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AMR Research: Wide RFID Adoption Not Until 2008

This is a recap of the recent AMR Research report's most important points related to the RFID vendor space and projections for RFID spending from end-user companies.
Jul 26, 2005This article was originally published by RFID Update.

July 26, 2005—AMR Research of Boston, Massachusetts, last week published the findings of a recent survey of 500 companies about their RFID plans. Following is a recap of the most important points related to the RFID vendor space and projections for RFID spending from end-user companies.

AMR's strongest statement about the state of RFID vendors is that "the opportunity for market leadership is still wide open." Survey responses varied widely to the question of which vendor class was the primary provider of RFID solutions. "Not sure at this time" was the leading response with 32%, followed by ERP vendor at 20%, tag vendor at 12%, in-house at 11%, application vendor at 10%, and warehouse management system (WMS) provider, reader vendor, and middleware provider all tied at 5%.

The culprit for such a confused marketplace is -- as is a theme throughout the entire report -- RFID's immaturity. There are so many pieces to the puzzle of an RFID deployment (tags, readers, middleware, applications, services) that vendors have found it difficult to overcome the diversity and dominate. This situation will improve as standards mature, predicts AMR, at which point "ecosystems will develop and selection will get easier for business users."

When asked which vendor they would turn to as their primary RFID provider, survey respondents answered Symbol/Matrics first and Intermec second. But at 36% and 32% of respondents, respectively, AMR does not believe this makes either of the two companies market leaders. "The market is still very fragmented," says the report, "with the top 20 [chosen RFID providers] being rounded out by vendors across all areas (tags, readers, infrastructure, and applications)." The complete list was:
  1. 36% - Symbol/Matrics
  2. 32% - Intermec
  3. 30% - Alien Technology
  4. 27% - IBM
  5. 27% - Texas Instruments
  6. 24% - SAP
  7. 24% - Microsoft
  8. 19% - Oracle
  9. 17% - Philips
  10. 12% - Manhattan Associates
  11. 12% - Sun
  12. 11% - OATSystems
  13. 10% - ADT/Sensormatic
  14. 10% - SAMSys
  15. 8% - RedPrairie
  16. 8% - ThingMagic
  17. 7% - GlobeRanger
  18. 6% - Acsis
  19. 5% - BEA
  20. 4% - HighJump
RFID technical expertise with 59% followed by ease of implementation with 51% were the leading two criteria respondents named for what they desire in an RFID vendor. Low total cost of ownership was in third place with 45%. AMR suggests that these results favor large vendors.

Another boon for large vendors was found in AMR's conclusion that selling RFID services requires winning over multiple people within a prospective client organization, not just the IT people. Representatives in operations, finance, manufacturing, sales and marketing, and R&D all play a role in a company's decision to deploy RFID, says the report. It goes on, "This presents a clear advantage for the large software vendors like IBM, Microsoft, Oracle, and SAP that already have established ties to IT organizations. These vendors can provide not only the technical expertise, but also the industry and domain knowledge to sell to all the constituents that influence the buying decisions for RFID."

Arguably the most valuable numbers cited in the AMR report are the RFID budget predictions. According to responses, RFID spending will see a 16% bump from this year to 2006, then slightly stronger 20% growth from 2006 to 2007. These are great numbers when compared to the wider supply chain management industry's modest growth in the low single digits, but it is a far cry from the hockey stick predicted and hoped for throughout 2003 and 2004. The average spend per organization this year is about $550k, next year $640k, and in 2007 $770k. These numbers lead AMR to conclude that "market acceleration for mainstream adoption will not happen until at least 2008," which is the report's most impactful -- and sobering -- take-away.

More report details here
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