RFID: Emulate the Internet

Wal-Mart put all its weight behind RFID and in January 2005 mandated its
suppliers to adopt RFID for pallets shipped in to its retail warehouses.
That's old hat now. More than a year and a half into the deployment, the
naysayers are already writing the deployment off. A research by a leading
analyst company said that Wal-Mart and other retailers that have pushed RFID
might be bitterly disappointed with the results. The company researchers modeled
a company-wide roll-out of RFID, used to track cases and pallets of goods
throughout the supply chain, at a hypothetical, $5 bn retailer. What they found:
In the best-case scenario, RFID investments pay off in nine to 10 years.
That's a long time to wait.

The obvious question then is: Is RFID a waste of money? Some analysts suggest
that RFID's deployment won't be as broad as anticipated. It will be highly
focused. RFID won't make it into every store. It won't make sense in every
store. In other words the research company suggests that it only makes financial
sense when used for tracking certain individual items, such as DVDs. If
retailers expand their deployment to track everything, it will only elongate the
time to positive RoI.

Common Wisdom

Going by the numbers we have today, it would not be too hard to believe what
the reports says. But a large number of analysts and informed people, ten years
ago, questioned the RoI of a corporate Internet mission because of the limited
functionality and associated administrative sweat. And, therefore, the mass
market for residential broadband was inconceivable. RFID projects hold great
promise for the future, but face the same concerns that the corporate Internet
strategy did over a decade ago. The point that I am trying to make is that CIOs
must look at the evolution and the growth of the Internet to take a few lessons.
These lessons can then be applied to RFID to foretell its evolutionary path.

Amongst the first candidates to be RFIDed were those applications which were
developed around manual data entry or non-serialized bar code tracking. These
tasks, if they can be called that, could be upgraded and enhanced with low cost,
high quality, automatically captured RFID data. In other words RFID holds
immediate interest in areas like store operations, inventory management,
electronic proof-of-delivery, and pharmaceutical tracking. However, a slew of
existing applications ranging from ERP to merchandizing applications are already
used to keep track of products or goods.

Does this not sound similar to the times when there were no products designed
to deliver reliable Internet service and manage bandwidth among multiple
business users. And thus out of necessity, many small and medium sized
businesses had to work with connections multiplexed though multiple low speed
dial-up modems. Similarly, the real potential for RFID RoI lies with
applications that will be able to leverage the automated tracking of objects at
low cost, high volume, and in real time without human intervention.

And its these applications that will make the RFID RoI equation easier to
comprehend and faster to turn to black. To be visionary with the Internet 10
years ago was to see the potential for it to spread from universities to
enterprise email to today's Web access via cell phone or e-commerce via
wireless at the corner Barista coffee shop. The changes that RFID brings will be
as large and life-changing as our mobile phone and Internet technologies have
become. RFID networks will evolve from an application layer to become an
enabling infrastructure and the RoI will come from both enhancing existing
applications and building many new ones that harness this revolutionary data
source. Some day RFID tagging may be as ubiquitous as Internet access is today.

The next obvious question is how is all of this possible?

Enabling Infrastructure

The most cost-effective way to deploy RFID on a large scale will be to
follow examples set by successful network-building models. Enterprise networks
combining Ethernet and TCP/IP can easily add more users and adopt new
functionality because their layered architecture and support for standards helps
to isolate the complexities of implementation, promoting scalability and growth.
A layered architecture is fundamental to every successful modern networking
technology. This is exactly what the early RFID solutions have lacked, focusing
on stove-pipe connectivity instead of network topology. Instead of building a
separate foundation for RFID, the RFID network must be welded into the
enterprise infrastructure and by standards that are already in place.

The idea hence, is not to look at RFID as an island of experimentation but as
a global plug-and-play solution that can be rolled out enterprise-wide. And this
is precisely the anti thesis of products and applications one sees in the market
place today. Analyst firms also suggest that the driving mantra for RFID
applications must be focus.

The Network Approach

This approach establishes a few key benefits that are otherwise overlooked
in most RFID deployments, pilot or otherwise. One, it follows a network centric
approach wherein RFID readers belong to the enterprise network. These RFID
devices are managed as part of the enterprise, not as separate experimental
nodes. The point here is to leverage the existing infrastructure that's
designed for scalability and manageability. Two, this approach to RFID networks
builds on standards to promote interoperability and commoditization. This may
not be as important today but in times to come, most RFID users will grapple
with interoperability issues as a large number of RFID solutions still depend on
proprietary tag protocols, reader protocols, and custom-built middleware.

RFID has the potential to emerge as the very fabric on which the new rules of
business will be written, the distinguishing factor will be to get the script
write.

Mohit Chhabra

The author is a principal consultant with FiNoble Advisors