Does this scenario strike a familiar cord?
Act I: A new technology hits the electrical wholesaling industry, and the first distributors that take the risk and invest in the market are pioneers and product specialists.
Act II. When the early pioneers succeed in the new business, other electrical distributors follow en masse.
Act III. The market matures, and products using what was once the latest technology that only the technoids would touch become commodities.
It's too early to tell if this scenario will play out in the residential structured wiring market. But it does describe the evolution of a different product that once tantalized the electrical wholesaling industry with its potential. Looking back at the evolution of this product niche may offer some clues as to how the residential structured wiring market may evolve in the next few years.
In the industrial market of the 1980s, programmable logic controllers (PLCs) were really hot, and EW published several cover stories on them and the “factory of the future.” By today's standards, PLCs had a pretty simple job. They acted like traffic cops on data highways in factories, directing the data that enabled motors, variable-speed drives, sensors and other equipment on the factory floor to speak with each other.
The ante that Rockwell Automation/Allen-Bradley, Modicon and other PLC vendors required of distributors to get into this market was high. It included sizeable investments in inventory, training facilities and factory-trained personnel. PLCs got off to a slow start, but a few pioneering distributors and control specialists saw their potential. When they succeeded, other industrially oriented distributors followed. Twenty years later, PLCs are almost a commodity, and are now even for sale on Ebay. Today, the big money in the industrial automation market is in selling the software that scripts the conversations on the factory floor and in providing one-stop automation solution to industrial customers.
Could a similar scenario occur in the residential structured wiring market? This business is maturing fast, much like the industrial automation market in the 1980s.
While researching this month's cover story “Structured Wiring Revving Up in U.S. homes” on page 18, EW Managing Editor Sarah Dolash found that while the residential structured wiring market isn't offering electrical distributors the explosive growth forecast by some home automation experts, it's still growing much faster than the traditional markets that electrical distributors serve in the construction and industrial business segments. While the electrical wholesaling industry on the whole is expected to grow 5 percent to 6 percent in the 2004 to 2005 time period, it's not unreasonable for a distributor to get growth topping 10 percent in the residential voice/data market.
I guess that's pretty darn good, all things considered. Yet it still seems like a market that could be so much bigger for electrical distributors.
Just consider the fascinating convergence of market and technological trends now taking place in the home. The basic technology behind residential structured wiring installations isn't very hard to grasp. A historic surge in housing starts continues. Home owners want the high-speed, broadband access that they enjoy at work in their homes. Baby boomers who grew up in the Internet Age often have the disposable cash to blow on big-dollar home theaters or invest in high-end security systems. Computer manufacturers, telecommunication companies and cable television conglomerates are battling it out to see who will rule when television and computers merge, and we all start using our televisions to read e-mail, surf the net, program sound systems and many other tasks.
Wireless communications may play a role in the home of the future, but these applications will still require at least some structured wiring to tie together these worlds. That's a plus for all facets of the electrical construction industry. It just doesn't seem to be happening fast enough. Good things take time. Maybe that's the real bottom line with the residential structured wiring market.