RFID: No Strong Signals Yet

When Wal-Mart mandated its suppliers to implement RFID, little did one

foresee that the ripple effect would kick-start an entire technology adoption

curve. Though Wal-Mart, along with Food & Drug Administration (FDA), has

been the industry pacesetter in RFID, putting steam into the initial run-up, the

real challenge lies ahead-facilitating the crossover from hype to mainstream

adoption.

Ground reality



Last year at the Gartner Symposium/ITxpo 2004, Stephen Smith, research vice

president at Gartner, stated that the RFID technology and the business benefits

it promises would not arrive with a big bang. According to Partha Iyengar,

country manager (India), Gartner, India is not really behind the rest of the

world in terms of technology adoption. "Like most new 'big bang'

technologies, it is at a stage where the hype about its value is significantly

overrated. It will take a significant period of evolution and maturity before

the business benefits happen," he says.

Tuning in to the ground reality, the market is today moving from RFID hype

cycle to reality cycle, with onus on the actual business drivers and not just

the Wal-Mart aura and the 5-cent tag 'price myth.' This, believe experts,

may eventually augur well for the technology's adoption in the coming years

even into those companies in India that fall beyond the purview of Wal-Mart and

FDA's stipulations. Rajesh Narang, chief system manager, Center for Railway

Information System (CRIS) feels that the technology may not come with a big

bang, but it certainly has the potential to make inroads slowly. "It will

definitely be an emerging factor in India in the next two to three years,"

says Sundarrajan Srinivasan, practice head of RFID at Wipro Technologies.

2005-the turning point?



Even without the big bang, 2005 may well turn out to be the turning point in

the Indian market with some companies planning RFID pilots (mostly Wal-Mart

suppliers) and with many more at least considering the technology in their

future agenda. So, Bimal Sareen, founder & CEO of Avaana and president of

the RFID Association of India, indicates that the activity in January and

February 2005 was almost equivalent to the activity in the last four months of

2004 and this momentum is expected to build up further. He calls 2005 to be the

year of RFID pilots in India, with quite a few pilots in the pipeline over the

year, though declining to name the companies because of non-disclosure

agreements.

A rigorous study of RFID's feasibility in our sector is required, depending on the benefit percentage in terms of usefulness” Kalpataru Bhattacharjee assistant vice-president (IT), XPS

Some of the organizations that are considering the technology include the

Indian Railways, New Holland Tractors, XPS, and LG. Indian Railways is

reportedly planning to use technologies like bar-coding and RFID to track its

parcels. LG, on the other hand, is planning RFID deployment for high-value items

in the year 2006. Kalpataru Bhattacharjee, assistant vice-president (IT) at XPS,

aptly reflects the cautiousness that goes along with this optimism: "We

definitely plan to go for RFID technologies, but prior to that a rigorous study

of its feasibility in our sector is required, depending on the benefit

percentage in terms of usefulness."

The drivers



Indeed, the biggest factor that is going to drive early adoption is the

external impetus coming from the Wal-Mart mandate. There is also increasing

international pressure on Indian exporters of items like garments and food to

put electronic product code RFID tags from 2005. The internal impetus for

driving operational efficiencies is also going to gain ground as many companies

start using the technology for solving specific business requirements, as well

as for competitive advantage.

According to Ravi Kathuria, director marketing of SSA Global, RFID adoption

will start growing worldwide as the hype moves beyond technology driven to

business-driven solutions. LG, for instance, is going to look at RFID for

benefits mainly at its dispatch points, where it will be able to save

substantially in man hours, according to Arindam Bose, head—IT at LG

Electronics India. Narang of CRIS recognizes a plethora of possible applications

for the Indian Railways to capture the actual arrival and departure

time of trains at stations, and then feed the data into the servers to answer

passengers queries across the counters and on the Internet. It can also be used

to capture the platform number of each train and position of each coach standing

on the platform, to relay to passengers. RFID can also help in preventing

accidents: if two trains are coming on the same track they can exchange RFID

signals to avoid accidents. It can also be used to locate the train on its route

in real time.

"2005 will be the year of RFID pilots in India” Bimal Sareen, founder & CEO of Avaana and president of the RFID Association of India

According to Srinivasan, the market is beginning to see RFID adoption in

areas related to personal identification/security, track and trace, library

management systems, and, to a certain extent, in manufacturing organizations

dominated by MNCs where automation will be more in shop floor and automotive

industries. However, Iyengar feels that the primary vertical where one might see

any action in India is in the retail space, especially if there is an increased

FDI in this segment. This along with the associated supply-chain management

industry (logistics providers, etc) will be the key ones to adopt it.

5-cent tag?



One of the key fallouts of a more realistic approach towards the technology

has been the busting of expectations around the 5-cent tag. The price, of

course, depends on the tag type and volume. For active tags it varies from $1-10

and can sometimes even go up to hundreds of dollars for specialized tags. For

passive tags it varies from 30 cents to $1, and some times even $2. However,

Gartner predicts that by 2009 the most competitive RFID tags will cost around 20

cents. One of the reasons behind this is the conflicting problem with assembling

low-cost tags: To reduce the cost of the tag what the vendors need to do is

reduce the size of the chip, which in turn increases the assembling cost. But,

as the organizations start adopting RFID tags in volumes, the prices will fall.

But, it is also important to understand the cost involved in integrating the

tags in existing software applications.

RFID may not come with a big bang, but it certainly has the potential to make inroads slowly” Rajesh Narang, chief system manager, CRIS

Smith of Gartner recommends that rather than asking at what price RFID

becomes effective, retailers should identify if a specific case exists for the

technology in their business based on today's price. In many cases, the price

point that will make good business sense will depend on the type of application,

equipment, and the environment in which it is to be used.

Despite the increase in focus on the business requirements driven by RFID,

its price will continue to warrant some significant consideration in a price

sensitive market like India. According to Iyengar of Gartner India, "the

highest inhibitor today is the cost associated with its implementation,

including the cost of the tag itself (which has still not reached levels which

can justify and support mass deployment) as well as the costs of truly

integrating RFID-based inputs (which can be huge) back into the Corporate IT

structure, so that some meaningful use can be made of it."

There are other inhibitors too for rapid adoption of the technology, not just

in India, but also globally. Bhattacharjee of XPS points out the lack of

awareness about the technology and where and how exactly it will be useful, is

one such factor. Unlike other countries, India still has not decided on the UHF

bandwidth for using RFID. This is very critical for retail application or any

system where one needs to have a good range for operational reasons.

Source : Dataquest