RFID Stakeholders Need to Prepare for the Internet of Things

By Scot Stelter

The IoT will pose significant risks and opportunities for many in the RFID industry during the next 24 months.

This month, a study published by the Pew Research Center's Internet Project lifted the Internet of Things (IoT) out of the CIO trade press and dropped it into the public square. The Pew IoT study solicited predictions of what the IoT would look like in 2025 from almost 2,000 "experts," with predictably divergent results. The popular press, including The New York Times, USA Today and The Huffington Post, are struggling to make sense of it. Sometimes, it sounds more like Hollywood than Silicon Valley.

The consumer impact dominates the news, including wearable computing, subcutaneous medical sensors and sensor-studded, learning smart-homes. Radio frequency identification is rarely mentioned, and the overlap with the IoT seems small. A recent survey by RFID Journal asked its readership to characterize their impressions of the IoT; one choice was "a buzzword without much substance." It would be easy for RFID professionals with their heads down to select this option, but this would be a mistake, as the IoT will have a significant impact on RFID markets and technology during the next two years.

The IoT is the natural outcome of cheap, embedded electronics and a maturing global network that allows devices to exchange data. Its roots can be traced to 1980s telematics solutions that employed proprietary protocols over satellite, radio and cellular communications technology to monitor and remotely control vehicles and equipment. Thirty years of standardization, Moore's Law and protocol development have left us with a growing body of accepted methods and inexpensive components for interconnecting a globally distributed "cloud" of devices. Some of these devices connect directly to the Internet, while others connect via gateways. Under this vision, the typical RFID reader is merely an IoT gateway, with RFID just one of many "last-meter" sensors.

Estimates for the number of connected devices range from 50 billion to 200 billion by 2020. These numbers are driving investment in integrated circuits, sensors, actuators, telecommunications equipment and software that dwarfs RFID. Within the past year, Google alone has invested perhaps $5 billion in IoT-related businesses, including its 2013 acquisitions of smart-thermostat company Nest Labs, and at least seven robotics firms. Microsoft renamed its embedded computing team after the IoT, and is reportedly boosting its staffing. Microsoft Research launched HomeOS for connected devices and a related "Lab of Things" development platform. General Electric has allocated a billion dollars to the "Industrial Internet." And Intel launched a new unit called the IoT Solutions Group, and an expanded roadmap features processors and gateways for IoT devices.

There is a swarm of IoT software platform companies, including Jasper Wireless, valued at around $1 billion, which secured $50 million in Series F funding last month, award-winning ThingWorx, which PTC purchased for $112 million in December, and several energetic startups, like Ubidots. These companies enable developers to create IoT solutions with easy-to-use development platforms and/or cloud services for connecting devices. Prices for connecting a simple device are as low as $1 per month. Some services offer a free tier to cultivate the growing community of "makers" and open-source developers.

As it evolves, the IoT universe will envelop RFID, with the action developing along several themes:

• Explosive growth in IoT device volumes will drive down costs for hardware components, such as network radios, microcontrollers and sensors. The RFID portion of an IoT device's bill of materials will experience price pressure as its proportion of an IoT device's total cost increases.

• Lower hardware costs and open-source hardware platforms, like Arduino and Raspberry Pi, will encourage invention that will lead to an expansion of RFID reader form factors and embedded RFID solutions.

• Lightweight communications protocols, such as Message Queuing Telemetry Transport (MQTT), MQTT-S and Constrained Application Protocol (CoAP), will enable cheap, resource-constrained devices of all kinds, including sensors and short-range RFID readers with a long battery life.

• Software-as-a-service (SaaS) models for device management and data collection will crowd out traditional software licenses, eliminating many server installations not only on-premises, but also in commercial clouds like Amazon Web Services or Microsoft Azure. Combined with new financing models in which end users purchase not the reader infrastructure, but rather the data flowing from it, this will reduce startup costs, enabling a low investment, pay-as-you-go model for end users. This will drive RFID adoption, but will also change the economics for hardware resellers in unpredictable ways.

• A new RFID data economy will emerge as cloud services for simple data brokerage and device management add data analytics and other services.

These trends will create both risk and opportunity for many in the RFID industry throughout the next 24 months. The RFID world has focused for several years on getting radio frequency identification across the chasm and onto Main Street. With recent successes in retail and health care providing profitability, it's time to look up, see what's going on around us and prepare for what's to come.

Scot Stelter has worked in the RFID field for more than 10 years, serving in senior marketing positions at both Alien Technology and Impinj. His company, Stelter Product Strategy LLC, provides guidance to businesses contemplating product strategy decisions in RFID, the Internet of Things and machine-to-machine communications.