Assessment of 2009 RFID Predictions; RFID Reader Interests

Year end is always a great time to look forward to the future and reflect on the past. Most of us are likely more interested in looking optimistically forward to 2010, and not spend much time on the dismal environment that enveloped 2009. We did this most recently in “Our Thoughts for RFID in 2010…,” which we published in December 2009. 

However, to help our readers evaluate our prognostication capability, we thought it might be useful to provide an evaluation of our 2009 predictions, which we issued in the January 2009 edition of RFID Monthly. We also wanted to provide an overview what appears to be important to our readers as well as provide some perspective on RFID Monthly as we close in on six years as an industry publication. 

Evaluating Our 2009 Predictions
One of the ways in which we seek to add value to the industry is to provide some perspective on the market and some expectation of the future. With this in mind, we thought it would be fair and useful to appraise the accuracy of our thoughts for 2009. 

Let’s start with our general overview, where we suggested 2009 would start very slow but pick up during 2H09. While we got this essentially correct, we admit the degree of difficulty was modest at best. Our reason for the early weakness was the clear evidence of large scale project push back and the obvious massive decrease in capital budgets. 

Less obvious was the question for pick up in 2H09 – our reasoning here was that many new projects were seeing good value add during 2008, and we reasoned that companies would be willing to spend small amounts of money to explore new avenues of efficiency once a large number of headcount reductions had been completed. We clearly saw increased evidence of small-scale project resumption in May that continued to progress through the remainder of the year. The progress largely began in Asia, but we have also seen progress in Europe and North America. Given general trends in the broader auto ID industry, we expect increased traction will continue in early 2010. 

We also offered a few more specific predictions for which we offer an assessment for each. 

“Increased data center asset tracking.” This did show progress in 2009, but not at the rate we expected. Given the clear problem of poor asset visibility and standard development in this area, we anticipated good progress. Some of this was limited as bank capital budgets were squeezed tight, but mostly the pace seemed to be moderated as change management is difficult and as solutions have limited integration with backend ERP systems. Long run, we still view IT asset management as having a strong RFID market opportunity of over $750M.

“Electronic vehicle registration.” We correctly suggested that the Latin American markets would see increased traction. Mexico announced a 3-year $40M deployment based on Gen 2. Columbia and Uruguay also moved forward with smaller Gen 2 deployments. Brazil, however, did not expand as we had forecast. We also saw increased traction in the U.S. for high occupancy tolling. While we did highlight this several times during the year as a growing trend, we failed to identify U.S. tolling at the beginning of the year. Note, Gen 2 in the U.S. market has gained only modest traction, with incumbent technology still retaining the lion’s share of business. 

“Healthcare expansion.” As a general statement, we were correct that RFID in healthcare would expand; however, some of our more specific predictions fell short, oops. We had expected specimen tracking to gain increased traction using RFID given some large players had been evaluating the technology, but 2009 continued to be a year of trail rather than meaningful expansion. With respect to pharma, we correctly anticipated that RFID piloting would be modest. However, it appears that the pharma industry is gravitating towards 2D bar codes. We had predicted that process requirements within pharma distribution centers would favor the automation associated with RFID and that 2D would prove too labor intensive. We had better success predicting increased use of active technology in hospitals for asset management, which became the predominate tracking solution as it leveraged existing Wi-Fi capabilities. 

“Apparel moves forward, but pace begins slowly.” This was correct on our part, the market began slowly and we did see increased pilot activity that confirmed a strong ROI. This was displayed in our June supplemental on American Apparel. However, we fell short in suggesting increased rollout activity which didn’t happen in part due to resource constraints, and due to change management difficulties. Apparel continues to have meaningful interest and we expect to see more pilot and rollout activity. 

“Technological.” Here we batted .500, which sounds good only if you play baseball. We were correct that new reader silicon would help a new set of product development, and that more projects would seek increased tag memory. However, we were wrong that printed tags would see a meaningful jump in the HF (ticketing) market and that battery assisted passive would see a nice increase in traction. We continue to expect these to be the case, but our timing was well too early. 

“Consolidation.” We admit to being too early in this prediction, but we can’t really understand why. The market remains overpopulated and we expected the severe economic weakness would drive more players to have to make decisions about staying alone versus merging, or changing business models. We continue to see the process of consolidation has a healthy part of a maturing market and expect more during 2010. 

“Privacy.” We correctly predicted that a multitude of state legislatures would again look at RFID and privacy. We also rightly predicted few of these measures would pass. However, this remains an important issue and we see the industry seeking to develop improved security related solutions. Expect more RFID privacy legislation in 2010. 

Reader Interests
As we look back on 2009, we have the chance to gain feedback from our readers on their general interests. Based on this, we wanted to provide you with an idea of where our industry interest lies. Overall, our readers remain convinced that RFID is gaining traction, and are interested in industry commentary on how RFID can add value. We regularly received comments of interest on articles related to our industry commentary, with particular emphasis on “Companies Reacting to Environment – We See Shakeout” and “Comments on Macro Environment and RFID Market.” They are also interested why some players are pulling back from the technology. Readers were also very interested in our thoughts on the longevity of RFID, particularly given a pull back by some larger players, most notably P&G during 2009. 

Most importantly, we continue to hear that end users want increased information on successful pilot programs. Our June supplemental that featured a case study write up on the American Apparel pilot was most in demand as we provided a write up on process details that helped the retailer gain increased revenue while also reducing operational costs. Our financial analysis helped end users understand that RFID could provide a meaningfully positive return on investment. We also learned several other retailers, manufactures, consumer product companies, etc. were seeing similarly positive results. However, the desire to share is limited for a variety of reasons, with the most important being competitive advantage. 

We also heard a good bit of interest in innovative uses of RFID, particularly in our articles related to Coke Freestyle and RFIDs ability to add marketing value as well as to our question “Could RFID Help Support Electronic Health Records?” In retail, readers were interested in innovative uses of RFID that could help with security as well as logistics as we received a good volume of comments on the growing problem of Retail Shrink, which we initially discussed in early 2009. 

We also began to offer more thought leadership comments from several third parties in 2009 and our readers responded positively. Most notably, we saw good interest from Chris Hanebeck’s “The Value of RFID” and Bert Moore’s “Using RFID-Based Sensor Technology.” These articles underscored that RFID can carry us beyond today’s business processes and can add meaningful value. 

Closing Comment
We wanted to thank our readership for the comments and feedback, which underscores that the industry is progressing and that RFID Monthly is serving as a collaborative industry mechanism. An important industry indicator is that feedback is coming from a broad set of disciplines, including engineers engaging in a solution selection process, logistics professionals trying to stay in touch with industry trends, executives sharing industry information with their boards, and investors conducting due diligence. We are pleased to report a meaningful increase in end users, vendors and investors as subscribers. Please keep your comments coming as we gear up for 2010. Best wishes during the New Year!!!

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