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RFID's Weak Link: Software Apps

AMR Research says only 1 percent of the 550 RFID companies it tracks offer RFID-enabled software applications.
Dec 13, 2002Dec. 13, 2002 - AMR Research, a leading Boston-based IT research and consulting firm, held a tele-briefing yesterday, entitled: "The Underselling of RFID." One of the key points to emerge from the briefing by the company's top retail and consumer packaged goods analyst was that there is a critical lack of application software that takes advantage of RFID data.

Moderator Bruce Richardson, AMR's Senior VP, acknowledged that there has been a great deal of buzz about RFID recently, but said: "This is probably the most under-hyped area we cover." He added that many companies are just beginning to learn about RFID and many vendors, with the notable exception of SAP, still don't understand its importance.

"We're finding a lot of U.S. [software] vendors just don't get it yet," said Richardson. "I had a logistics vendor in yesterday, and I asked them about RFID, and they said they are watching it. I don't understand that because this is going to have a dramatic impact [on business]."

Peter Abell, research director for retail industry services, said AMR is tracking 550 RFID vendors. He said less than 1 percent were software companies offering systems that take advantage from RFID data. The vast majority is hardware vendors and systems integrators.

"We definitely consider RFID a transformational technology," said John Fontanella, AMR's VP and GM of retail and CPG services. "This will fundamentally change the way supply chains are managed.

Fontanella described RFID as "a quantum leap over bar code." Users understand this, he said. "But unfortunately, application vendors are still a long way from being able to exploit the capabilities of the technology. I don't think most of them truly realize the effect this will have on business processes and the transformation of data."

The speakers did point out that SAP has been a member of the Auto-ID Center and is working on applications that will use RFID data. They also mentioned RedPrairie, which is exploring the potential of using RFID in the warehouse. But those were the only two enterprise application vendors that the analysts could come up with.

During the call, Richardson did an unscientific poll that suggests the situation may improve. He asked the vendors on the call if they were building RFID applications, investigating the possibility of building such software or had no plans to introduce RFID-related products. The results: 44 percent said they are building applications, 41 percent said they were investigating RFID and only 13 percent said they had no plans.

Another problem is the lack of integration. Enterprise application integration vendors sell software tools to help companies share data between different software systems. But there are virtually no tools to help companies get data from RFID tags and readers into their existing systems. Often companies are forced to do expensive custom integration work.

Cate Quirk, a research analyst covering enabling technologies, indicated that companies would have to invest large sums in storage systems. She indicated that the average company would see the amount of data they store increase by 10 to 100 times when they adopt RFID technologies. Richardson quipped that RFID was the equivalent of "the EMC and IBM full-employment act" because the technology would drive so much demand for the storage system vendors' products.

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