven logo are registered trademarks of Multiven, Inc. All other company and product names may be trademarks of the respective companies with which they are associated.

The content of this dossier is licensed under creative commons