There's opportunity in datacom. But is it as big or as available as it seems?

We have all been exposed to the ongoing clamor about the datacom market as a great new opportunity for electrical distributors. Many electrical suppliers are launching new product lines for the market, and they're pushing you to stock them. Electrical contractors are installing datacom systems, and they're asking for related products when they come to your counter. The industry's trade magazines all tell you or your customers how to get into the datacom business.

Distributors should scope out the datacom business to see how well it fits with their companies. But as more information emerges about the market, I keep wondering: How big an opportunity is the datacom market, how soon, for how many electrical distributors? How real is that opportunity now and in the near term? And does the reality of the opportunity live up to the hype?

Sales projections and data for the market vary all over the lot, but I've heard estimates in the $4-billion to $6-billion range, maybe at the outside $8 billion, in the connectivity and local-area wiring products, where electrical distributors, realistically, focus. That amounts to maybe 5%, certainly less than 10%, of the current size of the electrical product market.

Yet, the allure remains. When the typical computer cabling system in an office building gets changed out every 18 months (on average), there's some serious maintenance business available. Many distributors are still in the early research phase. At a recent IMARK meeting, 300 of that buying/marketing group's distributor members attended 15 different presentations on the market to see if they could capture a piece of it.

While this market is growing faster than the core business of electrical distributors, it has several tricky barriers of entry. Datacom technology is advancing rapidly, meaning the inventory, lingo and educational requirements change much faster than with traditional electrical products. Access to key product lines is also a concern. Many datacom product lines are franchised rather selectively, so a distributor has to prove itself as a serious player before getting access to some products.

The market's proponents, however, speak of years of double-digit growth. It's tough to find a balanced perspective. Bob Reynolds, Graybar Electric's top datacom exec, provided a more sobering take on the market at a recent seminar for independent manufacturers' reps. The senior vice president, comm data, of the St. Louis, Mo.-based datacom powerhouse, pegged the size of the market at "maybe $4 billion to 4.5 billion," and at less than 10% of the total electrical products market. Two-thirds of it, he says, is made up of cable products and the remaining one-third in connectivity products. He sees growth in the 3% to 12% range. "More realistically, annual growth will be about 10%," he says.

Reynolds says the market is already consolidated and that "about 90% of the business is concentrated in the hands of eight distributors."

Yet another noted datacom expert, Paul Rosenberg, consulting editor for EC&M, EW's sister publication, thinks this market is for real and urges distributors not to overlook it.

"The market is not huge right now, but it is substantial and growing," he says. "Not only that, it could lead aggressive wholesalers into dozens of supplementary and spin-off markets."

What opportunities exist for electrical distributors in datacom? Many manufacturers and contractors are sold on this business. But for electrical distributors, it's not a market to plunge into without ample research and preparation.