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Sure, RFID Shows Promise, But Economy Has Put It on Hold

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Earlier this week I wrote about how the recession will likely contract spending on RFID -- and more broadly, on any technologies deemed discretionary. Reader Patrick Sweeney left a comment in which he shared his opinion that my post "is missing the mark by quite a bit." I Googled Sweeney to find out he is the president and CEO of RFID solutions provider ODIN Technologies and author of "RFID for Dummies." Sweeney obviously knows far more than I do about RFID. Yet, with all due respect, I don't think my post misses the mark at all.

 

I wrote that the original use case for RFID, providing visibility and enhancing efficiency throughout the supply chain, has thus far proved less than promising. At least one market observer, IDTechEx, appears to agree. According to Raghu Das, primary author of IDTechEx's report "RFID Forecasts, Players & Opportunities 2009-2019:"

The tagging of pallets and cases remains to be a failure, with only 225 million passive UHF tags used for this application in 2009 - a far cry from the 35 billion tags that one consumer goods company alone predicted that it would be buying in 2009, when they presented at an event in 2003. The main reasons for this have been technical failures (poor read rates with high moisture content and metal products), lack of infrastructure and lack of mutuality of benefit between retailers and the rest of the supply chain. Work is still preserving however.

That isn't to say there aren't interesting and emerging new use cases for RFID. Sweeney rightly takes me to task for not pointing out some of them in my post. I tracked down a Wall Street Journal article he mentions that offers three examples of companies using RFID to track valuable assets: restaurant chain Blue C. Sushi for plates of seafood, intellectual-property law firm Sughrue Mion PLLC for paper documents and Wells Fargo for IT assets in its data centers. In a post from August 2008, I mentioned the idea of using RFID to track IT assets, as well as some other successful closed-loop deployments in environments like hospitals.

 

So do I think RFID has potential? Yes. But do I think many companies will forgo RFID projects until the economy improves? Yes.

 

According to VDC Research Group, demand for RFID solutions softened in 2008's Q4 and didn't improve in the first quarter of this year. Drew Nathanson, the company's RFID practice director, said three-quarters of respondents to a VDC survey plan to trim RFID spending by at least 60 percent in 2009. While the global RFID market grew nearly 35 percent from 2007 to 2008, to reach nearly $4 billion, VDC expects growth to fall to 11 percent this year.

 

Offering somewhat different numbers, IDTechEx projects the global market will reach $5.56 billion this year, up from $5.25 billion in 2008. (Again, not a very aggressive forecast.) The market will largely be led by government-led RFID projects, which IDTechEx's Das notes "do not need a fast return on investment." Private-sector spending, in contrast, is all about the ROI these days.

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