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2006: The Year RFID Vanished, Part 3

This is the third article in a four-part series from Dennis Báthory-Kitsz, who predicts that this year will be the one RFID vanishes. This article considers privacy, standards and frequencies, the transition from Gen1 to Gen2, and the rise of analytics.
Feb 03, 2006This article was originally published by RFID Update.

February 3, 2006—In this third installment of our series on 2006 predictions, we slog through the four swamps that could slow RFID in hip-deep muck. For background, see last week's article, in which we considered pharma, vertical applications, the RFID business case, and the demise of "mandate psychology". Next week we'll conclude with a look at pricing, transportation, consolidation, new opportunities, and ever-dangerous hype.

Tinfoil Hats for Sale

Privacy could be the explosive issue of 2006; the damage depends entirely on design. If missteps are avoided and careful attention is paid to security technology and conscientious implementation, privacy issues will nearly vanish -- for now.

Cliff Horwitz, chairman of RFID reader manufacturer SAMSys, thinks privacy arguments are largely flawed. "There has not been a single incident of identity theft or privacy abuse in the history of the deployment in access cards, Mobil Speedpass, or car keys," he says.

Horwitz is more certain than Bret Kinsella, vice president of operations and marketing at RFID solutions provider ODIN technologies. Kinsella says that there are "always people who will be concerned about privacy. It's important that the industry adopt safe practices."

Dennis Gaughan, research director with AMR Research, agrees. The privacy issue, he believes, "is not going to go away. It will intensify." He feels that consumer-driven companies need to reveal what they're doing with RFID and how they're doing it, including "measure of confidence" programs with third-party assurances that tags will be deactivated.

Kinsella adds that the issue will never completely go away and "must be diligently addressed throughout development." But he also says it's a lesser issue today than it was initially because UHF tags can now be turned off. "The industry should be lauded for that," he says, while maintaining that "we have to be as vigilant as credit card companies in protecting privacy."

Privacy, and the associated security issues, is also a "threshold issue", like computer viruses that target the Windows operating system because Mac is below a certain threshold of usage. The dominant technologies get the worm, you might say. When RFID becomes common currency, it too will be a target.

Bill Hardgrave, director of the RFID Research Center at the University of Arkansas, understands this. "Security is on the back burner so long as we're at the pallet and case level," he says. But when item-level tagging spreads post-2006, security and privacy issues will "pop up as little wildfires".

Stocking the Pantry

Vendors claim that 2006 will be another RFID learning cycle. The subtext is that Gen2 products will rapidly push Gen1 out of the marketplace, and shortages of Gen1 technology will start being felt.

Hardgrave predicts that Gen1 products will be gone before next year, with a rapid decline beginning in the second quarter. Kinsella says unequivocally: "Gen1 will be gone by June."

This could leave early adopters stranded. On the other hand, says Tom Hartmann, RFID manager at label converter Topflight Corporation, Gen1 knowledge will ease the transition to Gen2 for the early adopters. Because Wal-Mart has stated that it will move to Gen2 by the middle of this year, some suppliers report "they'll flip the switch in March or April, giving three months of shakeout."

End-users with Gen1 technology, says Kinsella, "will almost be forced to switch over to Gen2 because they won't be able to get replacement equipment and tags."

The fallout may be brand loyalty. According to Chantal Polsonetti, vice president of manufacturing advisory services at ARC Advisory Group, there will be "little vendor allegiance going into Gen2." Furthermore, despite early industry hopes to the contrary, those with no prior RFID experience are not expected to jump in with both feet now that Gen2 is out. "People who haven't gone whole-hog on Gen1 will have a cautious approach to Gen2."

Many-Standards-Good Redux

Settled standards were supposed to be RFID's magic carpet. They aren't.

Polsonetti captures the fundamental issue: standards vs. interoperability. The latter is "to be determined. Certified to the EPCglobal Gen2 standard does not equal true vendor interoperability."

SAMSys' Horwitz says that EPCglobal has been a negative influence "in that it has helped shape the thinking toward this being a one-dimensional issue."

Jeff Jacobsen, president of RFID reader manufacturer AWID, sums it up this way: "Before EPC: different protocols. After EPC: still different protocols."

But interoperability is coming. Polsonetti calls it "the promise of Gen2". Jacobsen says that while readers may be tied to different vendors today, in 2006 they will become appliances that "can talk to systems regardless of software."

U.S. companies will begin to embrace each others' technologies this year, while the European market will work to overcome regulatory constraints, a lack of mandates, and the absence of coherent guidance from a centralized EPGglobal-like institution.

But the big question is China. Since the ISO entered the final approval stage for 18000-6 Part C (incorporating the Gen2 technology) last month, it is unlikely to modify the standard now, at such a late stage. AMR's Gaughan wonders if it was crazy for China to deviate from the standard and even if "the China question will get resolved in 2006."

The Chinese standards differences are likely the result of politics. Gaughan calls them "minor and quickly accommodated by the mainstream." Hardgrave believes the differences will be addressed by technology manufacturers. "The Chinese issue is political, not technology," he says.

Jacobsen predicts that the first qualified RFID readers in China will be domestically manufactured, to "give Chinese companies a leg up, time to get their act together before they open the door [to RFID imports]."

The Year of Analytics

To date, the mantra that RFID is meaningless without turning data into actionable information has echoed in an empty hall.

But applications for management, interpretation, and analysis of RFID-generated data will appear in the supply chain. Horwitz calls this "the holy grail, the single most important venue for RFID" to build an industry worth hundreds of billions of dollars.

With SAP and Oracle organizing around RFID, the software will be "coming like a wolf pack," according to Jacobsen. He feels that once roused, the big companies will devote significant resources to providing complete RFID systems.

Gaughan calls 2006 "The Year of the Analytics", with the base infrastructure of reading tags and managing data continuing to evolve. It is a "classic market-maturity model", he says, where proof of ROI is unlocked by analyzing the data and improving business processes.

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