The technology needs to be applied correctly, but smart implementations will reap rewards.
Posted Dec 13, 2005
RFID technology's time may finally be coming if implementers can learn to look beyond its current characterization as a product ID-code system, according to a new Gartner report. Findings from "Market Share and Forecast: Radio Frequency Identification, Worldwide, 2004-2010" include an expected wave of new license sales in 2006 and 2007. These new licenses will be driven by companies replacing technology they were forced to adopt by Wal-Mart or a government agency, and also by purchases of add-ons to the pilot programs of 2004 and 2005. The most important changes will come not from further expansion of older implementations, but from the discovery of new business processes that take best advantage of RFID's potential.
"One of the biggest tragedies of RFID was that when it was introduced it was called the next barcode," says Jeff Woods, a Gartner research vice president and author of the report. "People looked at where barcodes were being used and tried to supercharge those processes with RFID. It turns out that replacing barcodes is actually one of the hardest processes for RFID to make a successful business case." This is because barcodes are extremely cost-effective and easy to grasp when implemented as inventory identifiers in structured settings like warehouses, while the true benefit of RFID--real-time tracking of movable assets in chaotic environments--is largely wasted in those cases.
Should RFID find its place, the growth potential is considerable. According to the report, worldwide RFID spending for 2005 is likely to reach $504 million, a 39 percent increase from the previous year. Accelerating adoption driven by the technology's value will lead to new license revenue of $751 million by the end of 2006, with worldwide spending topping $3 billion by 2010.
Woods identifies the settings where RFID is best deployed as those where it's important to be able to locate an asset quickly, easily, and accurately, regardless of whether it is in sight. "The trend we've seen in business cases is that there are two characteristics that make great implementations," Woods says. "These are mobile asset tracking and business processes for chaotic environments." One example is a hospital ER, "where it's easy to lose track of a wheelchair or an IV pump," he says. The FDA also has found a place for RFID in fighting counterfeiters and black marketers, and the DOD has been a major driver of RFID technology adoption for logistics and asset tracking.
The key to the longterm success of RFID is realizing that the technology is not an adjunct to existing management systems. "In many cases RFID will be used in areas where the process is not controlled by an incumbent business application," Woods says. "Contrary to the notion that companies will need to integrate RFID data into established transactional applications, companies will likely need to develop new business applications if they want to put RFID at the center of a process." It is here, Woods concludes, that the opportunity for real innovation exists.
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