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Is cabling a commodity?

Definitely not, says an industry insider as he delves into the commoditization versus innovation debate.


April 1, 2005  


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As a representative of a leading manu-facturer of structured cabling systems and components, I have been discouraged in recent years by the insistence of many people I meet that structured cabling is a commodity.

I have never viewed what I do for a living as being equivalent to selling hog futures, precious metals, West Texas crude, or Saskatchewan wheat.

I decided to do some in-depth research on the topic, which given my hectic schedule and CNS’ impending deadline, involved typing “structured cabling” and “commodity” into a Google search.

One thing led to another, and I eventually ended up reading about the concept of Datacommodities, which included an explanation of the term from author Ross Mayfield. “The technical standardization of MIPS, Mbps, and MHz demanded by customers to reduce their technology risk and for vendors to realize production economies create the characteristics of physical commodities,” he wrote.

Unlike traditional physical commodities, however, datacommodities (such as bandwidth, storage and processing) are not subject to volume trading or indexed pricing, but in many ways exhibit other commodity-like behaviours in the market.

In other reference materials I found that software code, web design, and systems integration also meet the criteria for datacommodities. So structured cabling is, at least, in good company with other critical IT components

Commoditization is not, of course, all bad or all good. The simplistic view of commoditization (“my prices are falling!”) is that it is good for customers and bad for vendors.

To understand the gray area involved in this view, one must look at the antithesis of commoditization: innovation.

Yin and the yang

Innovation is the process of turning ideas into commercially feasible products and services. It is the yang to commoditization’s yin.

One needs to look no further back in time than this past December and January to see that, thankfully, innovation is not dead in our industry.

The announcements by several key vendors of commercial structured cabling systems capable of supporting 10 Gigabit per second Ethernet transmissions over 100 metres of copper cable, signal the beginning of a new era.

The technical challenges involved in accomplishing these new product intro-ductions were staggering. Control of Alien Near End Cross-talk, which originates in cables adjacent to the cable under test, was critical.

Design and materials science innovations played a key role in overcoming the technical hurdles.

And this is not the first such innovation in structured cabling. In recent years we have seen Category 5, 5E and 6 introduced to the market, along with laser-optimized multimode fiber and a host of unique-featured apparatus.

Each of these technologies has gone from introduction to early-adaptation to market acceptance/standardization and ultimately to decline (in the case of Category 5 and arguably 5E, with the others likely to follow in the future).

In truth, the initial stages of the commoditization process are not undesirable for vendors, either.

New product releases are usually high priced, but their low volume means an insignificant contribution to financial results. As products move along the life-cycle curve, there is a sweet spot at which prices and production volumes are optimized for favourable financial results.

As the technology reaches complete standardization/commoditization and prices fall, followed by reduced volumes at a later date, the vendor will find participation less attractive.

Returning to the customer, though, there is evidence that early adoption of new IT technologies, can create a sustainable competitive advantage in a business, which may be of far greater value than the cost savings associated with buying commoditized solutions.

The early adopters view technology as a core strategic asset. They use technology, not as an end unto itself, but as a means of enabling their business to out-perform their competitors, thus building value for their stakeholders.

These are the companies that will embrace the early versions of Category 6A cabling. Is your company an early adopter?

My colleagues, and competitors and I know you are out there and we look forward to talking to you about Category 6A because, I am sure you will agree, that will be far more interesting and beneficial than discussing hog futures.

Bob Kostash is the Canadian region sales director for SYSTIMAX Solutions Inc. and a member of the magazine’s editorial advisory board. He can be reached at bkostash@systimax.com.