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AMR Research: RFID Adoption's Tipping Point is Here

AMR Research analyst John Fontanella issued a briefing this past weekend proclaiming that RFID adoption has quietly crossed a threshold that many industry observers have been anticipating for the last couple years: the tipping point.
Mar 11, 2008This article was originally published by RFID Update.

March 11, 2008—AMR Research analyst John Fontanella issued a briefing this past weekend proclaiming that RFID adoption has quietly crossed a threshold that many industry observers have been impatiently anticipating for the last few years: the tipping point. RFID Update spoke with Fontanella about his thesis, which is freely available until March 14th at RFID Reached Its Tipping Point -- And No One Noticed.

Fundamentally, Fontanella argues that because projected RFID adoption from the Wal-Mart mandate never materialized, vendors were forced to explore other possibilities for the technology. "When the industry realized that the enormous demand from Wal-Mart was not going to be the case, the idea of innovation kicked in," explained Fontanella. "Vendors said to themselves, 'Let's see what problems in the enterprise we can solve with this technology.' That sent vendors looking for opportunities."

The result? A fertile, nascent RFID ecosystem that will yield ever-growing adoption across a broad array of applications and verticals. Fontanella observed just this phenomenon at the Microsoft RFID Solution Days held late last month: "Listening to the audience of almost 300 technology vendors and end users discuss their projects, products, and services, it became apparent the industry has weaned itself away from its dependency on Wal-Mart and grew in other directions.

"For RFID technology adoption, this is its tipping point."

As disappointing -- and in some cases damaging -- as the Wal-Mart mandate was to the industry, it could ultimately be for the best. Now RFID vendors can offer myriad solutions to a wide variety of clients. The alternative would have been just one application (compliance), dependent on only one or a handful of companies (Wal-Mart, Target, Best Buy, etc.). "As a vendor, I'd much rather be looking at a million different applications for the technology, than looking at just one Wal-Mart," Fontanella said. "I think the market today is much broader, much healthier, and much more diversified."

Anecdotal evidence of this abounds, as RFID Update readers can attest. Companies like Alien, Avery Dennison, ODIN technologies, Xterprise, OATSystems, and ThingMagic were closely associated with Wal-Mart compliance just a few short years ago. Now, those same companies regularly announce deployments or applications that have nothing to do with the retail supply chain.

That said, retail supply chain adoption is hardly dead. On the contrary, it appears to be witnessing a resurgence, with retailers like METRO Group and Sam's Club mandating RFID tagging, and adding levies for non-compliance. "None of this is to say that the retail supply chain isn't viable for RFID," said Fontanella. "There is a lot of supply chain activity around the world."

Note that Fontanella's optimism does not mean that the industry can shift into cruise control. Even though the worst is likely behind them, vendors should seek to grow and accelerate the newfound momentum. "This isn't a time when people can lay back and be satisfied with what they've gained," Fontanella said. "We're still in the very early stages of the adoption curve." Most vendors he has communicated with acknowledge this, and don't intend to rest on their laurels. "Everyone is still hustling, absolutely."

So now that the tipping point has been reached, does Fontanella foresee a dramatic growth in spending and adoption in 2008, 2009, and beyond? No; at least not "hockey stick" growth. "The tipping point is really the realization of the direction that adoption would grow and mature," he explained. "We're going to see steady growth going forward, and a technology adoption that starts to reach into every corner of the enterprise."

Read the briefing from AMR Research (until March 14th)
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