The Next 12 Months in RFID

By Kevin MacDonald

The era of the Proof of Concept RFID pilot is over. Production quality RFID systems will be the big news in 2007-2008. End users frequently ask ODIN technologies (www.odintechnologies.com) what the next year will bring for RFID. In previous years, we have seen many narrowly focused pilots being launched. In 2007, we will see the RFID foundation being built for much larger scale adoption. Many companies turn to ODIN when they have a tough RFID challenge to solve or are looking to scale up their RFID system. Here is what ODIN's Leading Indicator suggests for next year.

What is important for RFID programs? Accuracy.

The past few years have been filled with small compliance projects and cost minimization efforts; and vendors that were once making big splashes in RFID are running for the doors trying to cut their losses. However, things are actually just beginning. What everyone needs most is tag read accuracy that is correctly installed the first time. In order for an ROI to be realized or a system to be expanded, there must be confidence that the RFID network is a robust and reliable data collection system.

What has been clearly happening in 2006 is that compliance has become a decreasing part of the RFID market, and real ROI based and strategic projects are emerging. In the past, people have claimed that 2004 and 2005 were "the year of the pilot," but 2006 was truly the year. In 2004 and 2005, the pilots were primarily driven by Wal-Mart suppliers who were dipping their feet into the RFID waters for compliance only. Further adoption was driven purely by Wal-Mart's expansion.

By contrast, the 2006 pilot market was driven by supply chain and non-compliance based applications. The hallmark of an RFID vendor who is well positioned for 2007 is that 90% of its business had nothing to do with Wal-Mart. Further expansion depends on the viability of the use case within an operation rather than a third party's plans. The advent of a stable and robust technology platform in Gen 2 has allowed companies who were waiting for a stable technology to begin exploring and implementing. Early companies are able to achieve real benefits and they know that current platforms will be scalable and usable.

From science project to production systems

This all adds up to expansion in 2007 and beyond. The early adopters are out in the market, buoyed by a more stable technology than normal in an early market, thanks to compliance. The fast followers and early majority of the market will be able to capitalize on the technology in an accelerated time table.

Up until now, there has been a smattering of companies forced to implement a technology in a timetable that is not suitable to their business goals. The companies that traditionally implement technology early in its lifecycle are not jumping aboard and reaping the rewards. Next year will be the beginning of those 2006 ROI based pilots moving into production and the fast followers and some early majority implementers starting pilots of their own. This is good news for RFID companies that have been clamoring for expansion, but it also adds the challenge that only pilots with real benefit will be implemented first and then scaled when proven.

Wal-Mart has done the industry a real favor by creating a large enough technology market for there to be many hardware and software vendors with an emerging technology. Now that the technology is cheap and available, companies will start to use it more broadly. Wal-Mart has taught all of the companies an important lesson: without sufficiently tagged items and a high read rate, RFID really is just another nifty and expensive toy. By moving away from pure compliance with poor read rates and shoddy ROIs for many in the supply chain, the industry will grow not only in 2007, but growth acceleration is now in the near future.

Kevin MacDonald is the VP of Client Architecture at ODIN technologies. Contact Mr. MacDonald at kevinc@odintechnologies.com