This time last year, the uninterruptible power supply (UPS) industry had high hopes for an ongoing boom, driven mainly by new telecommunications companies. But rather than the flood of hoped-for sales, the industry has had to watch helplessly as startup telcos drown in a sea of debt.
Market analysts have ignored the UPS market in the past, so there is little concrete data about its size and potential - market players have had to rely on anecdotal evidence and their own experiences - but there is general agreement that the mission-critical nature of the equipment and growing concerns about the potential for failures in our national power infrastructure, which have been fuelled by overseas cases such as the Californian power crisis, have helped keep bottom lines in the black.
Tripp Lite Asia-Pacific manager Don Seaton says that while he has no doubt there will be a downturn in the telco market, there is no need for concern. "The big guys that snaffle the ones going under are still going to need equipment so I think things will level themselves out."
Seaton is turning his attention this year to the SOHO and medical markets. "In the United States last year, sales of medical equipment topped US$3 trillion. The Australian market for medical equipment this year is expected to be around A$500 million and most of that has to be protected by UPS products. The equipment is so power-sensitive and expensive that the cost of a UPS is nothing against the initial outlay.
"We will put out some evaluation 230-volt units in Australia to test them in the local environment."
Seaton says SOHO, which makes up less than one per cent of the overall market, is starting to pick up without any push from the UPS industry. "The power industry and the worsening power situation are doing that for us.
A lot of the home electrical equipment people buy nowadays is very sensitive and I think you will see UPS dealers doing deals with insurance companies, whereby if someone buys a UPS, they get a rebate on their insurance. It makes bloody good sense."
Invensys national sales manager Michael Mallia says the idea is a "good thought" and worth investigating, although he warns that home users could be lulled into a false sense of security because the home-level UPS is not going to protect them against direct lightning strikes.
Mallia agrees there has been a slow-down in the overall market, particularly in the telco and ISP sector, but says there is still growth in every sector as more people realise the need for UPS units.
While part of that growth is driven by concerns over the potential for a California-type power crisis, some growth has resulted from the channel pushing UPS because it is a high-margin product.
"However, I have noticed that some distributors selling UPS units for the first time price them the same way as they price everything else. They don't want to spend the time getting the high margin," Mallia says.
"It is a matter of educating people on how to sell the product and creating customer awareness. We try to teach them how to select a UPS, the types of technology available and what is best for each application."
Mallia says he is expecting a strong recovery later in the year, and resellers should be looking at the SME market in particular. "The percentage of sales of UPS units to servers is still way too low and they should be trying to sell a UPS with every server."
And APC managing director Leanne Cunnold says it's not just servers that need a UPS. "In the 1980s people wanted to protect hardware, but today data is more valuable than hardware and people want availability to that data. They want to protect it where it is created, stored and transmitted. You can have the most redundant infrastructure but power is still critical to provide availability. The days of just protecting the server because it is the centre of the network are long gone. Resellers need to be looking at the IT infrastructure of their existing and new customer base and putting a UPS on every server, router, desktop and printer," she says.
"The reseller needs to know the key business process of their clients and map their power needs accordingly."
Liebert channel manager Russell Perry says his company has yet to feel the downturn and has had a record 12 months, "largely because of the enormous telco activity in the market".
"That activity is not going to
continue, but for every telco closing its doors there's a new one opening. We may not see the same level of activity as the recent past but the market is still there. The Internet data centre market, which really buoyed our business, is flat but the business we are carrying forward is through being a technology partner in areas such as the new 3G mobile networks," Perry says.
"When you have an upheaval in a market it can put the kibosh on infrastructure projects and people cancel their plans, but in many cases people are just applying more thought to their plans. Sometimes that drives people towards a more robust system, which can increase sales. While we are seeing some deferments and cancellations, we are also seeing companies looking for technology partners and people who can help with risk management.
"Our channel strategy has not changed. We are taking a solution through the channel to the market and, if anything, it is even more relevant than it was when we went to the channel four years ago," he says.
Chloride Hytek national marketing manager John Simpson says UPS requirements for mission-critical applications have remained unchanged and the market, while definitely softer, remains strong.
"Clearly there has been a reduction in capital expenditure - for example, there were a lot of web hosting facilities going into Sydney over the past 12 months but there are no more on the horizon," he says. "But overall, the UPS is no different to the general economy - things are a little quieter than they were last year, but I would not say there has been a major slump."
Simpson says that the financial
services and retail sectors of the UPS market are showing a lot of resilience and are areas he expects will provide good business in the coming year.
The UPS market as it stands
- Medical industry.
- 3G mobile networks.
- SOHO and SME markets.
- Internet data centres.