Published In June 2001
Your company has just installed a multi-million dollar voice/data/video (VDV) system for either a new or established customer. If the job had been traditional electrical construction, then that would be the end of the project, and the end of your presence at the customer’s facility. After all, there’s usually not a great need to continually change plugs and receptacles. But in today’s fast-paced Internet world, customers have a constant need for moves, adds, and changes (MACs). “MAC work can be defined as working with existing customers to relocate, without disruption, the phone and computer capabilities of their employees,” explains Randy Maddox, vice president of business management at ERMCO, Inc., Indianapolis, Ind. According to a recent Census of Construction, electrical contractors billed out $9.7 billion worth of telecommunication work in 1997. Assuming an average of 12 percent per year growth (the average growth rate since 1997), the VDV market may be worth upwards of $20 billion by 2003. Now, no one really knows what percentage of total billings can be attributed directly to MAC work, but even the most modest percentages indicate a huge market, which means a huge potential for electrical contractors to capture the work. Defining the market Steve Harlan, president of Harlan Electric Co., Inc., Nashville, Tenn., considers MAC work to be mainly for emergency situations. “The customer is usually in a time-sensitive position when it calls us,” he said. Others define the market as work that usually follows a major installation or jobs for smaller customers that are in the process of expanding and need to make appropriate changes. “We typically associate MAC work with a defined project, whether in new construction or a retrofit job,” said Bruce Sisson, general manager of the energy and communications division of Sargent Electric Co., Pittsburgh, Pa. “MAC work is another area of service work, but for VDV systems instead of for power distribution systems,” said Paul Warren, senior vice president for the VDV Group of MONA Electrical Construction, Inc., Clinton, Md. But if it’s all service work, then why are so many in the industry saying how different MAC projects are? “Service work is more of an emergency situation, but MACs are more structured, although emergency situations do arise,” said Maddox. There is an increased need for close scheduling coordination with the customer when dealing with MACs, with contractors sometimes needing to perform the work after normal business hours to prevent disruption to the end-user’s productivity. Such increased coordination, plus the time-sensitive nature of dealing with telecommunications systems, leads to a closer relationship with the customer. “Traditional electricians are usually more behind the scenes, while MAC service technicians are more involved on a daily basis with the customer and with the end-users of the telecommunication equipment,” according to Harlan. Technicians also have to have a better understanding of the customer’s long-term needs. “In some cases, MACs are a daily event, due to the constantly changing technology and shifting needs of the customer.” “There is definitely a closer relationship with the customer when performing MAC work,” agreed John Karel, vice president of operations at Applied Business Communications (ABComm), St. Paul, Minn. As network sizes increase and technologies change and advance, customers will constantly need new cabling. It is that constant need that will bring customers into much closer contact with their VDV and MAC provider than with a traditional electrical contractor. Standards are also a differentiating factor between traditional electrical service work and MAC work. In the electrical service market, projects are guided strictly by the National Electrical Code (NEC) and deal in high voltage. In MAC work, the electrical contractor and its technicians must also be well versed in Building Installation Consulting Service International (BICSI), American National Standards Institute (ANSI), and Telecommunications Industry Association (TIA) standards. “MAC work involves a more diverse knowledge of standards, equipment, tools, and manufacturers’ termination criteria and product certifications,” said Bob Wilson, MONA’s chief operating officer. “Another big difference between the MAC and traditional electrical service markets is repeat business,” observed Marty Parent, manager of the VDV division of Harrington Electric Co., Cleveland, Ohio. There are fewer changes being made in electrical service work; that market is based on maintenance and repair. MAC work, however, is based entirely on moving telephone lines and computer and telecommunication cabling. These two markets differ on the technical side as well. MAC work involves more specialized products, and technicians must be certified in different product applications. “These technicians need more cross training to address interconnectivity issues,” says Russ Goldstein, sales manager for Sargent’s information technology (IT) services group. Manufacturers also demand more product certification for VDV work than they do on the electrical side to ensure warranty compliance and system performance. “Electrical contractors that perform MAC work are relied on more by the customer to understand the complete cabling infrastructure and what is needed to maintain or improve it,” Goldstein said. Show me the money Even though there are a lot of opportunities to provide MAC services to telecommunication customers, is it profitable for the electrical contractor? The answer is “Yes,” according to Maddox. Charging a unit price, rather than an hourly rate, can increase the contractor’s margin. “MAC work is also generally lower risk. The contractor has more control over schedules and does not have to coordinate as much with other trades, such as on a traditional electrical construction site,” he added. Wilson is a little more cautious. “It can be very profitable. But you still have to build the relationship with the customer just as you do in traditional electrical service work,” he said. The MAC market, according to Wilson, is based more on responsiveness to the customer’s service request than on price, which is more typical in traditional electrical service work or electrical construction. Karel is also not sure that MAC work is more profitable than electrical service work, but believes it is an exciting market with new opportunities and changing technologies. Although the profit potential is there, Goldstein doesn’t believe that MAC work is necessarily more profitable or substantially different than traditional electrical service work. “MAC work for us consists of mostly smaller accounts and it takes the same resources to dispatch a truck and technicians to a telecommunication service job as it does to a traditional electrical service job.” How to succeed in business In the Broadway musical, J. Pierpont Finch learns “How to Succeed in Business Without Really Trying.” In the real world, however, it takes a great deal of effort. And to succeed in the VDV MAC market, many factors come into play. For example, skill sets, although equally important in traditional electrical construction or service work, are different in the MAC market. “The key to success is having technicians with technical, scheduling, and customer interaction skills,” said Maddox. In MAC work, the technicians are constantly interacting with the customer and the work performed has a direct and immediate effect on the customer’s productivity. “With traditional electrical service, there is usually a way to bridge the gap until electricity is fully restored. In the MAC world, downtime is to be avoided at all costs, making performance of the electrical contractor imperative,” he added. Wilson emphasized that the MAC contractor cannot substitute high-voltage electricians to perform this kind of work. “You must use the same, trained personnel who know how to perform VDV work. There is a huge difference in low-voltage terminations and testing procedures and the skill sets are not interchangeable,” he said. Parent also stresses the depth of knowledge. “VDV technicians need to know every facet of the system and have to be well trained and able to troubleshoot,” he said. Although traditional electrical installations can be equally as complicated as VDV or MAC work, they do not usually involve the same array of varying technologies. “For the nontechnical,” Parent added, “MAC technicians more often have to develop personal relationships with the customer and so are usually more sales oriented than traditional electricians.” To increase your share of the MAC market, Maddox advised, target additional long-term customers each year. “MAC work grows by either having a customer who is experiencing its own corporate growth, or by picking up long-term VDV projects, which then tend to lead to the MAC work,” he said. In Nashville, the wireless issue is beginning to bring some instability to the VDV and MAC markets. “The successful contractor must continually hone its skills to add value to the customer beyond the technical, whether dealing with wired or wireless systems,” Harlan said. That includes being prepared to offer customers solutions that incorporate the technological knowledge and the business skills that will satisfy their needs; a network of reliable vendors for the cable, computers, and other equipment needed; and reliable partners that can help deliver a complete package to the customer. Another strategy to increase market share is to win over the IT staff at corporate or institutional facilities. “If you can keep them happy, you will have a long-term customer,” predicted Wilson. He advises focusing on corporate and institutional clients because they tend to be larger with large networks and with greater needs for MACs. Also, he advised parlaying electrical construction projects into a single source for both electrical and MAC work. “Build a reputation by performing quality VDV installations,” advised Karel. And the best tool for performing high-quality work is an educated, well-trained workforce, with professional technicians and a service manager who can facilitate projects and maintain complicated schedules. “The customer must be able to rely on your team for quality work and accurate testing documentation to minimize the time required for them to bring their networks on-line,” he added. Future potential According to Maddox, the MAC market continues to grow. “Customers today are trying to consolidate work space and increase their own productivity,” he said. The company has recently experienced an increase in traditional electrical work from customers that have awarded ERMCO VDV and MAC projects. “It has usually been the other way around.” Maddox attributes this trend to the traditional electrical and VDV markets becoming more of a partnership. “If an electrical contractor can both install the power and telecommunication systems, then the customer only has to go to one source for all of its needs.” Wilson is even more optimistic and calls the market’s future potential unlimited. “Technology is changing constantly and customers are demanding higher speeds to fill their own needs to remain competitive. Both factors create a constant need for new cabling,” he said. Karel is just as optimistic and thinks the VDV market, including MACs, is in its infancy. “There’s no reason to doubt that opportunities will continue to present themselves.” “High-speed Internet is the next step in the VDV market,” predicted Parent. He believes the changeover will involve a great deal of MAC work as customers learn what their needs really are. “The high-speed Internet and wireless markets will create a vast number of opportunities for MAC and troubleshooting work as these systems begin to go online,” he added. Gigaspeed/Ethernet systems will also increase MAC work opportunities, according to Parent. “A lot of businesses have systems that will have to be upgraded to support these higher speeds, which will create a vast number of cabling problems for the customer and increased work for the contractor.” Harlan sees a decline of MAC work in his market, but only, he cautioned, as the industry knows it now. “The current VDV and MAC markets will soon be replaced with new technologies and demands, such as wireless. An electrical contractor can succeed and grow right along with these changes if it is willing to adapt to them.” The industry can help “Training is key,” says Maddox. The industry needs to provide training, improve the electrical industry’s public image, and demonstrate the opportunities for personal success that are available in it. “The VDV market appeals to a younger age group. Companies that provide an atmosphere that promotes creativity and that helps foster cooperation between low-voltage technicians and traditional high-voltage electricians, are better positioned to attract the best of both,” he said. “Apprenticeship programs in low-voltage must constantly evolve along with the technology,” said Wilson. Offer training to a wider audience, he suggested, and provide more continuing education to the technicians who have completed basic apprenticeship training. “We must also educate clients that electrical contractors are multi-faceted organizations with the skills and resources to install and service the most modern, sophisticated systems.” In ABComm’s market, the industry has already recognized the need to promote the low-voltage industry to the public and to recruit new workers. “We then focus our own in-house training programs on the specific needs of our customer base,” Karel said. Harrington Electric also stresses the importance of training. “The contractor needs to supplement apprenticeship training to both help technicians adjust to the most recent technological changes and to focus on the customer’s individual needs, and they must take advantage of manufacturer training,” Parent said. “The industry is coming to a crossroads,” Harlan predicted. “Organizations such as JATCs have to continue to provide the programs that train technicians in the cabling needs of the customers, but must also be prepared to develop new programs that adjust to new technological revolutions,” he concluded. 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.