As promised in my last blog, here’s a little more explanation of my take on the current state of the RFID software market. Doing my latest round of research I was reminded that despite the media focus and hype over the last 5 years on passive UHF technology and open loop applications that many now associate with RFID - its LF, HF, active tags and closed loop applications that have been around for more than 10 years that are sustaining the market. Even without the boom growth that was hoped for from Retail compliance mandates and now postponed California ePedigree laws, strong growth is still evident in the market with the overall hardware/software market growing at >10% CAGR, and the software market forecast at >20% CAGR (both according to ABI Research).

I’ve been a strong advocate of RFID for business process improvements, since my Analyst days at AMR Research, where I talked about ‘Instrumenting DDSN With RFID’ back in 2006,  the role of Mobile and RFID in ‘Sensor-Driven Supply Networks’ in 2007, and of course the emergence of Microsoft as a major RFID ecosystem driver with the launch of ‘Microsoft BizTalk Server 2006 R2: RFID for Everyman’, in an article I co-authored with one of the true evangelists for RFID, and greatly missed, John Fontanella.  It was great to get the opportunity to deliver Microsoft keynote at RFID Journal Live 2009 with Sudhir Hasbe to 2200 attendees who made it to Orlando Florida despite the current economic woes.

So here’s my take on the state and direction of RFID as we approach the middle of 2009:

• Business Process Improvement has taken over from Retail Compliance as #1 driver. This hasn’t happened overnight – my last AMR research projects conducted for clients back in 2007 already showed that the real driver behind investments was BPI, and that Retail and DoD driven compliance wasn’t sustaining growth. Recent AMR and ABI research confirms this.
• Closed Loop Applications integrated to existing Enterprise Apps are driving ROI.
  Closed loop applications are less sensitive to tag prices, and the integration and data management problems are within the control of a single enterprise, and can typically be integrated with existing enterprise apps to drive value. Access Control, ID Documents, Ticketing/Tolls, are good examples.
• Killer Apps haven’t emerged – yet, Cross-Industry Apps are driving growth. while there are still many niche industry applications, the revenue, and therefore ecosystem of technology providers and system integrators are coalescing around a dozen or so cross-industry applications where well defined processes are leading to best practices, good case studies demonstrating ROI, and high repeatability.
• Beyond Pilots to Multi-Site Deployments – new adoption driven by ease of integration, scalability. Some Consumer Goods companies now have 5 years of experience with RFID, and some of the aforementioned cross-industry closed loop applications have been around for more than a decade.For these applications there’s a pragmatism about the technology, and more focus on the ease and cost of deployment, scalability, and commonality of the platform being used to deploy multiple applications, multi-site.
• Software innovation has lagged hardware innovation - Services 10x Software cost. While we’ve seen lots of innovation in tags and readers, RFID projects are still weighed down by the cost of services.
• RFID Software Market has evolved from Middleware/Edgeware to Apps/Solutions.
  It was forecast by AMR Research, and other Analysts, and we saw further consolidation of the niche RFID middleware vendors in 2008. Not only has the middleware/edgeware been merged into EAI/B2B platforms, but with well defined cross-industry best practices emerging, we’re seeing the dawn of RFID 2.0 business process platforms.
• Market Consolidating around RFID Ecosystems.
  With very few niche markets large enough to sustain a vendor community, the need to take RFID applications cross-industry, and the need for sustained R&D to keep pace with hardware innovation, RFID ecosystems are developing around large platform providers
• More to RFID than UHF. Software support for multi/ Hybrid Sensors.
  The software stack now has to support a wide array of RFID readers/printers, as well as barcode, GPS, environmental sensors etc. A dedicated stack for passive/UHF isn’t enough for the range of application opportunities that need to be addressed.
• RFID goes Mobile in support of Enterprise 2.0, Manufacturing 2.0, Security 2.0.
  By coincidence, I worked on separate RFID and Mobile research projects back in 2007, and decided to cross pollinate some of the questions to test some hypotheses on the combination of RFID and Mobility being a replacement for traditional tethered automation in some manufacturing environments. There was a strong correlation, particularly in Lean manufacturing scenarios. Of course adding mobility to readers as we are seeing on forklift trucks and in handheld devices is expanding the range of deployment options even further now. See the BizTalk RFID Mobile Site.
• Cloud/S+S emerging for new generation of Open Loop multi-enterprise apps. In previous posts, I’ve touched on the potential boost that Cloud Computing and the Windows Azure platform offer to address multi enterprise applications – supply chain track and trace being an obvious example. We’ve got a few wrinkles to work out like Master Data Management and Federated Identity Management, but the Cloud seems the logical place to publish, aggregate and disseminate RFID data for many open-loop, multi-enterprise applications, and the technology and business models are developing fast!