Return on RFID Tagged as Elusive

UPDATED: While companies such as Oracle are rolling out RFID packages with great fanfare, experts warn that it's still a pricey solution in search of a problem.

While Oracle Corp. on Tuesday rolled out technology geared toward helping companies cope with the oceans of data that Oracle hopes will soon flow from RFID tags and readers, some say that vendors havent yet proved that anybody needs it.

"Its a technology in search of a problem right now," said Jeff Woods, an analyst for Gartner Group in New York. "This is a very, very, very expensive technology, and the business strategies are elusive. And lots of people have spent some money on this and come up with nothing."

Typical costs for a radio-frequency identification deployment, including tags, readers, software, new databases and new application servers, can be anywhere from $10 million to $30 million. Deployments can stretch out over four to five years.

"When people hear that, they say, Oh, I didnt know it was that difficult and expensive. I thought [Proctor & Gamble] had it worked out," Woods said.

Unfortunately, nobody has it quite worked out. In RFID circles, hopes for getting costs down rely on what skeptics deem the apocryphal five-cent tag. Such tags are affixed by manufacturers or third parties to individual items or to cases of goods. The tags then transmit data such as location coordinates to RFID readers. This information can be used to track, for example, where goods are—a useful set of data that can be used to fight warehouse shrinkage or to ensure the safe location of hazardous materials.

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The tags currently sell for between 40 and 50 cents each. The price comes down in large quantities; Alien Technology Corp., for example, recently announced a sub-20-cent tag in order quantities of 1 million. The price causes many manufacturers to quail when they think of the consumer backlash or competitive disadvantage that will come if the price gets passed along instead of being absorbed by the manufacturer, Woods said.

For their part, RFID readers are on par with bar-code readers, a "fairly expensive" type of gadget, Woods said.

Meanwhile, some enterprises have tried to leverage software they already own to deploy RFID, but the processes required are vastly different from bar-code data collection.

"Applications will have to be substantially upgraded or replaced," Woods said. "Youll break lots and lots of applications with RFID. It always comes down to a semantic quibble about whether its an upgrade or a replacement." Either way, it works out to about the same amount of hassle, he said.

As far as databases and application servers go, massive scalability will be required, since RFID technology will result in an unpredictably large stream of data, all transmitted without the normal, slowing factor of human input, since RFID requires neither hands-on keyboards nor hands-on bar-code scanning. As retailers such as Wal-Mart foresee a day when every Hersheys candy bar in the world can communicate its individualized identity, the data flow could bulge to 10 to 100 times the data output by bar-code scanners, Woods said.

With such a large output of data, Oracle is relying on its 10g grid technology to save the day. Jacob Christfort, vice president and chief technology officer of Server Technologies for the Redwood Shores, Calif., company, said Oracles early RFID implementations failed to yield precise numbers of how much data Oracles technology will generate. But he said the ability to add low-cost component servers to the mix will come in handy no matter what the output.

"One of the really important aspects of the increased load is that normal machines are never going to scale to handle this amount of data or the processing," he said. "Traditionally, with general ledgers, you could scale by buying a bigger machine. What happens when we get this amount of data in a global company, theres no way you could scale with one machine. Thats when you take inexpensive machines and grid them together."

Other problems with the current state of RFID include a low rate of data collection. Some enterprises are collecting only 70 percent to 80 percent of tag data. One Gartner client is seeing a meager 20 percent to 30 percent of tag data. Such problems are often caused by the nature of the materials being tagged. For example, cans of Coke are going to be a major hurdle to tag and read because metal inhibits radio signals, much the same as with cell phones.

As if thats not enough, RFID is also facing grumbling from consumer-privacy advocates. Last week, U.S. Sen. Patrick Leahy, D-Vt., called for a congressional hearing on RFID, citing the technologys potential to be used in ways that could infringe on consumer privacy—or worse.

"While it may be a good idea for a retailer to use RFID chips to manage its inventory, we would not want a retailer to put those tags on goods for sale without consumers knowledge, without knowing how to deactivate them and without knowing what information will be collected and how it will be used," Leahy said, according to a transcript of his speech to participants of a Georgetown University Law Center conference on the legal and technological challenges of video surveillance.

"While we might want the Pentagon to be able to manage its supplies with RFID tags, we would not want an al Qaida operative to find out about our resources by simply using a hidden RFID scanner in a war situation."

Editors Note: This story was updated to include Aliens recent sub-20-cent tag price announcement.

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