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RFID EDITOR'S NOTE
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Who Lost the RFID Industry?
One interesting fact is that Microsoft has lost more than $5 billion on Bing, its search engine designed to complete with Google (see Microsoft's plan to stop Bing's $1 billion bleeding). If the company had poured even a fraction of that amount into RFID, it could have purchased a hardware company, such as Impinj or Alien Technology, and an applications firm, such as OATSystems (which was snapped up by Checkpoint Systems—see Checkpoint Systems Acquires RFID Software Company OATSystems and RFID Baby Born from Checkpoint-OATSystems Marriage), ODIN RFID or RFID Global Solution, and owned the RFID market.
I know what you are thinking: Shareholders would not be happy if Microsoft invested $1 billion in the RFID market, with no prospects of earning that back in the near term. And maybe so—but I think shareholders would be happier to see their company invest in a technology that will take off in a few years, rather than continue losing revenue on a futile attempt to displace a gorilla in a tech market. (Moore's readers know that it is almost impossible to displace a gorilla, so why try?)
During conversations in recent months, I've lamented that CEOs of these big companies just don't understand how big the RFID market is (the CEOs at such large firms as Avery Dennison, Motorola and UPM RFID deserve credit for sticking with the market despite sluggish sales). Some defend the CEOs, saying there are many technologies on the market that could take off, and that they are waiting to see which hit before placing bets.
I know that's the way it works, but I have two problems with that kind of thinking. First, it's very obvious that RFID is the next big thing in the technology market. The only potential obstacle that could prevent it from becoming a multi-billion dollar market would be if vendors were unable to make systems reliable enough due to the fickleness of radio waves—but given how well cell phones and Wi-Fi systems now perform, I sincerely doubt that will be the case. (The improvement in passive UHF and active systems over the past few years reinforces my optimism.)
Second, CEOs are paid a lot of money. So if they're not being paid to foresee what the next big revenue opportunity is—and to seize it—then what are they receiving all that money for? Sitting back and waiting to find out which technology will hit may be a good way to avoid taking risks that could lead to being fired, but ultimately, it means buying a technology startup that's growing rapidly in a market also growing rapidly. You have to pay very high earnings multiples in that kind of market. So, while watching and waiting may be a safe move for CEOs, it's bad for shareholders.
I know that the big players will start coming back into the market now that RFID is beginning to gain some real traction. The question, then, is this: Which CEOs will continue to play it safe by dipping a toe in the water, and which will be smart and confident enough to move quickly to dominate the market, the way IBM did with personal computers while the folks at Xerox slept?
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.
I know what you are thinking: Shareholders would not be happy if Microsoft invested $1 billion in the RFID market, with no prospects of earning that back in the near term. And maybe so—but I think shareholders would be happier to see their company invest in a technology that will take off in a few years, rather than continue losing revenue on a futile attempt to displace a gorilla in a tech market. (Moore's readers know that it is almost impossible to displace a gorilla, so why try?)
During conversations in recent months, I've lamented that CEOs of these big companies just don't understand how big the RFID market is (the CEOs at such large firms as Avery Dennison, Motorola and UPM RFID deserve credit for sticking with the market despite sluggish sales). Some defend the CEOs, saying there are many technologies on the market that could take off, and that they are waiting to see which hit before placing bets.
I know that's the way it works, but I have two problems with that kind of thinking. First, it's very obvious that RFID is the next big thing in the technology market. The only potential obstacle that could prevent it from becoming a multi-billion dollar market would be if vendors were unable to make systems reliable enough due to the fickleness of radio waves—but given how well cell phones and Wi-Fi systems now perform, I sincerely doubt that will be the case. (The improvement in passive UHF and active systems over the past few years reinforces my optimism.)
I know that the big players will start coming back into the market now that RFID is beginning to gain some real traction. The question, then, is this: Which CEOs will continue to play it safe by dipping a toe in the water, and which will be smart and confident enough to move quickly to dominate the market, the way IBM did with personal computers while the folks at Xerox slept?
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.
READERS' COMMENTS
Lost?
The latest "monkey" story suffers like its predecessors from 3 distinct issues: 1. Considering that a) approx 80% of tags are made in Asia and b) that market develops in the direction of being commodity and c) that applications cover a huge spectrum, it is naive to believe that anybody can "own" the market 2. Many companies have as an objective to generate revenues, not to own a market and there are limits to patience, waiting for results 3.The "Number One" ranking, the "Winner takes it all" ideas are obsessional. Have a look at the debt structure of (leading- they are all, no?) listed pure RFID vendors. One can not talk the RFID industry to greatnes but it will develop step-by-step.
Posted By: P. EGLI 12/06/2011 at 2:50:10 AM
Please read Geoffrey Moore's Crossing the Chasm and Inside t
Thanks for your comments. There is a fairly large contradiction in your comments. You suggest that RFID tags and readers will be commoditized and that is a reason why one or two companies won’t dominate. Commoditization usually leads to a few large players because they can mass produce items more cost effectively than many smaller players – economies of scale and all that. All companies have an objective to earn revenue. But earning revenue means investing. All companies spend money developing new products. This money is a sunk cost that is only earned back when the product sells. The easy thing to do if you are a CEO is buy up an established company with revenues, which can be expensive, or invest in a competitive version of an existing product that is selling. Microsoft lost $5 billion trying to compete with Google. Was that smarter than going after the still immature RFID market? I don’t think so. When Steve Jobs decided Apple should get into the iPod market, MP3 players were selling poorly and small players were probably losing money. Was that a reason not to get in? Of course not. I highly recommend that you read Geoffrey Moore’s books Crossing the Chasm and Inside the Tornado. Moore argues that the market for new technologies WILL NOT take off until there is a dominant player. I think he’s right. It is true that there are many applications across many industries, and no one or two players can own all of RFID. But I think we will see gorillas emerge in the tag and reader markets and I think there will be software companies that will dominate specific industries, such as retail, manufacturing and health care (specifically for real time location of assets). I think the point you are missing is that companies can make markets, rather than waiting for them to evolve. There was no significant market for MP3 players or tablets until Apple created the iPod or iPad. Apple created those markets. Similarly, a major IT company could create the apps that drive adoption in RFID. But don’t take my word for it – read Geoffrey Moore.
Posted By: M. Roberti 12/06/2011 at 7:42:02 AM
Amtech and SCS
Great article as always. If you are interested, you can find that Amtech was selling at least three UHF RFID systems prior to IBM beginning any development of their system. These Amtech systems were primarily marketed toward transportation solutions. Also, SCS or Single Chip Systems had a single ASIC solution pointed directly toward supply chain solutions prior to the IBM effort. Both Amtech and SCS had products in customers hands prior to the the IBM effort, which was a development effort, not a commercial project.
Posted By: C. Carrender 12/06/2011 at 9:21:52 AM
Geoffrey Moore Fan
In reply to the comment above. Geoffrey Moore is a great resource for business wisdom. I've been following him since Crossing the Chasm and Escape Velocity is an amazing book. You can find out more info about Geoffrey at http://www.geoffreyamoore.com or http://www.escapevelocitybymoore.com
Posted By: R. 12/07/2011 at 12:01:00 PM