RFID Not Ready For Prime Time

By enabling objects to inexpensively transmit information about location, configuration, and history to a remote automated reader, RFID technology promises to radically improve the efficiency and effectiveness of various business processes from warehouse inventory control to security.

Nonetheless, only 10% of Global 2000 organizations are currently engaged in RFID pilot projects. We believe approximately half of these projects are already being written off as failures, while most of the rest have yielded indifferent results. Next year will likely see a drop in the level of RFID investment, as many organizations pause to re-evaluate the technology’s true potential.

Long-Term Promise

Although the dampening of expectations surrounding RFID is a natural reaction to the almost hysterical enthusiasm that characterized this technology during the first half of 2003, organizations should still prepare for RFID’s pervasiveness in the longer term. By 2008, we anticipate approximately 30% of manufactured capital goods will be RFID-enabled with that percentage growing to 80% by 2013. RFID chips will also find their way onto consumer goods, though privacy issues will ensure that progress in this sector is slower.

IT organizations will be particularly burdened by this technology’s widespread deployment because the monitoring, filtering, analysis, and much of the first-line response to RFID-generated event signals will fall on their shoulders.

At the same time, the explosion in data volumes and the ensuing need for monitoring and management will fundamentally transform the infrastructure and application management market, as vendors race to extend their respective product portfolios’ sense-and-respond functionalities into the RFID space.

Three Obstacles

Before RFID deployment resumes its growth, several obstacles need to be overcome:

  • The market will require international standardization and stabilization, with regard to both the actual technology and functionality deployed within the various RFID chips and the syntax and semantics of the RFID signals themselves.
  • To allay privacy consumer concerns, usage protocols that minimize the scope for intrusive consumer observation will need to be developed, and this will slow deployment.
  • To actually make use of much of the information contained within the signals, vendors will need to develop (and organizations will need to implement) a rich two-dimensional infrastructure. The first dimension will be devoted to management of the signal traffic. While, the second dimension will be devoted to the elicitation of meaning from the signals and providing the linkage between RFID signal generation and other corporate applications.
  • In other words, RFID is not a self-contained technology. Although systems integrators could create the required middleware (and we anticipate during the next three years RFID-related projects will generate approximately $2 billion for the systems integration market), widespread deployment will presuppose off-the-shelf availability of RFID management and interpretive software, an availability unlikely before 2006.

    As the previously mentioned time frames imply, the third obstacle will be the first to be overcome. In fact, we anticipate that approximately 20% of new IT and communications-related venture capital investments in 2004 will be in the RFID space.

    At the same time, despite the current furor around privacy, the modifications of RFID technology required to ameliorate concerns are minor. The most enduring obstacle will be conflicting syntax and semantics standards now being contemplated by the U.S. and the EU. Although we believe the long-term benefits of RFID are such to make costs associated with dual standard support worthwhile, failure to come to a global agreement ensures that deployment will be limited until the end of this decade.

    Bottom Line Advice

    The short-term prospects for RFID have been over hyped. Serious obstacles stand in the way of widespread deployment. Technology will become a significant factor in various industries in three to five years.

    Organizations must avoid short-term investments in RFID infrastructures. They should wait for standardization, a resolution of current political/legal conflicts, and the emergence of off-the-shelf RFID middleware.

    Want to discuss RFID? Take it over to our IT Management Forum.

    This article was compiled and edited by CIO Update staff. Please direct any
    questions regarding its content to Allen Bernard, Managing Editor.