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RFID – Slow and Steady Wins the Race

I touched briefly on this topic in my last post, but I don’t think it will surprise anyone who pays attention to RFID that the market seems to have slowed recently.  I believe that this is due to a confluence of factors, and that one shouldn’t be disheartened, but rather take solace in the fact that the market is actually maturing.


Many of you may already be familiar with the Gartner Hype Cycle, but for those of you who aren’t, it’s a term that basically defines the adoption pattern of most technologies.  There are 5 basic stages: trigger, inflated expectations, disillusionment, enlightenment, and productivity.  Essentially when a new technology takes center stage (the trigger), people get excited and dream about the potential (inflated expectation), and then they determine that, although these things may be possible, they are nowhere near reality (disillusionment).  At this point, they roll up their sleeves, start solving the hard problems, step by step, and figuring out what truly can and cannot be accomplished (enlightenment), which is followed by a phase of really using the technology in the most appropriate matter (productivity). 


It’s clear to me that RFID is no exception.  It came onto the scene when M.I.T. was looking at it as a way to improve supply chain efficiencies and GS1 decided to try to extend their sphere of influence from one unique id technology (barcodes) to another (RFID).  ThusEPCglobal was born, and with RFID standardization underway, a market full of companies interested in the promise of increased supply chain efficiency was born.  Initially there was a bit of a chicken and egg problem since the entire supply chain only benefits when multiple companies adopt the technology.  With Wal-Mart’s mandate, however, many suppliers didn’t have a choice. Essentially, Wal-Mart envisioned the cost savings this technology could bring and made the proclamation ‘let there be chicken’.  

Several companies that had to adopt RFID to comply with the mandate looked for ways that their implementations could benefit them instead of just add to their cost.  Some companies managed to find this kind of ROI, while the rest were left paying a technology tax as part of doing business with Wal-Mart.  Through this time period several key stakeholders tried to push the technology forward, but the benefits weren’t nearly as readily available as had originally been dreamed, and the market seemed to falter.  And thus, this is where we are today: The trough of disillusionment. 


What actually gives hope to the market is that some of the staunchest advocates of RFID are now showing signs that they are willing to take a more realistic approach to adoption.  Most notably, Wal-Mart has refocused their efforts on those specific business processes which provide them the most benefit. 

This is something that SAP has been advocating since the beginning, and we’ve been helping our customers realize the benefit for specific business processes where RFID makes sense.  That’s not to say that SAP wasn’t also one of the visionaries, dreaming the dream in the beginning.  We were.  We were one of the sponsors of the original work at M.I.T. and truly believe that the future of the RFID market holds great potential.  We are, however, first and foremost a business process company, and we therefore focus on helping our customers figure out how to improve the efficiency of their processes.  Sometimes RFID is the best way to do this, sometimes not.


Ultimately, as the market matures and more of the initial drawbacks are overcome (tag prices, etc), it will make more sense for more business processes to be RFID enabled.  The current dose of reality is welcome and it puts the entire industry on the slope of enlightenment, which we’re just starting to climb.  We have a long way to go before we reach the peak of productivity, but I think it’s evident to me that we are now on our way.

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