Cisco users see some pricing relief

Cisco Systems's prices have long been viewed as higher than those charged by its networking rivals. But some IT managers and analysts said last week that the pricing situation has improved modestly for Cisco users. Two analysts who attended Cisco's Worldwide Analyst Conference in San Jose, California, said that the networking market leader has in recent months lowered some of its prices by a small amount or improved the performance of products without increasing their cost.

And two longtime customers said in phone interviews that they think Cisco has made steady strides on improving the price/performance characteristics of some products -- though they added that there's still plenty of room for improvement in pricing on devices such as memory cards and peripherals for voice-over-IP (VoIP) phones.

"I'm of the opinion that, generally speaking, Cisco's prices are improving and I get more for my money," said Matt Valenzisi, network manager at North Carolina State University. He said that's especially true for stackable switches such as Cisco's Catalyst 3750 product line, probably because Cisco has to compete against many other vendors in that market segment. The university plans to buy 22 Catalyst 3750s in the next few months, adding to its installed base of about 2,000 switches from various vendors.

In contrast, Valenzisi said he's alarmed by what he has to pay for memory upgrades to Cisco's switches and switching modules -- something he routinely adds to purchases and buys from Cisco to ensure interoperability. For example, he said, Cisco recently charged him US$10,000 for a 1GB memory upgrade for an optical services module, many times what he expected to pay. "Their memory pricing is way too high," he said.

A network manager at a heath care provider with 6,000 workers said his company is getting an increased amount of services on core infrastructure products from Cisco, such as its switches and routers, for the same prices it was paying before.

But the user, who asked not to be identified, added that Cisco's prices "are still very high" for devices such as VoIP phones and their batteries and cables. A wireless VoIP phone can run well over US$1,200 with all the added gear that end users need, he said.

John Chambers, Cisco's president and CEO, acknowledged in an interview that users frequently voiced concerns about pricing when he talked to them in the past. However, Chambers said the complaints have stopped since he began conducting quarterly reviews of pricing and new product developments two years ago.

Earlier this year, some IT managers said they were willing to pay premium prices for Cisco's products because of its financial stability, reliability and strong customer service.

But Gartner Inc. analysts Mark Fabbi and Bob Hafner have written several reports over the past year urging users to seek rival bids in order to push Cisco's sales force to make more competitive counteroffers. That strategy seems to be working for users, according to Fabbi. "There's a lot more response by Cisco on competitive bids than a year ago," he said.

Fabbi added that Cisco seems to be paying more attention upfront to the prices it's charging, especially with its biggest users. "Cisco realizes they can't take customers for granted and has been proactive with discounts," he said.

Zeus Kerravala, an analyst at The Yankee Group, said that Cisco's prices "are still an issue with customers." Kerravala agreed with Chambers that there has been some improvement, but he added that it's very hard to quantify.

Join the newsletter!

Error: Please check your email address.

More about CiscoCiscoGartnerHISYankee Group

Show Comments