))) How To Reap RFID's Rewards

What you need to know to sell the up-and-coming technology

Steven Lang
February 9, 2004

John Pulling, COO of Grand Rapids, Mich.-based ISV Provia Software, remembers the moment he knew it was time to make his move. He had been chatting last year with an exec at one of his biggest customers, Gillette, a very early adopter of Radio Frequency Identification (RFID) technology, who told him point-blank: "You guys need to look at this because it's going to be big. This technology is going to be disruptive."

So Pulling decided then and there to create an RFID department for the $25 million supply-chain software integrator, which has recently begun RFID engagements with a couple of customers and is fielding interest from dozens.

"We needed to be on the cutting edge, not the trailing edge," he explains. "So we cranked it up to a new level."

Provia is not alone. That's because customers are scrambling to get up to speed, buoyed by highly publicized moves by Wal-Mart and the Department of Defense — all of which translates to fertile opportunities for a variety of supply-chain integrators.

The question is: How do you make inroads into a market many have heard about but only few know how to navigate? According to our exclusive VARBusiness 500 Q4 '03 survey, only one-fifth of respondents are beefing up their RFID solution palettes, while more than one-third aren't even familiar with it. Well, they'd better learn fast, believes Judy Dobson, managing partner of professional services at NCR.

"[Customers] are beginning to choose their lineups and technologies," she says. "Right now, it's OK not to be RFID-savvy, but you'd better be able to converse about the technology and have a theory."

For NCR, it's all about educating the customer, Dobson says. In addition to the retail and packaged-goods industries, she says potential customers include the health-care and homeland-security markets, and advises preparing customers as they consider moving data around their enterprises. It's no longer about "one transaction of 12 units to a store. It's now 12 transactions; that involves significant logic changes," she explains.

NCR technology director Chris Herwig says VARs, too, will be facing a "tremendous learning curve." He recommends they first understand the business problems they're trying to solve, then layer technology on top of that.

And be advised: The cost for entry can be steep, which could put some VARs in a wait-and-see frame of mind. NCR acknowledges limited revenue at this point, but wants to be prepared when RFID reaches the retail environment.

"With compliance and certification, it's easily a seven-figure investment depending on what you're trying to accomplish," Dobson says.

Of course, one way around that steep price tag is to partner. Brian Higgins, BearingPoint senior manager and director of its Global RFID Solutions Practice, says he receives about a dozen calls each week from solution providers who are trying to find a foothold in the RFID market.

"They sort of view us as the guy with the Rolodex," he says. "From a strategic viewpoint, one path [to this market] is to establish a partnership with a bigger consulting firm that has existing clients."

On the other hand, he warns against striking an alliance with just anyone. "Be clear about what you can and can not offer," he says.

Higgins also suggests nailing down "anchor accounts" — two or three accounts that allow you to raise the RFID victory flag. "Whatever you have to do," he says, "fight for them and use that as your case study." He advises seeking out clients "that have the burning bridge behind them" and are ready to act. And it also means seeking out "market trailblazers."

Be forewarned: Many agree that RFID technology — both the hardware, like antennas, transponders and transceivers, and the software — is tricky to implement and that you have to do your homework before you get down to it.

"RFID is a finicky eater. It doesn't read through all sorts of media — aluminum siding for example," warns Kenneth Dorsey, CTO at Integrated Warehousing Solutions. "Study the problem you're trying to solve very closely."

With $22 million in annual sales, the Downers Grove, Ill.-based integrator has 130 employees and sells software products and services to midmarket customers that distribute parts, for example, in the automotive and consumer-goods markets. It has run about six projects thus far for roughly $1.6 million in revenue.

"RFID is coming out of its trough only now after the hype. The reality on the ground is that it works for a much smaller set of circumstances," he says. "Be wary because you may find your initial budget exceeded by discovery costs. Interoperability [problems] will be the source of those overruns."

Adds Provia's Pulling: "Learn the limitations of the technology. It's still very much an engineered solution and can't read everything. Different products affect the propagation of radio frequencies. Build the products around the solution...You have to run pilot programs...Lab-tested is quite different than field-tested."

Pulling says that Provia partners with all the usual suspects, including Alien Technology and Matrix, and that revenue from his company's engagements have varied from $75,000 to $400,000.

NCR's Dobson, meanwhile, believes that "bigger impacts will come on the software side." She says that when a technology takes product ID to the next level, the data associated with it becomes much more complex. "Tech integration will be the least of [an integrator's] worries," she predicts.

Also critical is education — taking the time to identify, then partner with, the vendors, ISVs and other integrators that can give you traction in your niche, as well as the training you give your staff.

"Invest in the people part...Train them," says Howard Jenkins, founder and executive vice president of Youngstown Systems, a Youngstown, Ohio-based integrator who expects RFID work to account for 40 percent of his revenue. "A lot of manufacturers will do that for you."

In the final analysis, it may be Wal-Mart and the DOD that got the ball rolling, but it's going to be up to you, the solution provider, to run with it.

Getting Started

Vendors involved in RFID, like Sun Microsystems and Texas Instruments, are investing resources in training VARs. If interested, contact them. Vijay Sarathy, Sun product line manager in its new RFID business unit, says his company is offering six- and nine-month RFID programs for interested VARs. And Texas Instruments is offering RFID evaluation kits to VARs. The kits contain a reader, antenna, RFID tags and a getting-started guide, according to Bill Allen, Texas Instruments' marketing communications manager, who expects the RFID market to climb to $3 billion in two years. The vendor also sponsors one-day training boot camps to provide a technology overview, he says.