It's decreasing, but this says some good things about the industry, according to a new report; standards and savvy customers will provide a future.
Posted Aug 10, 2006
RFID software and services revenue is expected to reach $3.1 billion in 2007, a decrease of 15 percent from previous estimates, according to "Focus on RFID Software: Investigating New Solutions and Approaches," a new report by ABI Research. Although this might be discouraging for some investors, the truth is that the revised forecast is likely to be a positive sign for the future of RFID.
Much of the reduction between the first quarter of 2006 and the present is specifically in the areas of asset management and SCM, according to Michael Liard, director of the RFID and contactless practice at ABI. The lowered revenue expectations are not due to a decline in the industry, but a result of the current direction of RFID evolution and four interrelated factors. "They are 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, " Liard says.
Increased planning skill among customers will lead to a more refined industry environment. "Buyers are becoming more savvy about project planning--they think about what they need an RFID implementation to do today, but also where they want to be in the future," Liard says. "This means a reduction in wasted effort and money."
Industry consolidation and collaborative solutions also point to better integration for RFID projects. Consolidation among industry vendors and service providers will eliminate overlap and lead to more standardized and efficient solutions, Liard says. "The partnership ecosystem is taking a different shape, and this will mitigate some of the cost associated with RFID implementation. These are early signs that the RFID industry is coming to maturity."
The revenue stream for RFID is still quite strong, Liard says, and market maturity requires an outlook to the future. "There may be this present reduction in revenues, but it's enabling future adoption, whether for hardware, software, or services." Until now, much adoption has been driven by retailer requirements. "Customers say, 'I adopted this to comply with Wal-Mart, but what's in it for me?' We've figured out how to collect RFID data, now we need to figure out how to leverage it."
The next step is to pile on the analytics in order to achieve that leverage, Liard says. "In the past, you needed to have IT and operations at the table on any RFID project. Now, it will have to be IT, operations, and marketing. The analytical data from RFID will be very important for them."
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