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VDC: Near-term RFID Opportunity Barely Profitable

Venture Development Corporation authored an article whose sobering thesis was that the hype surrounding RFID had produced dramatic overestimations about the near-term market's growth potential.
Jul 05, 2005This article was originally published by RFID Update.

July 5, 2005—Venture Development Corporation of Natick, Massachusetts, authored an article a couple weeks ago more forceful in tone and language than many in recent memory. Its sobering thesis was that the hype surrounding RFID had produced dramatic overestimations about the near-term market's growth potential, and that success as an RFID supplier will require far more time, effort, perseverance, and investment than the conventional wisdom has heretofore suggested. Furthermore, what will drive most RFID sales in the near term will be mandates. Thus, the central question for RFID suppliers becomes, in the words of the article: "Do your prospects have guns to their heads?" That is, are they under a mandate that requires they invest in RFID. If not, according to the article, the "[sales] target will not buy." Without the "proverbial 'gun to the head' ... there is little chance that that account will be providing you and your team with a profitable revenue opportunity. There is no doubt RFID can bring value to a user and business processes - but it is tough to argue against the fact that in today's market, compliance is king."

Despite the dour tone, VDC does consider the grand long-term vision of RFID to have merit; its pessimism is focused specifically on the near term, which it implicitly defines as three years. It affirms RFID's potential to "spark revolutions in asset and transaction management." So, for those RFID suppliers "prepared to support break-even work, or business that is 10 basis points red," a "fairly significant market opportunity" awaits. Given this long-term optimism, the article actually does, despite its contrarian style, reinforce a certain conventional wisdom underlying the hype: RFID -- when, not if.

Please let me know your thoughts on VDC's assertions. Will supply chain RFID be a marginally profitable slog for the next few years? Will it take off sooner? Will it ever "take off", or will it instead be a gradual growth opportunity that builds slowly over a decade?

Read the article from Venture Development Corporation
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