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IBM (NYSE: IBM) is set to announce this week a major radio frequency identification (RFID) strategy that involves integrating the next-generation supply-chain and tracking technology with existing data systems.
Seen as a refinement and eventually replacement of barcode supply-chain tracking and inventory, the wireless tags and readers are slowly gaining traction in the market, which is expected to top US$3 billion within four years. Much of the RFID adoption is being driven by directives and deadlines from major retailers, particularly Wal-Mart (NYSE: WMT).
Integrating RFID
However, analysts and industry players alike recognize that RFID can reach its full potential only if it moves beyond tracking boxes to an integrated source of data that is used with other business planning and operations applications. IBM, which a year ago announced an RFID middleware initiative, is combining the technology with its WebSphere, DB2, Tivoli and other existing business software.
While some companies seem to realize the need for RFID to be part of the larger convergence of data, networking and communications, many are limited to dipping their toes in the RFID river, adopting the technology only as much as required by partners such as Wal-Mart.
Yankee Group senior analyst Mike Dominy said vendors such as IBM are promoting RFID as the next big technology thing and are selling the use of RFID not only for tracking goods and shipping, but also for overall business operations.
Oracle, MS, HP
"As companies like Wal-Mart and others start rolling out RFID in the supply chain, we're going to see them integrating RFID data with other data," Dominy told TechNewsWorld. "That's the difference in the RFID market we see today."
Dominy explained that while RFID was previously closed off from other IT networks and data, it is increasingly being folded in with inventory, quality assurance, production, demand and other applications.
While Wal-Mart, Best Buy (NYSE: BBY), and other major retailers have spurred RFID adoption among their partners, semiconductor companies such as Texas Instruments (NYSE: TXN) and Philips (NYSE: PHG) are working to improve and reduce cost of the technology.
On the IT side, the larger hardware, software and services providers -- Microsoft (Nasdaq: MSFT), Oracle (Nasdaq: ORCL), IBM, HP (NYSE: HPQ) and others -- appear to be the most trusted and best-positioned for RFID integration, according to Dominy.
IBM Bias?
"Our research shows the user or enterprise preference is toward using big players to implement RFID," he said.
However, Dominy cautioned that despite IBM and others' pronounced support for open standards, customers relying on their RFID solutions may be limiting themselves.
"IBM sells a host of technology used for RFID," he said. "So obviously, there's going to be a bias to IBM solutions as opposed to solutions that don't necessarily rely on IBM technology."
Leaping Hurdles
AMR Research senior analyst Kara Romanow told TechNewsWorld that despite the RFID adoption being driven by Wal-Mart's requirements -- which include RFID implementations from its top 100 partners by the end of the year -- there are still hurdles for wider adoption.
For example, Romanow said even companies that realize the advantages of RFID are still reluctant to adopt the technology because of the price of the actual tags and the accuracy or RFID reading.
However, those issues are being addressed and RFID pilot projects are now being expanded to include other parts of business planning, analysts agreed.
World of Lessons
Dominy said while North America is a bit further along in the deployment of RFID technology, Europe and other regions are also moving quickly toward adoption. The U.S. is further along in supply chain RFID, but Europe is more advanced in "closed loop" or internal use of the technology, according to Dominy.
The analyst said there are still questions, however, regarding how the technology will roll out in Asia, particularly in China. The fear is that RFID may get bogged down in the standards and frequencies mess that slowed wireless technology.
"We have to use the lessons from wireless and apply them," Dominy said.
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