When It Comes To RFID, Sometimes Down Means Up

Aug. 25, 2006
As anybody who has spent even a little bit of time tracking the RFID industry can attest, there is a large and growing cottage industry of consultants, systems integrators and market analysts who all have a stake in the game (and that doesn?t even count ...

As anybody who has spent even a little bit of time tracking the RFID industry can attest, there is a large and growing cottage industry of consultants, systems integrators and market analysts who all have a stake in the game (and that doesn?t even count the doomsayers who are also making a nice living from their books, newsletters and websites that warn about the "Big Brother" apocalypse soon to come from government's/retail's use of these "spychips"). In any event, it's very unusual to find a market analyst who believes that RFID is NOT setting the world on fire right now.

And yet, here's an interesting market projection from ABI Research: In 2007, the total amount of sales of RFID software and services will be roughly $3.1 billion, which is 15% less than ABI previously estimated. Assuming that ABI's projections are accurate, that kind of "negative growth curve" would be cause for alarm and panic. But in fact, something else is happening here.

Michael Liard, ABI's RFID practice director, explains the lowered revenue expectations as resulting "from the current direction of RFID's evolution, not from any decline in the industry. Four interrelated factors, particularly within asset management and supply chain management RFID markets, have led us to revise our forecasts: market consolidation; collaborative solutions; the growing availability of off-the-shelf commercial RFID software packages; and the improving level of skills in RFID project planning."

I can't quite pinpoint the logic in Liard's argument -- that RFID revenues are on the decline because people are getting better at planning their projects, unless of course what he is really saying is that many of the companies predicted to hop on the RFID bandwagon back when Wal-Mart and the DoD announced their mandates are so far sticking with short-term slap-and-ship strategies that require the purchase of far fewer RFID tags than analysts originally thought would be necessary, based on pie-in-the-sky predictions that assumed immediate full-scale adoption of the technology. In fact, the tech roll-out is still largely at the pilot stage for most passive RFID tag users.

Liard has it almost exactly right when he points to the market consolidation as a major factor for why the RFID industry isn't growing. I'd take it a step further, though, and point out that there really isn't an actual RFID industry to speak of yet, so rather than using the term "consolidation" -- which implies that an industry has already emerged -- we should be speaking of a gestation period that is lasting much longer than anybody imagined.

The biggest news so far this year within the RFID "industry," after all, was a non-event: Alien's withdrawal of its IPO. Mike Langberg of the San Jose Mercury News described it rather succinctly: "Wall Street just escaped an attempted alien abduction, spurning a wildly inappropriate initial public stock offering from Alien Technology of Morgan Hill." Read the rest here.

Other than Alien and a few other small companies, the RFID tags currently available tend to be provided by companies who make most of their money doing other things, such as Texas Instruments, Philips and Symbol Technologies. Alien, or Impinj, or SmartCode, or any other pure-play RFID tag producer might very well stage a successful IPO in the future, but I don't think we need to wait for Wall Street?s imprimitur to decide whether or not a technology is "legitimate" or not.

"Do you use RFID, and does it do the job it's supposed to do, and do you anticipate a reasonable return on your investment?" If you can answer "yes" to all three of those questions, then RFID is already legitimate -- for you. And that's really the bottom line on any technology -- whether it works for you.

I'd love to hear from the community at large about your experiences -- good, bad or indifferent -- with RFID.

About the Author

Dave Blanchard Blog | Senior Editor

Focus: Supply Chain

Email: [email protected]

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Contributing Editor Dave Blanchard provides the IndustryWeek audience his expertise in lean supply chain, reporting on topics from logistics, procurement and inventory management to warehousing and distribution. He also specializes in business finance news and analysis, writing on such topics as corporate finance and tax, cost management, governance, risk and compliance, and budgeting and reporting.

Dave is also the chief editor of Penton Media’s Business Finance and editorial director of Material Handling & Logistics.

With over 25 years of experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), and is a frequent speaker at industry events. Dave is an award-winning journalist and has been twice named one of the nation’s top columnists by the American Society of Business Publications Editors.

Dave received his B.A. in English from Northern Illinois University, and was a high school teacher prior to his joining the publishing industry. He is married and has two daughters.

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