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Cover Story: Toughing It Out

No matter what you call it -- a slowdown, slump or recession -- Canada's cabling industry has been taking a bit of a beating lately. But those in the know say we are tough enough to take a few bruises and resilient enough to bounce back after the punishment ends.


January 1, 2002  


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The telecom industry is clouded by fallout from Internet pipe dreams and failed business strategies, but blue skies are forecast for Canada’s cabling industry amid predictions of an aggressive, national drive to upgrade infrastructure.

Many corporate IT planners have neglected the impact of cabling infrastructure on their local and campus networks. This “phenomenon of indifference” — as one industry expert puts it — is about to change as planners stare a new IT reality in the face: Upgrade soon, or else.

As many as nine out of 10 companies will need to overhaul their corporate communications infrastructure in the next five years or face serious consequences, according to a Canadian market strategy report (Sept. 2001) by The Yankee Group, Brockville, ON. Report author Jeremy Depow predicts any enterprise which has not re-architected its communications infrastructure in the past 24 months will soon be compelled to do so.

Other industry observers agree with that assessment — and that is good news for the cabling industry. “It’s a fair prediction,” says John Bakowski. The Secretary for the Board of Directors of BICSI and Product Manager for Cabling & Connectivity at Bell Gateways in Toronto, Bakowski has been “in the biz” for 30 years and says the structured cabling business, in many ways, works at opposing ends to the telecom industry.

“When the economy of a country, or a province, or a city, starts going down, and the number of people who are employed is reduced, companies tend to fall back on infrastructure as a release — and the telecom industry tends to turn down,” he says.

“Then, eventually, when business picks up again, there’s a need to build the infrastructure of people back (up to previous levels), thus increasing workload in companies…. I’ve seen this trend before, during other downturns in the economy in the 70s and 80s: When business slowed down a bit, the cabling industry tends to pick up.”

Bakowski’s assessment rings true with Greg Porter, the Canadian director for BICSI and Business Development Manager for Tyco Electronics Canada Ltd. in Markham, ON. “When the economy slows, we’re doing more with less people, but we require more infrastructure. That’s the cycle,” says Porter. “And right now, I don’t think it’s as bad in the cabling sector as it is in the telecom box manufacturing sector. People might hold off putting in higher-end network equipment but the whole infrastructure is still running over the cabling side of it.”

NEW ATTITUDES

Certainly a new and unprecedented attitude toward collaboration is key to future success in the telecom and cabling industries. Experts and executives agree that players must, in this new digital economy, dialogue with each other and with a host of other companies — including suppliers and customers — if they are to know the real value of new capabilities, generate new innovations and successfully bring them to market.

Lucent Technologies has collaborated with other industry leaders on several projects. Carol Stephenson, president and CEO of Lucent Technologies Canada Corp. in Markham, ON, says the demand for information continues to grow in corporations. “And, as they become more knowledge-based and more global, information sharing is becoming a truly critical element to their success. As a result, corporate infrastructures are modernizing,” she says. “Companies are moving to provide more high speed access to data for their employees. (And) cabling will play a role here as companies accelerate their modernization plans.”

Analyst Jeremy Depow feels telecom and cabling industries are, more and more, experiencing the same things — and roles are subtly changing. “Telecom and cabling industries are now working very much in concert,” he says. “Products like unified messaging products, the big VPNs and networking within offices, are demanding some pretty intense bandwidth. And, at the same time, we’re seeing new products like wireless. But that doesn’t mean we’re done with cabling; it means the roles are changing a little bit — and these industries are actually now much more in sync.”

TIME FOR A CHANGE

Speaking of change, Nick Tidd, president of 3Com Canada, Mississauga, ON, says that, from his perspective, the telecom and cabling industries were due for some. “For too long, folks have just been throwing bandwidth at problems. It had come to the point, in fact, where people were kind of throwing their hands up and saying, ‘Whoa! Stop! Let’s take inventory’.”

Technology, says Tidd, “was this great messiah; and the attitude was that just by adding great technology the problem would just go away. Our eyes were bigger than our bellies.”

He says 3Com’s new approach is focused on dialogue first, solutions second. “We talk with our Canadian customers in a way that’s centred on augmenting their strategy and — even more importantly — upon giving them ways in which they can be more productive with their core technology decisions. People are now getting to an understanding of where they were, where they want to go, and what they want to achieve — and how technology can solve problems and create a solution, versus throwing technology at a problem.”

Depow echoes some of those sentiments. “A slowdown on cabling means companies aren’t spending as much as they were before. In the past, too many bucks were being spent on silly ideas… Today, they’re not wasting as much as they were before. But they’re still going to be spending money on IT and cabling,” says Depow. “And that will be a key factor in saving money, in the long run.”

Convergence, on the whole, was just a fairly meaningless buzzword. But today, and tomorrow, some are deriving real value and actually converging products and solutions (into) answers that save money and management pains. That’s the way telecom in Canada is going.”

And where does Tidd see things going? “We’ll definitely see some upgrades. We’ll see a move to gigabit; we’re seeing it already in backbone and we’re going to see it to desktop and seeing voice over IP taking over marketplace…We’re entering into an area where technology is more about the collaborative.” And that, he adds, bodes well for corporations’ ability to expand their global reach.

“But it’s still about bridging communication gaps,” he says. “What puts us back in touch with customers on a face-to-face relationship basis is what works and, before you can even get to what’s next — whether you’re saying ‘it’s gigabit to desktop,’ or ‘it’s a wireless world’ — you have to sit down with folks and dialogue.” Quite simply, today’s economic conditions, says Tidd, are forcing corporations to be more cognizant of their internal environment.

NEGLECT WARNING ISSUED

Depow warned in his Yankee Group report that neglect of wiring infrastructure may become more than a main determinant in corporate success or corporate failure. “It could signal the next Y2K — but with more evident impact,” the report concludes.

“What I’m trying to say in the report,” Depow says, “is that all these new services and bandwidth-eating solutions are coming around pretty fast and, before companies know it, they’re going to start to see some network problems, delays in productivity due to piecemeal and badly-organized cabling systems.” Flaws in the infrastructure may bring the whole network down, Depow notes. And the infrastructure may well be the Achilles heel of the move to a high bandwidth-based network: “If you just keep adding on to what you’ve got, and not really going by the standards, you’ll find your (cabling system operational) costs are just… going to skyrocket.”

Bakowski agrees — although perhaps not with the Y2K comparison. “Cabling infrastructure, and the comparison of that to Y2K is a little beyond where I would have gone but — that having been said, — the things that he said in his report are things I’ve been preaching since the beginning of the year.”

Namely? The times signal a significant and inherently essential shift in the relationship between companies and cabling partners. “Any company that has a strong reliance on (IT) infr
astructure is now looking for more than somebody who can throw in jack,” says Bakowski. They’re looking for people “who are true partners, in the business; partners who will be both financially and physically responsible.”

Why now? Well, consider the times, and the major drivers behind the industry scene.

“Obviously cost is major a driver,” says Porter. “It always is… there’s more cost pressure when times are slower, during these economic downturns.”

Quality is another driver. “As things slow down, people tend to shop a lot more, to get more bang for their buck. When times are really good, it’s hard to get people to come in and do small changes. They’re more quality conscious; expectations are higher on the customer side. And it’s the same thing with regard to the size of jobs: You have a hard time getting people to come in and do 25 drops during “up” times. Right now, people are much more willing to look at smaller jobs and keep employees working.”

NEW DEMANDS

The converging of technologies is the most influential major driver behind the state of Canada’s cabling industry, according to Depow. And converging technologies present numerous challenges to cabling managers. “No longer do managers only have to worry about voice; they must now be well versed in the installation and support of integrated voice and data products.”

This shift in responsibility (which can be seen in many of today’s leading enterprises) is only the beginning, says Depow.

Industry trends moving toward IP-based networks will result in significant new demands on IT managers. One major challenge that IT management will have is how to move up the learning curve so that staff will have the needed skills to support increasingly sophisticated users.

Enter the integrated cabling supplier — and maintainer — as a partner. The integrated cabling supplier is more than a deployer of physical assets, says Depow; the best integrated suppliers are also partners with the IT department of the enterprise — their skills, staff, and expertise do not go home at the end of the contract, or the end of the day. They help companies solve increasingly complex tech problems and create tailored solutions.

“(Technologies)… are starting to mature and, as they do, bandwidth requirements are increasing in order to support all those applications penetrating small offices and large corporations,” says Depow. “So what we’re seeing is this cabling thing — that everybody thought of as a boring topic — becoming much more prevalent; becoming vital to IT strategies.”

Depow says many companies are now looking to outsource, and it’s becoming very important to find the right people to get involved in your IT strategy.

COST DRIVINGS CONNECTIONS

Relations are built on trust and financial responsibility. The Yankee Group report says just that, in a number of places, and it’s something that’s been developing for the last three or four years, and is now beginning to mature.”

So why is the cabling industry on cusp of a new relationship curve? It gets back, at least in key part, to what Porter first noted: Cost.

“(IT) managers are not unlike everybody else,” says Bakowski. “They have limited resources. If they build a relationship with an integrator they can trust, they know the design they’re going to get, they know they’re not getting hosed on the price, they know what a particular integrator can do for them — and they’ll go to him directly.”

Plus, he says they’re looking for “that anchor” — that stable partner in sometimes unstable times. “And integrators are becoming more sewn into the fabric of companies,” says Bakowski. An integrator can’t just come in and say ‘This is what you want’ and leave. A true integrator will talk to customers, find out what their needs are, find out what the business demands are and they’re going to have to keep up with current technology.”

CANADA VERSUS THE U.S.

As for a cross-border comparison, Bakowski believes the Canadian cabling industry is better off these days than the cabling industry in the U.S.

“For one thing, the U.S. tends to be more reactive; the Canadian mind set, or Canadian economy — one or the other — are more affected by economic trends but tend to be not as reactive.” He says we tend to be slower to react and tend to be more decisive in our reactions — perhaps because we are more conservative.

What ramifications does this conservative mode have on our cabling industry? The swings are not as wide and the effects on our personnel are not as dramatic in Canada’s telecom and structured cabling businesses, says Bakowski.

“Don’t get me wrong. They are affected, obviously. But not to same degree as in the U.S.,” he says. “Plus, in the U.S., there are obviously more major players. The difference in the U.S. is, although they have more than their share of the large corporations who are able to balance their workloads and demands for their service, there are also more of the smaller companies. And the smaller companies tend to be more reactive or affected by downturns — or any kind of economic factors that come into play.”

In Canada, although we have our fair share of smaller companies, the bigger guys tend to weather the economic waves as well and do it better, he says: “They’re able to flatten our their demands. They may see slowdowns, but they’re more diversified, (and) able to get involved in others things.”

Porter says the Canadian market tends to be “totally driven” by what’s going on in the U.S. “But our (Canadian) industry tends to see lag a little behind. So if the U.S. economy slows, we typically start to feel the same effects about four or six months later And that’s especially the case with larger companies because a lot of them are subsidiaries of U.S. companies — like mine (Tyco Electronics) for example.”

INDUSTRY IS “RESILIENT”

While it hasn’t affected everyone, Bakowski says the slowdown has certainly made its presence known. “Something that is starting to trend in the industry, is this: there are players dropping out. There are people who, five years ago were big players in the business, who are either not there today or (are) on their way out. And a number of cabling integrators are now, for example, finding it tough to stay in the business because margins for telecommunications aren’t what a lot of people thought they would be.”

So how are Canadian companies coping during these rather difficult times?

Canadian companies are laying people off, just like in the U.S., says Porter, “and they’re keeping their focus with their sales people — and getting rid of middle management people.” Porter feels the events of September 11 pushed Canada’s cabling industry a little further down the path it was already on: “We were teetering on the fence and, my personal feeling is, we’ve hit the bottom of this.” He says that now we’re going to have to ride the slowdown — or recession — for another few months.

“There are, obviously, some heavy economic influences on the business,” says Bakowski. “But are they as bad as people some are predicting? No, I don’t think so. I mean, look: Our vice president of cabling (for Bell Canada) is looking at increasing — at least doubling — our business in the next two years…I think the infrastructure business, although it’s consolidating (the number of players), is certainly going to continue to be very resilient.”

JoAnn Napier is a technology author, writer and speaker, based in Halifax, Nova Scotia. Her book “Technology With Curves: Women Reshaping the Digital Landscape” (HarperCollins) will soon be released in the U.S.


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