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ABI Warns RFID Integrators to Adapt to Tech Maturation

ABI Research observes that RFID technology has matured enough that the role of system integrators in the technology ecosystem is shifting, according to a recent release issued by the Oyster Bay, New York-based research firm. RFID Update spoke with ABI analyst Pete Poorman about the observation and how SIs will have to adapt.
Jan 29, 2008This article was originally published by RFID Update.

January 29, 2008—ABI Research observes that RFID technology has matured to the point that the role of system integrators (SIs) in the technology ecosystem is shifting, according to a recent release issued by the Oyster Bay, New York-based research firm. RFID Update spoke with ABI analyst Pete Poorman about the observation and how SIs will have to adapt.

"We have seen an era where there were RFID system integrators, companies that positioned themselves solely as that. But the technology has improved, and the knowledge of it has become more broadly disseminated," Poorman told RFID Update. "I think we're coming to an end of the era where an integrator can be successful solely by being an RFID expert."

Poorman sees three paths that SIs currently focused strictly on RFID might pursue to remain successful going forward: vertical specialization, packaged software or offerings, or developing even deeper expertise in RFID.

Vertical specialization means focusing not on a particular technology -- RFID, in this case -- but on a particular vertical, like healthcare or retail or defense. By focusing on a vertical, SIs can offer a suite of technology and consulting services to an industry that changes over time but never goes away. "RFID becomes part of their toolbelt," said Poorman, "not the primary value they deliver." He cites CACI International, which offers a wide range of solutions to the government sector.

The path of packaged software allows SIs to "productize" certain processes or systems, rather than developing custom solutions for every client engagement. "As integrators enter emerging markets, they do a lot of custom jobs," Poorman explained. "As they do more and more, they start to see a common theme among them, and best practices emerge. They can then capture that practice into a product." Selling products instead of custom solutions can be more attractive, according to Poorman, because products typically offer higher margins than services -- if there is enough volume.

An example of capturing best practices in a product is IBM's addition of RFID capabilities to its WebSphere software in the form of RFID Premises Server.

Poorman characterizes the final option for SIs as "doubling down": rather than diversifying their focus away from RFID, they develop an ever deeper expertise in it. He noted that some companies will be able to pull this off successfully, but, critically, the market demand for pure-RFID integration companies will inevitably drop, and room for only a few such players will remain.

Poorman noted that this shift for SIs, precipitated by RFID's maturation, is common in emerging technology markets. He pointed to internet adoption in the mid-nineties, when SIs existed that focused exclusively on internet connectivity and deployment. Now that the internet has matured and is ubiquitous, its functionality has been subsumed by solutions and is largely taken for granted. Poorman predicts a similar eventuality for RFID.

Read the release from ABI Research
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