Soft Return
Last month, AMR Research humbly pointed out that its prediction in RFID spending for Wal-Mart's Top 100 suppliers was off its mark. Suppliers spent $250 million to meet Wal-Mart's deadline as opposed to the $1.8 billion AMR originally predicted. In addition, the AMR Research study shows that the 100 suppliers do not view RFID as a strategic investment and have patched systems together just enough to meet Wal-Mart's compliance deadline.
"There were too many hurdles to overcome in too short a period," says Kara Romanow, research director at AMR Research. "Many of Wal-Mart's suppliers are more convinced than ever that there is no ROI, and even worse, consider their technology investments to be a throwaway thus far. Because of this, they've only spent the bare minimum needed to comply," she says.
Importance of Software
Clearly, suppliers have sent a strong signal that there is little downfall to the "slap and ship" mentality, even if it is a temporary solution to meet a deadline. Still, the question remains as to whether or not consumer goods firms should invest in RFID-enabled software and services now. And depending on who you ask, it might not be such a wise idea to downplay the importance of RFID software, even if it is early in the game.
Erik Michielsen, director RFID & Ubiquitous Networks for ABI Research, is one such person who believes it is a mistake to take a soft stance on RFID software. By extending RFID solutions to numerous data access points without required human resources and then managing the data without needing massive enterprise integration, says Michielsen, RFID solutions are capable of scaling across enterprises as retail and government mandates push consumer goods suppliers into larger RFID investments.
Michielsen believes investments in RFID software will hover at mid-to-high six figures per location, based on reader, software and integration costs. "Often, there is just not enough time to plan and implement a larger RFID strategy, so defensive compliance buys time," says Michielsen. "Another may be that standards and RFID suppliers are not stable enough to invest. Whatever the reason may be, patch or defensive strategies will be more prominent than offensive strategies in 2004 and will pick up significantly by mid-2005."
A Compelling Case
There are two camps within RFID middleware. One camp is creating standalone middleware independent of the operational system and the other is creating bolt-on middleware that fits on existing ERP and WMS systems. The first camp includes vendors like OATSystems, GlobeRanger, ConnecTerra and Shipcom Wireless, while the second set is led by Manhattan Associates and SAP.
Companies such as Acsis, ConnecTerra, GlobeRanger and OATSystems are the smaller, venture-backed companies that have played an active role in EPCglobal's Software Action Group (SAG) leadership and have worked extensively with early-stage retailer and consumer goods RFID trials.
IBM, Manhattan Associates, Oracle, SAP and Sun Microsystems are larger companies with track records providing global software support and services that have also been progressively active with RFID trials in 2004.
Finally, Progress Software, Reva Systems and Shipcom Wireless have also worked with leading consumer goods manufacturers and/or contributed to EPCglobal software leadership and innovation initiatives.
Spend Money to Make Money
RFID-enabled software will become more important in mid-2005 as deployments scale in both number of readers and number of RFID-enabled locations. Retail software licenses, like Wal-Mart's three distribution centers and 100 retail locations, will be a significant early driver in the market. Software licensing and services revenue is expected to catapult in 2006 and 2007 as multiple consumer goods and logistics provider sites are equipped with RFID hardware and software.
The bottom line, according to Michielsen, is that the impact of RFID is still a few years away from transforming global enterprises. "The enterprise level is where the most complex process changes will be required and companies are not willing to commit to this change without multi-vendor-offered reliable, affordable, interoperable and scalable RFID hardware and software," says Michielsen.