This article was originally published by RFID Update.
January 11, 2006—The Aberdeen Group surveyed 250 industry executives and managers about how their companies view RFID as an enabling technology, both in its ability to deliver value today and in the future. The responses we received told us much about the strengths and weaknesses of the RFID market as it now exists, and what combination of events and technical advances would create a much broader adoption of the technology in the future.
Over fifty percent of respondents said that the inability to create an internal value proposition for RFID is the single most difficult challenge in creating greater support for further adoption of the technology. Despite the presence of this formidable obstacle in the short-term, the survey also uncovered a strong undercurrent of optimism about RFID. Almost 60% of senior management surveyed told us that the technology holds great potential value for their companies, and two thirds of them also feel that it would help create significant differentiation in their business processes. Disillusionment in the present yielding to optimism for the future is difficult to reconcile and leaves open the question of how the leap will be made. This is the source of the confusion that plagues RFID today.
Our survey showed that while most of the companies responding hadn’t progressed past pilots, the number of pilots continue to increase. Almost a quarter of respondents said that they were planning new initiatives in the next twelve months, and another 29% say that they have found definite advantages to using RFID and will increase their investment over the same period of time. As a result of this increase in activity, a key indicator to RFID rate of adoption continues to grow. Over 40% of companies responding to the survey say they will spend between 10% and 30% of their RFID budget on external technologies and services in the coming year. This is the best indication that more companies are moving from the evaluation and education stage to taking action.
So where is the value in RFID, and when will its tipping point, a time when use of the technology becomes ubiquitous, be reached? A significant minority of companies said that they were already receiving value in areas such as asset, transportation, and security management. The majority though, particularly those companies that are under a customer mandate, are still struggling. The survey pointed out two areas that have the greatest influence over the adoption rate of RFID:
- Business practices that will demonstrate the real value of RFID are at best still in their early stages of development. The reality is that new processes and technologies are being developed in parallel, a very risky approach but also one that potentially could create significant market differentiation. A segment of our survey respondents, whom we characterized as “market makers,” are committed to developing RFID use cases that represent a significant departure from current business practices and also demonstrate the value the technology can bring. Market maker leadership is an absolute necessity to the growth and maturity of RFID.
- A tremendous amount of energy has been spent on solving the issues that the physics of RFID pose, but relatively little has been spent on developing technology that will help realize the technology’s true potential. We found that the technical infrastructure to deploy RFID on a large scale is lacking, as are the related services provided by the incumbent vendors of survey respondents. Less than 15% of companies said that their EAI, storage, or network management vendors were very helpful in RFID deployment. The same was said for ERP vendors, telling us that the analytics and applications that can take advantage of the data describing location, condition, state, and status that RFID gives us is yet to be developed. Regardless of the advances made at the reader and tag level, RFID requires a scalable infrastructure and software that can take advantage of the data it captures to rapidly accelerate growth of adoption.
The establishment of new business models and technical advances that will cause the vast majority of companies to adopt RFID at a much faster rate represents the true tipping point. To achieve this goal, and in the process establish RFID as the game-changing technology its supporters view it as, will require market makers to drive process innovation and also to subsidize the technological ecosystem that will make its cost and risk to implement much lower. Progress has been made on the process innovation side. Companies implementing closed-loop RFID processes are already finding value. The early experiences of market-making retailers and suppliers improving store fill rate and promotional compliance using RFID tells us that a compelling value proposition is not out of reach. Now it is time to focus on building the applications, analytical tools, and technical infrastructure that will allow companies to scale up implementations and receive the maximum benefit from RFID technology.
The full report, The RFID Benchmark Report: Finding the Technology’s Tipping Point, is available free on Aberdeen’s website.