The Active RFID Market, Part 1

In this guest article from Yankee Group, analyst Marcus Torchia defines active RFID real-time location systems (RTLS), explains the different kinds, and makes recommendations to enterprises in the market to purchase one.
Published: September 6, 2005

This article was originally published by RFID Update.

September 6, 2005—A real-time location system (RTLS) allows physical objects, typically high value (e.g., a tool chest, jet engine, worker or patient), to be tracked and located. An RTLS runs over a WLAN to determine an active RFID tag location with reasonable accuracy (6 to 10 feet). An RTLS is akin to a global positioning system (GPS), which provides X/Y geolocation coordinates for locations such as campus or in-building environments. System components include readers, location-determining software, active RFID tags, system management software and applications.

Enterprises primarily buy an RTLS to increase operational efficiencies through asset tracking. An RTLS enables a host of enhanced enterprise applications to emerge, such as asset utilization, workflow optimization, perimeter and zone security, intrusion prevention and detection (IPS/IDS) and future potential E911 compliance for VoWLAN.

With real-time asset visibility in place, businesses often realize an ROI in less than 2 years and sometimes within several months—the ROI from an RTLS is demonstrable and measurable. In the near future, real-time location systems will increase top-line sales with location-based retail marketing through tagged shopping carts, for example.

Understanding the Differences in RTLS Technology

Before engaging with vendors, enterprise decision-makers will benefit from understanding the state of RTLS technology, system costs and usage cases. Although RTLS vendors offer full solutions, they are built on proprietary and generally closed systems. Enterprises must balance vendor lock-in with the need for flexibility and application extensibility.

RTLS vendors were founded starting in the late 1990s based on emerging WLAN technology. A new crop of competitors quickly emerged basing solutions on the successful IEEE 802.11 WLAN standard. The former group generally uses unlicensed spectrum (408 MHz, 433 MHz, 900 MHz, etc.) for tag-to-reader air interfaces, which are referred to as “legacy” for the purpose of this article. The latter group developed systems based on IEEE 802.11 on the tag-to-access point air interfaces, which we refer to as simply “802.11.” It’s important to note that 802.11 tags can communicate with 802.11 access points directly. However, legacy tags require additional reader hardware infrastructure to communicate. The difference amounts to a cost advantage of 802.11 systems over legacy systems because generally the greater the operational area covered (e.g., square footage of the building, yard), the more hardware costs scale. However, this doesn’t necessarily mean that 802.11 systems will obviate legacy systems based on this single difference. Tag performance, location accuracy, existing infrastructure and applications are among many factors that enterprises must weigh in any decision.

Systems costs will vary based on an enterprise’s existing WLAN infrastructure, business process transformation requirements and the physical environment where the RTLS will be used. Customers can expect solution components costs to break down into the following averages: tags and related hardware (35%), software (45%) and professional service (20%). These figures don’t include Wi-Fi access points (APs). A total system cost approach—including initial/incremental AP infrastructure—should be used because a vendor’s technology will directly affect the infrastructure requirements. Further, customers should project how costs will scale as greater RTLS use increases within the organization.

Recommendations for Enterprises

  • Evaluate business processes and match to RTLS vendor capabilities. Vendor technologies differ, which affects system performance and total solution cost. At the heart is the location-determining method suitability (e.g., power, time, angle), which changes depending on the operating environment (e.g., indoor building vs. outdoor yard). Turn to experienced WLAN/RTLS systems integrators for assistance with benchmarking the best solution.
  • Prioritize part of the purchase decision based on vendors’ product interoperability with other vendors’ system components (tags, APs, exciters, etc.). Invite bids from several system vendors (either 802.11 or legacy). Interoperability mitigates the risk of vendor lock-in, which carries its own set of risks such as greater exposure to vendor financial distress, price inelasticity and limited solution range.
  • Consider future needs for deeper enterprise systems integration and application development. Enabling applications with location information will require flexibility and extensibility through robust APIs and middleware. Weigh the importance of meeting short-term business goals against risks such as shifting competitive landscape and evolving standards.