Structured Cabling Technology and Market Assessment
When we started researching the structured cabling market a few months ago, it seemed like not much had changed in the past three years. Some of the individuals we interviewed for this report thought so, too. But as it turns out, there have been many changes to the market. The recession reduced investment, led to the cancellation of many projects, and those that continued worked under reduced budgets. This, in addition to changes in IT technology, reshuffled the product mix that the end-users demand from manufacturers, forcing them to reconsider their portfolios, and often, the way that they approach the market.
One major market that continues to grow is the data center. Spurred first by the growth of the Internet and now, in addition, by the global proliferation of smartphones and applications like on-demand video, the need for data center space continues to increase. Seeing this opportunity, many structured cabling manufacturers have developed programs specifically to attack this market.
Growth in the data center market has increased the need for fiber-optic products. The small form-factor LC connector and laser-optimized multi-mode fiber (LOMF) have become the norm and both are expected to grow over the next five years: the LC LOMF plug at a CAGR of 11% and OM3/OM4 LOMF at an average CAGR of 30.2%. Tight budgets are currently making the upgrade to the premium OM4 fiber a difficult sell for manufacturers. The increased optical reach over OM3 from 300m to 550m, which is the major selling feature of OM4 fiber at 10G, is not needed in a majority of data centers. It is difficult to justify the cost for the upgrade.
At the same time, there is a need for a fiber-optic solution that bridges the gap between the 40/100G reach of 125 meters for OM4 multi-mode and 10 kilometers for OS2 single mode fiber. An OM4+ fiber solution that has a reach of 300 meters would provide a cost-effective solution for campus installations and utilize less expensive transceivers. The other option might be to have a less expensive SM transceiver that could reach perhaps one kilometer. Both of these solutions are being developed.
Pre-terminated fiber optic cable assemblies are becoming commonplace, replacing field-terminated ones in the data center and campus environments (Figure 1). These assemblies are popular with project managers due to the speed with which they can be installed and that they are factory-tested by the manufacturer. This eliminates one headache from the project manager’s punch list. These assemblies are a negative for installers who have developed the high level of skill required to field-terminate fiber optic connectors, eliminating a major source of revenue for them. They are custom manufactured at various lengths using a variety of connectors including LC and SC depending on what types of equipment they connect to. However, the LC connector is quickly taking the market due to its small form factor and ability to support high-density applications.
The MPO connector is seeing tremendous growth. Its progress is driven by the desire to increase density, simplify termination, and to support new applications such as 40 and 100 Gigabit Ethernet. Bishop predicts a CAGR of more than 170% for these connectors over the next five years (Table 1 below). In the short term, growth potential is stymied somewhat by the economy, with some end-users hesitant to commit to the price premium that these products demand. This is especially true in the colocation data center market that is often designed with short-term goals in mind, where re-cabling in the future is a more attractive option than investing in future market needs.
Table 1: Summary of Fiber Products
Fiber-optic products are poised to steadily take share from copper in the structured cabling market over the next five years. The overall five-year CAGR for fiber from 2013 to 2017 is expected to exceed 17%, while copper’s will be -0.2%.
Although copper’s grip on the structured cabling market is slipping, there are opportunities with higher-bandwidth shielded products, such as CAT6A F/UTP and CAT7 S/FTP, which will both see upwards of 25% CAGRs. CAT6A U/UTP will see some growth with an overall CAGR of 5.5%. These products support 10-Gigabit Ethernet. The increase in demand in shielded products is because 10GBASE-T manufacturers such as Arista are recommending the use of Category 6 or 6A F/UTP or Category 7 S/FTP (Figure 3) products to support their RJ45-based products. This recommendation is based on meeting FCC emissions requirements and not internal requirements such as alien crosstalk.
10GBASE-T is finally starting to gain market share, now that power and cost objections have been addressed. It has taken a long time for this application to get to market, and in that time frame, several technologies have pushed their way into the data center, especially Top-of-Rack (ToR) architecture and SFP+ Direct Attach Copper (DAC) cables. These technologies are significant because they have eliminated the patch panel at the top of every rack, which is a fundamental part of the conventional structured cabling system. Although manufacturers are educating their customers about the additional installation flexibility afforded by the addition of a patch panel, there is no reason to believe that IT managers will abandon the point-to-point wiring within the rack that they have become accustomed to.
SFP+ DAC also supports 10-Gigabit Ethernet and directly competes with 10GBASE-T. It has the advantage of being a module-based system, allowing the user to switch from copper to fiber as required. Its disadvantage is that it has a larger form factor than the RJ45. SFP+ currently has a sizable part of the ToR server market, about 86%. Bishop does not expect it to disappear.
Table 2: Total Components by Media Type
Although the overall market for Category 6 (Figure 4 left) cabling will shrink over the next five years, manufacturers have the opportunity to capitalize on this mature product and it will continue to be a source of revenue. The structured cabling business has always been competitive and the commoditization of the market caused by the recession has put additional pressure on manufacturers as the number of new installations dwindled; competition for every job is fierce. End-users are watching their budgets. This has led to a complete commoditizing of the structured cabling market. Five years ago manufacturers positioned themselves by claiming improved network performance. It was a battle of dBs with manufacturers working to specify their products at end-users and trying to lock out the opposition by showing better performance on their spec sheets. There is little interest in dBs and it is increasingly difficult to gain a singular bid specification position. And, those that are closed are being opened up for competitive bid. This puts the squeeze on all manufacturers.
At the same time, manufacturers have done a great job selling their customers on Category 6. With the exception of running 10GBASE-T at distances of less than 55 meters, which is not recommended by any manufacturers, Category 6 does not have an application that requires its use. 1000Base-T, the prevalent application in the data center, runs over Category 5e. Yet, suppliers have convinced end-users to install Category 6 for “future-proofing” and because it allows for extra headroom beyond the standard.
With the commoditization of products and structured cabling taking a backseat in strategic thinking of IT managers, cabling companies have reinvented themselves in order to gain their customers’ attention. Many no longer lead with cables and connectors, but have developed marketing strategies that address hot buttons such as cooling. In order to address this topic, vendors have introduced a series of products to maximize airflow through the rack or cabinet. In addition, firms like Panduit have developed pre-configured rack systems designed around a specific switch. This reduces designing, planning, procurement, and installation time. Many of these racks are custom-configured to customer needs. It fits in perfectly with the concept of data center standardization and the implementation of PODs at a rack or row level.
This type of value-added service is becoming the norm. CommScope has long been a leader in taking the role of trusted advisor to its customers. Over the years, manufacturers such as Panduit, Leviton, and Siemon have added application-engineering staff to advise their customers with product selection and specification development. They also have the ability to assist with design and how best to maximize the efficiency and effectiveness of their company’s products in each unique installation. Companies will be expanding these value-added services and will continue to develop standard configurations designed to support the products of major equipment makers. This puts manufacturers that do not have a broad product line at a competitive disadvantage. Cable manufacturers, for example, may not have the product set necessary to address their customer’s core concerns.
Although bandwidth requirements in the data center are increasing, the desktop has been stagnant for many years. 1000BASE-T is currently capable of supporting user’s needs in all but a handful of cases. Category 5e and Category 6 cabling support this application. At this time, there is little need for 10GBASE-T to the desktop and server and switch manufacturers are currently concentrating on developing the data center market. Five years ago it was common to install four drops to every workstation. This is being cut back to cut costs. There are also some new technologies such as Bring Your Own Device (BYOD) that strengthen the need for wireless infrastructure within the building. In the next five years there will be major changes in the types of devices that are supported in the work area and in the structured cabling systems that are installed to support them.
The demand for Category 5e will also decrease over the next 5 years by a CAGR of -23%. Category 5e will mainly be used in low-end installations such as residential and to support applications such as building automation systems, security, and lighting. IP-based building automation and security systems have been discussed for years and are now finding their way into high-end structures. IP security cameras have been on the market for years and although they represent a substantial portion of revenue for manufacturers, large volumes of coax-based analog cameras are still being sold. These cameras are often incorporated into hybrid systems that link this mature technology to IP-based systems. LED lighting is widely used to light the outside of buildings; the technology exists to replace conventional fluorescent lighting fixtures with these products. Redwood Systems, a manufacturer of these systems, claims that the typical 250,000-square-foot office utilizes more than 6,000 RJ-45 connectors, nine racks, 70 patch panels, and 500,000 feet of cable.
Figure 5 shows the percentages of copper cabling to be installed over the next five years.
This article touches on just some of the key points regarding the structured cabling market. More detail can be found in Bishop & Associates’ Structured Cabling Technology and Market Assessment.
Tom Debiec is in charge of structured cabling and other connectivity projects at Discerning Analytics. Trained as an engineer, Tom has more than 20 years of both technical and marketing expertise in the premise cabling market. During his career in the cabling industry, Tom held positions in product development, design, technical support and program management. He participated in industry standards including NEMA, TIA and IEEE. Tom’s technical background and experience in product development allow him great insight for analyzing the technologies that shape the market. His marketing knowhow position him well to rationalze and communicate trends in a clear, authoritative manner.
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