who you gonna call?

You're in the middle of what's already a pretty stressful day at the distribution center when your pager goes off—the executives meeting in the boardroom want you to join them ASAP. The unscheduled request could mean any number of things: Maybe the board is fed up with the charge-backs you keep getting hit with from that big retail customer. Perhaps they finally approved the long overdue expansion plans for your DC. Or maybe—just maybe—they've signed off on that gainsharing program you've been touting.

Not even close. On this day, word comes down that the big guns want to implement RFID technology throughout the DC. To make things worse, there's a deadline looming: It turns out that your biggest customer is demanding that you be RFID-ready within the next nine months ... or else.

After postponing the planned family vacation and reaching for the Advil, you start drawing up a list of equipment you'll need—tags, readers, software ... But when you go to identify potential vendors, you realize you're in uncharted waters. This isn't going to be like buying, say, conveyors or forklifts, where you have plenty of well-established suppliers to choose from. In an emerging field like RFID, the first challenge is figuring out whom to call and where to start. Do you pick your software or middleware first and then go from there? Or should you begin by selecting your tags and/or readers? And in a turbulent market like this, what assurances do you have that the vendors you choose will be around for the long term?

It takes two (maybe three) to tango
If these concerns are keeping you up at night, you're not alone. When respondents to a recent survey conducted by AMR Research were asked what class of vendor was their primary RFID provider, the answers were all over the map. The majority response—the answer selected by almost one-third of the respondents: "Not sure at this time."

That indecision is reflected in the results of the AMR study, which confirms that despite a great deal of activity in the field, no one vendor now dominates the RFID market. As for why RFID technology providers are finding it so difficult to establish leadership, the report's authors point to the broad and diverse nature of the market. RFID, as a technology, ranges from tags and readers to middleware and applications. Because no single supplier can meet all their needs, some early adopters have picked multiple partners across all of these categories as their primary vendors. But that could change. As standards mature, "ecosystems" are likely to develop and selection will get easier for users.

When asked which vendors they would likely consider for RFID deployments, the survey respondents tended to go with companies they knew, putting Symbol and Intermec, both longtime vendors of automatic ID and data collection equipment, at the top of the list. The authors of the AMR report warn, however, that this does not make them the market leaders. The market is still very fragmented, they caution, with the list of the top 20 vendors being rounded out by a variety of suppliers (companies providing tags, readers, infrastructure and applications).

"The market is up for grabs, in our opinion, [waiting] for a leader to …emerge," says Marianne D'Aquila, a research analyst with AMR Research. "What end users are looking for is a clear path to a return on investment and hardware and integration capabilities. You want to have somebody that can integrate all of this ..."

D'Aquila says that the vendors that ultimately prevail in this market will be those that can convince prospective customers that they're more than technical experts, that they're also sensitive to their clients' practical and financial concerns. When asked what key attributes an RFID partner should possess, survey respondents cited the need for deep technical expertise with sound implementation strategies at the lowest total cost of ownership. That would appear to favor larger vendors that can support large implementations and global deployments.

"So much of figuring out RFID is getting the right partners—from the right consulting partners to the right middleware partners to the right application partners," says Eric Peters, chief executive officer of software startup True Demand. "People are really looking for solutions, like how RFID can reduce out-of-stocks or reduce inventory. At the end of the day it's usually not one company, but a collection of companies that make this happen."

The great RFID shakeout
If the situation weren't confusing enough already, it appears that the industry is poised for a shakeout. Oyster Bay, N.Y.-based ABI Research expects a rash of acquisitions and consolidation in the next nine months as consumer demand shifts beyond RFID readers and tags toward more robust and complicated back-office applications.

Recent events bear out ABI's predictions. In July, for example, RFID Ltd. announced that it had acquired Packaged RFID Inc., an integrator of RFID technology for the retail and defense sectors. The combined company will form a new group that will be able to offer RFID integration for small to medium-sized suppliers to Wal-Mart, Target and the Department of Defense.

Erik Michielsen, ABI's director of RFID and ubiquitous networks, believes that the software segment of RFID will also see fast and furious consolidation, as larger players move into areas traditionally dominated by smaller companies. That will force the smaller players to either partner with larger players or come up with new service offerings. For example, Michielsen notes, "SAP [with its Auto ID Infrastructure, which is part of NetWeaver] is pushing down from the enterprise application space and picking up functions traditionally done by OATSystems, Acsis, ConnecTerra, Sun and GlobeRanger."

But these smaller companies are beginning to fight back, Michielsen notes. As the big players begin to encroach on their turf, some have responded by broadening their focus beyond RFID middleware and into data analytics, business intelligence and automation networking, he says. "OAT is pushing up and becoming competitive with some NetWeaver functionality," he reports, "and it's joined in the business intelligence space by T3Ci."