Winners and Losers in the RFID Market

By Mark Roberti

Nov. 17, 2008—A couple of weeks ago, I laid out a strategy for how manufacturers, retailers and distributors should use radio frequency identification to cut costs in the near term and develop an infrastructure that can make them leaner, more efficient and more competitive down the road (see When the Going Gets Tough...). Today, I'd like to address providers of RFID hardware, software and services.

I've been writing about business technology since 1992, so this is not the first economic downturn I've witnessed. When technology companies sense the market is slowing, some reduce their investments in research and development of new products, marketing and staff in order to remain profitable, or to reduce their burn rate if they aren't profitable. But this strategy almost never works, and often puts the company in a hole. In the case of young companies that aren't profitable, this strategy is often one from which they never recover.


It won't be any different during the current downturn. While you cut your investment in R&D, some of your competitors will continue to invest in the future. When the recession ends and firms begin increasing their spending on new technology, your competitors will come out with new products that are a significant advance on their old offerings. Your products, meanwhile, will not be as good, and you'll wind up falling hopelessly behind.

Similarly, some RFID companies will continue to invest in marketing. They will develop a sales pipeline that will bring in some revenue in the near-term—attracting those smart end users that take the infrastructure approach I suggested in my prior column—and a lot more revenue as the market picks up again. If you cut back on marketing, there is no pipeline. You'll not only struggle in the near-term, but also miss the boat when the market picks up.

So what should you do? The answer is to invest wisely. If you have some employees who are of marginal value to the organization, they can go. But your key engineers and sales and marketing people are critical. Keep them. Invest in new products that will deliver real value to customers, and cut projects that the engineers think are cool.