Survivor - A Real-Life Game For RFID Vendors

If I were a betting man, I'd bet that within 10 years, RFID (radio frequency identification) technology will be ubiquitous throughout the supply chain. I'd also bet that half of the current vendors selling RFID products will be history. Those who are looking for a get-rich-overnight scheme in RFID should look elsewhere.

Pay Your Dues
Escort Memory Systems (EMS) (Scotts Valley, CA), has spent the past 15 years developing a list of applications for its RFID products. A former division of Datalogic, one of Europe's largest AIDC (automatic identification and data capture) vendors, EMS is now a key vendor for giants including Ford Motor Company, Seagate Technologies, and Toyota.

"Many vendors jumped into this market hoping to immediately find a killer app," said Mark Nicholson, president/CEO of EMS. "In the process, some of these vendors were killed. Some have left the industry.

"This is not a technology that will jump from $0 to $5 billion overnight. EMS has spent years working with customers to develop applications. But, if you can show customers that the technology really works, you can often convince these customers to try the technology in other parts of their businesses. Ford is a good example. We started in one small part of its business, and each year the company seems to adopt more of our technology. Toyota is following the same course. We are tagging each car manufactured by Toyota. The tag stays with the car for its life and provides useful information about when and where a car was manufactured. Eventually, the tag will store service info as well."

New Player - New Ideas
i-Ray Technologies, Inc. (Natick, MA) is a newcomer to the list of players offering RFID, real-time locating systems (RTLS). i-Ray believes it will be able to use existing cell phone infrastructures to locate 911 callers, delivery trucks, and for that matter, just about anyone or anything. But for now, the 1998 RFID start-up company is concentrating on its passive tags and a new active RFID tag system with a read range of seven miles.

Geva Barash is VP of i-Ray's worldwide operations and executive VP of sales and marketing/general manager of the company's U.S. operations. [i-Ray has divisions in Europe and Israel as well, ed.] Barash told me that i-Ray will offer an active tag system with a seven-mile read range in the first quarter of 2002. "We will be able to locate an item within a three-foot radius," said Barash. "However, to do so will require three antennae and triangulation software."

i-Ray is also experimenting with using cellular technology as a method of locating people. "We will be coming out with a solution for locating 911 users," Barash stated. "Each cell phone has its own ID. By combining an active tag with the existing characteristics of a cell phone, we can track users through existing cellular infrastructures."

Overcoming Start-Up Challenges
Most start-up businesses have a common problem - how to take their products to market. Barash admitted i-Ray may have dropped the ball in its early efforts to obtain sales. "The ideal way to sell our products is through a channel of VARs and integrators," said Barash. "Let them handle the time-consuming process of installing systems.

"We began taking orders on our own and now we are so bogged down with installation projects that we don't have time to train a reseller network. The (profit) margins are strong enough that both the vendor and the reseller can make out well. So, why not let resellers help market the product? It increases sales more quickly."

Given the existing situation at i-Ray, Barash said the company was holding off on building its channel. "We cannot afford to rush our sales and installations," he told us. "It is critical to maintain a positive image. If we rush through these installations, we will spend the next three years trying to repair the damage done to our name. We believe we can complete our current orders and begin working on channel development by the first quarter of 2002."

The Value Of The VAR
Nicholson said EMS actively pursues VARs that can help develop new markets. "We try to find VARs and integrators from a number of regions around the world," he explained. "Then, we find VARs with a particular area of expertise such as electronics, warehouses, or factories. When we need help with a sale or when we have a lead, we simply go to the VAR that has the most experience and the closest proximity to the potential customer.

"With the help of key integrators, our business has been growing steadily. Orders for tags used to be in the 10,000 to 100,000 range. Today, our orders are in the millions. The next level - which we see coming within the next 12 to 18 months - will be in the tens of millions range."

Be Realistic
VARs and integrators will be able to make money selling RFID technology. But, be realistic. Don't adopt the technology with the idea you'll be able to retire on the profits it brings in your first year. You must slowly build your business, and then let it bloom into something much larger. By the way, choose a vendor that is not promising you overnight success. Remember, you want a partner that will still be around by the end of the year.