According to the U.S. Census of Construction report, electrical contractors billed $9.7 billion worth of telecommunication work in 1997. Assuming the average 12 percent per year growth rate since 1997 holds steady, the information transport systems (ITS) or VDV market may be worth upward of $25 billion by 2005. No one actually knows what percentage of total billings can be attributed directly to MAC (moves, adds and changes) work, but even the most modest percentages indicate a large market and a potential for electrical contractors to capture the work.
Opinions about the market's size, its growth rate and the opportunities it affords, however, vary among electrical contractors. In the San Diego market, according to Steve Jensen, product manager in the systems and service group at Dynalectric Co., growth rates for MAC work have been holding steady at 10 to 12 percent for the past couple of years.
“The moderate growth of the MAC market is driven through the expansion of some business segments, even while others are contracting,” he said.
But even when a business reduces the amount of space it is using, it must still have its ITS cabling reconfigured to accommodate personnel changes.
Paul Warren, senior vice president of the VDV group of Mona Electric Group Inc. in Clinton, Md., estimates the MAC market is huge, with 10 to 15 percent growth rates, based on the fact that the data-wiring portion of most jobs is usually in that same percentage range of the installation.
“The market continues to grow rather than shrink because customers still need to deploy new, upgraded VDV and telecommunication cabling technology to maintain their competitiveness,” he said.
However, because the recent cabling evolution to Category 5E and Category 6 cabling has reached a plateau, the growth rate is more stable, rather than explosive.
“The MAC market is growing in general, but with more contractors breaking into it, it is becoming a little more difficult to maintain market share,” said Steve Witz, vice president of Continental Electrical Construction Co., Skokie, Ill.
The market is still growing, Witz believes, because companies are moving to new buildings after negotiating more cost-effective leases, and people are becoming more technologically savvy by taking increasing advantage of computer networks and modern telecommunications.
“And if a contractor is already performing VDV work, it is not difficult to leverage its existing experience to enter the MAC market,” Witz said.
Conversely, John Karel, RCDD/OSP, president of AB Comm, St. Paul, Minn., believes the MAC market is shrinking.
“Many facilities have already completed their second- generation recabling needs and, as more firms enter the MAC market, more competition for smaller pieces of work has been created,” Karel said.
What is MAC work and how is it different?
According to Warren, MAC work is primarily the relocation and reconfiguration of an existing ITS cabling infrastructure, usually for current clients. The market includes MACs from single workstations all the way to entire tenant relocations.
“MAC work can also include added-value services, such as providing the necessary permits, drawing documentation, labeling and testing,” added Witz.
According to Jensen, even though the MAC's business aspects and traditional electrical service work are the same, the materials used and installation techniques are different. For example, the type of conduit, cabling and end-user devices are different as well as the people who perform the actual work.
“A VDV technician is a different classification than traditional electrician and requires different training and certifications,” he said.
In addition, the skills required are dissimilar, and ITS technicians performing MAC work must be experienced with various manufacturers' equipment and certified to install and test it.
“There are no manufacturer certification requirements for electricians that wire for power,” Jensen said.
Although Warren doesn't believe MAC work is essentially different from traditional electrical-service work in terms of providing a service, he agrees the skills required are completely diverse.
“In most jurisdictions, electrical-service work requires that journeymen be licensed, while VDV technicians must be BICSI certified,” he said, adding the only similarity is the traditional electrician and VDV technician pull wire, but the technician works with different equipment criteria and technically different installation procedures.
Witz said additional factors make MAC work different, such as technical knowledge; a higher level of professional presentation; increased flexibility; superior communication skills and the ability to convey the technical aspects of the scope of work to the customer; and budgeting, estimating, design and sales skills.
“VDV technicians have much greater interaction with the end-user and IT staff, and require more training in communication and sales,” he said.
According to Karel, buyers of traditional electrical service work don't necessarily care about wire or outlet choices. But in MAC work, the technicians must be better prepared with a more varied choice of available manufacturers' products for voice and data.
“MAC work requires more extensive planning for purchasing and inventory control to avoid frequent trips to the wholesaler for the right products,” he said.
But is MAC work more profitable than traditional electrical service work? Jensen said it's true for Dynalectric.
“Not many of the large electrical contractors in San Diego have entered the market, so there are fewer contractors performing VDV work and less competition,” he said.
Witz's view is that MAC work can be more profitable than traditional electrical-service work because it is so specialized.
“Since customers that require MAC work usually cannot afford any delays, contractors like Continental need to mobilize quickly, which allows them to ask a little more for these services,” he said.
Warren's and Karel's views are less optimistic. Warren believes market competition forces MAC margins to be smaller than rates for traditional electrical service work.
“A contractor might be able to offset the smaller labor rates through material costing, but it will still have to offer competitive pricing to first obtain the client,” he said.
Karel agrees tight market competition has shrunk ITS and MAC margins.
“It is perceived to be an easy market to enter for firms that don't invest in the necessary training and tools, and customers can end up hiring companies based on price rather than value,” he added.
Taking the plunge
For the electrical contractor not already performing VDV work, breaking into the market requires a commitment from upper management to invest in trained technicians, specialized tools and the necessary materials to demonstrate to potential customers the company can successfully perform the work.
“Training and certification of existing project managers and superintendents in the various systems is also necessary so that they can successfully manage projects,” Jensen said.
And if a contractor is already performing ITS work and wants a piece of the MAC market? Then, Jensen said, it is important to have managers and technicians dedicated to that market segment because customers tend to reward contractors that respond to their needs and provide quality work and immediate response.
Witz also stressed the importance of providing immediate response to customers' requests for those contractors wishing to be successful in the MAC market.
“The type of lag time that is normally allowed in traditional electrical-service work is unacceptable to a customer that will lose productivity if the MAC work is not performed immediately,” he said.
According to Warren, it takes a completely different mind-set, skill set and certifications to be successful in either ITS or MAC work.
“MACs are already an integral part of VDV work. If a contractor is performing work on an original infrastructure installation, then it will also be performing MAC work during the project and most probably will be the chosen contractor to fulfill the facility's future MAC needs,” he said.
What the future holds
Over the next couple of years, Jensen expects current growth rates for MAC work to remain steady as businesses continue to contract and reconfigure their cabling infrastructures in existing facilities.
“Some of the electrical contractors that best serve the MAC segment of the VDV market today may have the leading competitive edge when construction rates begin to move upward again,” he said.
Another future opportunity for electrical contractors performing MAC work will come out of the 2005 National Electrical Code, which is already being adopted by many jurisdictions and requires abandoned cabling be removed, regardless of its plenum rating.
“As new fire retardant cabling becomes accepted in the market and replaces plenum-rated cables, facilities will begin the process of upgrading their infrastructures, putting the electrical contractor in an excellent position to upsell its value-added services and its ability to perform the work,” Warren said.
Regardless, the MAC market is expected to change as wireless and VoIP technology continue to advance.
“Wires are still necessary, of course, but not as many MAC may be needed when wireless systems are in place,” Karel predicted.
However, according to Peter Archacki, director of structured cabling systems for Continental Electrical, wireless devices don't last forever and will require service.
“Electrical contractors that understand and anticipate this coming shift will be able to prepare themselves to provide service for these devices, in addition to traditional MAC work,” he said. EC
BREMER, a freelance writer based in Solomons, Md., contributes frequently to ELECTRICAL CONTRACTOR. She can be reached at 410.394.6966 or by e-mail at firstname.lastname@example.org.