VAR Sues Cisco Claiming Contract Breaches

The solution provider, Infra-Comm, San Juan Capistrano, Calif., is suing Cisco Systems, San Jose, Calif., regarding Cisco's handling of a particular Infra-Comm customer whose contract was eventually passed to AT&T despite what Infra-Comm says was its long-term development of the opportunity and registering of the deal with Cisco.

Luke Hosinski, president of Infra-Comm, said he hopes that other partners become more aware of what he said are the possible dangers of working with Cisco, including not reading the fine print in Cisco's Indirect Channel Partner Agreement (ICPA).

The customer in question, an Orange County, Calif.-based real-estate development company, was not named by either Infra-Comm or Cisco, and its name was redacted to "The Customer" in court documents examined by ChannelWeb. The lawsuit was filed Jan. 18, 2007, in Superior Court of Calif., in Santa Ana, Orange County.

The case has roots going back to 1999, when Infra-Comm first signed Cisco's ICPA and provided a quote for the customer's first Cisco products.

Since then, that customer became a major customer of both Cisco and Infra-Comm, purchasing more than $650,000 in Cisco ISR 2811 routers with Power-over-Ethernet (PoE) ports in its first move to replace its traditional telephone system with IP telephony equipment.

By this point, Infra-Comm had built its business around Cisco's IP telephony product line.

It had several clients in the $400 million-plus revenue range with multiple offices for which it deployed Cisco IP telephony projects with all the related infrastructure including security and Cisco Unity e-mail services, Hosinski said.

"We did the implementations, testing and tuning," he said. "Our customers had from a dozen IP phones to several hundreds of IP phones per site."

That experience was recognized by Cisco, which gave Infra-Comm the West Coast Commercial Ops Top Channel Partner "Trail Blazer" award in 2005 and certified Infra-Comm as a Silver-level partner in early 2007.

Infra-Comm nourished the Cisco relationship with that particular customer for a couple of years with a beta project, initial infrastructure deployment, and even helping move 300 servers on a weekend, Hosinski said.

Because of that relationship and Infra-Comm's expertise, the customer decided to implement a Cisco IP telephony project that included 1,200 IP telephony handsets along with related servers, PoE switches, management, and power supplies at the corporate headquarters in the first phase of a two-part project. The second phase was slated to include an additional 1,200 handsets and related infrastructure for the customer's branch offices, Hosinski said.

In mid-2005, Infra-Comm applied for an opportunity registration under Cisco's Opportunity Incentive Program (OIP) system for a deal with the customer worth potentially $3 million, Hosinski said. That registration was approved in January 2006, giving Infra-Comm a six-month window under which it could pursue the deal with the customer armed with special exclusive pricing from Cisco, he said.

Infra-Comm also recommended an item it could not provide, Cisco Advanced Services. CAS is not sold through the channel and has no separate product SKU, Hosinski said.

However, based on Infra-Comm's relationship with Cisco, Hosinski said he didn't hesitate to give that recommendation. "We look at the big picture with our customers," he said.

Therefore, the customer issued a purchase order directly to Cisco for a one-time deal for CAS in the third quarter of 2005.

And that is where the trouble began, Hosinski said.

Next: The Infra-Comm/Cisco Relationship Goes South