Wal-Mart Gets It Right

It may be beneath the radar now, but RFID will reverberate.

The tech story of the year so far that will be even bigger next year? Lets see. You could argue that it is the first favorable signs of the end of the tech-spending freeze. Last week, Goldman Sachs, in its latest IT Spending Survey, taken in mid-June, found general improvement in spending intentions for the first time since the inception of the survey series in the fall of 2001. But intentions to spend and actually spending are distinctly different. In my conversations with IT execs, those suggestions about renewed intentions to spend are generally borne out, but whether the money is freed from those deeply frozen budgets still remains as unclear as the economy in general. This one wont play big next year.

The Oracle hostile bid for PeopleSoft? This is clearly a good story with all the elements of high drama. Youve got strong, vocal personalities in Larry Ellison and

Craig Conway. It runs counter to the axiom of avoiding unfriendly tech takeovers. Its got customers worried. But this deal could disappear if the stakes get too high.

How about SCO claiming to have been wronged by IBMs alleged abuse of its Unix license? If the end of the tech downturn is a strong economic story and the Oracle hostile bid is a strong financial story, the SCO suit claims top the category as the strongest legal tech story. Youve got all the elements of a courtroom drama except in reverse. This time the little guy (SCO) is in the attack mode while the (really) big guy is the one with the support of the open-source community. This story will depend on the courts calendar.

My vote is the edict by Wal-Mart requiring its top suppliers to put RFID tags on pallets and cases of their products by January 2005. The tagging requirement by Wal-Mart is only the latest in a string of announcements and innovations that is moving the important, but lackluster to some, topic of inventory control and management toward the top of the technology agenda. The advantages of RFID are easily understood by anyone waiting in a long line at a toll booth as cars equipped with electronic toll collection systems zip by in the automated lanes. The economics of tagging can be justified on stopping theft losses alone. The technology is moving toward standards, the major vendors are playing catch-up to the more adroit startups and there remain many social as well as political issues surrounding the topic—all of which make a great story.

"The Wal-Mart announcement is the first time I can remember a business decision of this magnitude being made in anticipation of technology innovation and commercialization. The unanticipated consequences—for vendors, consumers, competitors and regulators—will be fascinating to watch: We dont yet have tools, laws, productive capacity, standards or social norms to accommodate this technology and its potential implications," said John Jordan, principal in the Office of the CTO, Cap Gemini Ernst & Young, in an e-mail exchange in which he assessed the importance of the Wal-Mart announcement.

"The ripple effect this technology can have is amazing. Think of the leveraging power that the Internet, e-mail and IP communications provided in connecting people to people and computers. RFID is the next link of connecting things—and not just information about these things but also their processes, places and contact points. All of this information has been hidden in the supply chain," said Fran Rabuck, president of Rabuck Associates and a member of the eWEEK Corporate Partner Advisory Board.

The ripple of connecting all these things is just beginning. While much of the current debate has focused on the cost of the tags, thats not where the technical hurdles remain. The difficulty of developing the database system for tracking everything in the warehouse, the problems of building a privacy infrastructure that will match a companys privacy policy, and the requirements of building and maintaining a flexible and scalable computer architecture for identifying, tracking and managing all those millions of products moving through the economic system will ensure the RFID story remains a top pick for a long time.

Eric Lundquist can be reached at eric_lundquist@ziffdavis.com.