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ABI: RFID Market Remains Weak

Confusion about low-cost tags, cutbacks in capital spending and a lack of skilled integrators is limited demand.
By Bob Violino
Oct 09, 2002Oct. 9, 2002 - Interest in and awareness of the potential of RFID technology has never been higher. Despite that, few new large-scale implementations have been announced this year. Edward Rerisi, a senior analyst at Allied Business Intelligence, attributes that to confusion about low-cost tags, cutbacks in capital spending and a lack of skilled integrators.

"The interest level is amazing," says Rerisi. "But it isn't turning into sales or major implementations. People were hoping security would drive demand, but that hasn't really happened. We're in a waiting period, and I don't know what the spark is that will bring us out of it."

Rerisi attributes some of the reluctance to the general decline in spending on IT systems. But he also says there is a lot of confusion in the market. "People are hesitant [to invest in RFID] because they are hearing about a five-cent tag," he points out. "It may be possible one day to create a 5-cent tag, but you can still do a lot of things with RFID and make a compelling business case for it today."

Earlier this year, ABI, an Oyster Bay, N.Y.-based technology research firm, released a report called "RFID: Technology Evolution, Market Segmentation Analysis and Player Profiles," which concluded that the worldwide market for RFID transponders would exceed $1 billion by 2007. It also said the market for RFID readers and associated software and services would reach the same level around the same time.

Rerisi says that closed-loop systems -- that is those that can be implemented internally -- will still be the main focus for RFID in the short term. He points out that if a library puts a 50-cent tag in a book that will be on its shelves for 10 years, the tag costs only 5 cents per year and can provide a good return on investment.

"Companies have to look at the application and the real costs involved with RFID," he says. "How often will you use the tag? Do you need to get your partners on board or can you do it internally? These are the questions people should be asking themselves."

Another factor retarding the growth of the market is the general lack of integrators who can install RFID systems. "You need people who know how to handle RFID technology, but you also need people on the backend," says Rerisi. "Especially for larger installations, you need people who can take the RFID component and integrate it neatly into a large-scale enterprise resource planning system or a local database."

ABI has not revised its forecast for market growth. One reason is that standards such as ISO-18000 should be promulgated next year, which could drive adoption of RFID technology among several business partners.
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