PBXs, LAN electronics, hubs, switches, servers, software - these are the next step for ambitious contractors who have gained experience in the voice/data/video structured cabling market. Increasingly, electrical contractors are responding to the demands of their customers to become true systems integrators, designing and installing the total package of power, voice, data, and video systems. A good example of this trend is Baker Electric of Des Moines, Iowa, providing one-stop shopping for all things electric, a true contractor of the new millennium. Baker Electric and its subsidiaries provide full systems integration services. One subsidiary, Baker Communications, sells telephone equipment, PBXs, and Lucent products. "In addition," says David Hearn, the company president, "we're a Cisco Systems distributor. Baker Communications does all of the voice and data integration. Baker Electric does the structured cabling work." Another subsidiary, Control Installations of Iowa, provides another level of systems integration. "We go from temperature control to fully integrating all of the security and firm alarm systems," Hearn explains. Baker Electric, Baker Communications, and Control Installations together illustrate the challenge, opportunity - and confusion - for electrical contractors when the words "systems integrator" are discussed. Along one line of thinking, a "systems integrator" is a company that fully integrates all of a building's systems. "There are two distinct possibilities that people are considering when they say 'systems integration,' and they are different in scope," explains Tony Beam, director of systems marketing at AMP. "One person may use that phrase to talk about integrating low-voltage communications cabling with fire and safety, and HVAC, and with lighting controls and security controls," Beam continues. "All of this is cabling-related and, in essence, all of it is related to the intelligent building or 'smart building' mentality. "We believe the electrical contractor should be actively looking at these types of opportunities and pursuing them," he adds. Another definition There is another meaning for "systems integration" - commonly used in the voice/data/video business. "The other definition is integrating the local area network (LAN) electronics with the cabling, and getting into hubs, switches, PBXs, Novell servers, and that entire gamut of functionality," says Beam. For most electrical contractors, this type of systems integration, he notes, "is probably a pretty dramatic departure." Another commonly used terminology is to contract "passive" voice/data/video installations with "active" components. Electrical contractors doing what's called "structured cabling" work are essentially installing passive equipment: the wires, cables, and hardware. The active stuff - equipment such as Network Interface Cards (NICs) and those hubs and routers made by companies like Cisco - is generally tackled by a systems integrator or value-added reseller (VAR). For the balance of this article, let's tackle the second meaning of the words, and take a look at whether or not electrical contractors with some structured cabling voice/data/video experience can or should consider taking the next step and becoming a voice/data systems integrator. To obtain some perspective on this opportunity, Electrical Contractor got data from various studies of the active components market (see accompanying story). Additionally, we spoke with key personnel at voice/data/video manufacturing companies, who have worked with contractors on structured cabling. They were asked to evaluate the chances that Electrical Contractor's readers have of taking this next step. Why not turnkey? "Why should a contractor only limit himself to installing the cable," asks Wayne Maniglia, national sales manager for Unicom. "Our company is not just a premise wiring supplier. We are a total solution provider. Why shouldn't the contractor, like our company, try to encompass the whole thing?" Maniglia, like all of the other suppliers interviewed, emphasized that contractors need training to do this work. "They need to understand WAN and LAN principles, everything that encompasses the telecom business, to make the transition from an electrical contractor to telecom. "But if they get the proper training, they can go to the IT manager or MIS or networking manager who is setting up the actual network, and tell them that, instead of using a second or third party for the systems integration and the cabling, why not have one company do all of the work." At Hubbell Premise Wiring, Todd Harpel agrees, with a caveat. "If the contractor becomes a system integrator, that might allow one to charge even more for basic services, because of that additional expertise. "However, there is a difference from putting in the (structured cabling) infrastructure. Systems integrators have to be concerned with quality of service and downtime issues. There is a great deal of expertise needed, and training," says Harpel, who is technical services manager for the company. "It is something that you do not want to get into if you are not fully committed," adds Rick Akins, marketing manager for data communications at Panduit. "On the positive side, the fact is that supplying the cabling certainly has a major effect on the ultimate importance of the (active) hardware. And, in a lot of cases, if you're talking to a decision-maker about hiring your firm to do the cabling, that will be the same person who makes the hardware decision." "Of course, there is, obviously, an additional revenue opportunity," he adds. "But the downtime is that it is a much more technical sell, and there are significant support issues involved with being an integrator." An important caveat comes from Robert Chase, marketing manager for the commercial wire management group at Thomas & Betts: "Contractors can't just tiptoe into systems integration. They need to be committed. A contractor who has a history of success in cabling, with case histories he or she can point to - that's the contractor who is ready to move up." Skills shortage Perhaps it goes without saying in this era of manpower shortages everywhere, but several manufacturers mentioned the fact that there is a shortage of people with the skills to do the voice/data/video systems integration work. On the flip side of this coin, many said the best advice they could give contractors who wanted to become integrators was to hire someone with experience! "It's always better to provide that systems integration function," says Paul Kish, senior product manager for NORDX/CDT. "To do so, however, you need to make those key relationships with the providers of equipment - so you can make these kinds of decisions, and make recommendations to the end user. "To do that, you will need people on staff with those type of connections. If a contractor can get that kind of expertise on staff, then becoming an integrator is a good move, in terms of value." Getting the required expertise - either through intense training or hiring experienced personnel - will not be easy. However, it will pay off now and on into the future, according to Sue Smith, director of data communications at Pass & Seymour/Legrand. "There are not enough trained system integrators around now, so I definitely think it's something contracting firms should be looking into," says Smith. "If there are not enough today, there certainly are not enough for tomorrow, as the digital world keeps exploding. "A lot of it depends on a few key people. If a contractor wants to get into systems integration, the number one priority has to be getting the people who can take you in that direction. You'll need at least one core person to take you in that direction, at a minimum. "Plus, you will need to invest in sending people on your staff to the appropriate electronics training. You can train your people to do this work, provided you are ready to make the investment. It's much faster to hire several people with this expertise, but they are in short supply." How can a contractor judge whether the opportunity exists for his or her company? "Talk to your customers," Smith says. "They can't get enough of this expertise. Your existing customer base would rather outsource this work to someone they can trust. "I'll bet if contractors talk to their customers, they'll find they are just not satisfied with the availability of help in systems integration." Agreement on this point comes from Bob Carlson, marketing manager at Siemon. "As more and more applications become available, I think electrical contractors will recognize the opportunities and advantages of becoming a systems integrator. I think they're going to need to be able to perform systems integration, to support the new networking technologies." At Siecor, Martyn Easton, manager of premises systems marketing, thinks the opportunity may be greatest for those contractors serving mid-sized and smaller businesses. Note that Siecor, unlike the other manufacturers quoted herein, is primarily in the fiber optics business. "Look at it from the end-user's standpoint," he says. "The system, as far as they are concerned, is cabling and electronics. I would think they would find it appealing (to get systems integration and structured cabling services together from a contractor) - especially the smaller customers. "The opportunity for growth is with that mid tier (or smaller) customer. They don't have the wealth of technical resources that the larger companies have - for example, they generally do not have an IT manager. "There is a lot more complexity to systems integration. It's not a simple thing to do. But I would definitely recommend that contractors start moving in that direction." Watch your step "I wholeheartedly agree that it's the next step contractors should take," says DeWayne Anderson of Leviton Telcom. "It fits as a natural direction if a company has already built a good, sustainable business (in cabling). You have to invest in the personnel and operations but, really, why separate the cabling and the integration? They are becoming so integral. "A problem for many of the existing systems integrators is that they have to subcontract the cabling out. Some of them are actually buying voice-data cabling specialists for this reason." At Lucent Technology, Mike Barnick agrees. "For a contractor, it appears to be an opportune time to consider expanding into this dynamic world. Of course, it is a different business. You are providing end customers with quality support, quality installation, and quality recommendations on the communications infrastructure for their business needs. "It becomes more of a daunting task to stay current with the technology. It requires more of an investment by the contractor company. But it's a tremendous time, in which data networking is exploding." Perhaps, eventually, the electrical contracting market will have more companies like Baker Electric than not - becoming, if you will, a "double integrator" by integrating not only the voice/data installation, but all of the other cabling work as well. "We can do everything for a customer," sums up David Hearn of Baker. "When I go in for a project interview with a customer, I take people from Baker Communications and Control Installations with me. "I tell the customers that they won't have to worry about any of their systems, if they hire us - all they will have to do on the day they open the building is just to show up!" BIO: SALIMANDO is a Vienna, Va.-based freelance writer specializing in electrical, voice/data/video construction, and integrated technology issues. He can be reached by e-mail at [email protected]. His twice-monthly column on current industry news, "The Web Prowler," can be read on Electrical Contractor magazine's Web site: www.ecmag.com. TABLES FOLLOW (can also be turned into charts/graphs) SIDEBAR How Fast Is the 'Active' Market Growing? The market for LAN electronics - including network interface cards, hubs, routers, and related equipment - was flying into the new millennium, according to numerous estimates and projections released in 1999. Here's a quick look: - Lucent Technologies said that the market for services and supports for communications networks would grow "by more than 16 percent annually from 1999 to 2002, going from $96 billion to $153 billion." - Shipments of switches for Gigabit Ethernet, a technology just getting to its feet in terms of installation, were expected to quadruple between this year and 2003 (see Table One). Note that every Gigabit Ethernet installation is likely to need a networking cabling infrastructure upgrade. - Actual shipments of routers have grown in the double-digit range (17 percent in a recent quarter) for 10 straight quarters, according to Cahners In-Stat research. - "Inside-plant consumption" of fiber optic installation apparatus is expected to grow from $1.1 billion in 1997 to $2.5 billion in 2002. Many market participants reported a slowdown of sorts in network design and installation work in the second half of 1999, which was widely credited to the diversion of funds to "Y2K" fixes. Most observers believed the market would rebound sharply into 2000, thanks both to the end of the Y2K worries and to the advent of Gigabit Ethernet. - Joe Salimando Table One Gigabit Ethernet Switch Shipments 2000 2.1 million units 2001 3.8 million units 2002 6.0 million units 2003 8.6 million units Source: Dataquest