In the first major smart card security deal since the Sept. 11 terrorist attacks, the U.S. Army has announced that it will buy 60,000 smart card readers from SchlumbergerSema, the technology subsidiary of Schlumberger Ltd.
Although the purchase is part of the Department of Defenses long-planned smart card implementation program, analysts believe the renewed focus on network security and physical security will speed the adoption of smart cards in the domestic market in general and federal agencies, in particular.
The sale of the readers -- which will be deployed at army installations worldwide -- is SchlumbergerSemas second major smart card contract with the military. It has already sold 600,000 of its Java-based smart cards to Defense, which is using Electronic Data Systems and Logicon, a subsidiary of Northrop Grumman, to integrate the technology. Within two years, Defense will issue about 4.4 million smart cards in an effort to increase security and allow faster and more efficient provisioning of personnel, weapons systems, payroll and other matters. The cards may also carry medical and dental records.
"Security has been the No. 1 selling point for smart card makers and chip vendors" said Anoop Ubhey, an industry analyst with Frost & Sullivan in London. Last weeks attack "will provide a push for smart cards, without a doubt. Network security and network access, those are the applications where we see potentially explosive growth in applications [of smart cards]."
Smart cards may also get a boost from Congress, which is reportedly mulling a plan to require all citizens to carry some form of national identity card. However, that proposal is likely to receive stiff opposition from staunch conservatives as well as many liberals. And no formal card proposals have been submitted.
Francois Lasnier, the general manager of SchlumbergerSema Transaction Systems, says the DoDs decision to use smart cards is an "obvious message for companies and federal agencies to look at what the government is doing. Smart cards are one of most convenient and secure ways to deal with the digital age."
The cards SchlumbergerSema is supplying to the military comply with a variety of standards, including Java Card 2.1 and Open Platform 2.0.1, which will allow the cards to interoperate with a variety of machines and provide multiple applications. The cards meet cryptographic standards set by the National Institute of Standards and Technology and the National Security Agency. They will also be equipped with private-key infrastructure that will allow them to be used in secure Internet communications and transactions.
SchlumbergerSema has estimated that the U.S. smart card market will grow at 55 percent per year over the next several years, twice the rate of global smart card growth. Frost & Sullivan has predicted that global smart card production will more than double, to about five billion units by 2004. Much of that demand will likely come from the Chinese government, which has announced it wants to distribute a smart card to 1.26 billion of its citizens.
The U.S. lags far behind Europe in smart card usage. Visa International estimates that Britain and France together have more than 40 million smart cards in use. In comparison, Americans have about four million of the chip-based cards in their wallets. And that number appears even smaller when compared with the billion-plus old-fashioned magnetic-stripe payment cards now in use in the domestic market.
Although the numbers are still relatively low, an official who works on smart card technology at the General Services Administration expects that the federal government will begin ramping up its use of smart cards. Other than Defense personnel, only about 1,000 federal employees spread among five agencies are currently using smart cards, said the GSA official. But that may be about to change. "Between the DoD and the Department of Justice, the push for smart cards is coming," he said. "And its going to happen soon."