RFID revolution inevitable as IT spending set to increase

Related tags Cent Rfid

A new report from Forrester claims that companies are planning to
increase IT spending by 3.9 per cent in 2005, a conclusion that
supports ABI Research's recent assertion that firms are set to
scale up and integrate RFID into their normal operations this year.

Most suppliers and manufacturers have made some headway in meeting RFID mandates, and there is a conspicuous trend towards installing IT as a means of improving efficiency and cutting production costs. What both surveys reveal is that both these trends are set to increase.

As a result, 54 per cent of the executives polled by Forrester have a positive outlook for their business in 2005, compared with 44 per cent last year. These findings are consistent with the increase in CIO confidence Forrester has reported in its quarterly CIO Confidence Poll.

Optimism continued to increase each quarter in 2004, with 54 per cent describing the current business climate as strong or very strong, compared with 33 per cent in Q1.

This confidence is also reflected in ABI's​ report. "We are seeing companies increase their RFID budgets three to five times this year compared to 2004,"​ said Erik Michielsen, ABI Research's director of RFID research.

Indeed, according to Forrester, whose surveys are entitled "2005 Enterprise IT Outlook: Business Technographics North America,"​ and "North American IT Spending In 2005,"​ applications are the big winner for budgets in 2005. Some 59 per cent of decision-makers surveyed identified deployment or upgrade of major packaged applications as a priority, replacing security as the top priority from the past year.

The research suggests that suppliers and manufacturers are being won round to the advantages of IT technologies such as RFID. There have been worries over the expense of implementation and the cost benefits.

Writing in forbes.com​ last year, for example, Chana Schoenberger points out that one manufacturer makes a 5 per cent margin on tagging $10 cases of tuna fish. But with tags costing 20 to 25 cents, and the associated labels bringing the cost up to $1 per case, RFID might cut deeply into margins without immediate benefits to the company.

But this mindset looks set to change as companies begin to accept the trend towards hi-tech manufacturing and supplying. Forrester also suggests that many enterprises are turning to outside help. Some 69 per cent of companies that identified application upgrade as a priority will purchase consulting help for those projects.

Overall, the demand for systems integration services increased 10 percentage points this year, from 34 per cent planning to purchase in 2004 to 44 per cent for 2005.

IT outsourcing also remains strong. Application outsourcing is fuelling www.forrester.com Forrester's forecasted growth of 9 percent for the category, with outsourcing for applications maintenance growing 27 percent in 2005.

RFID tags are tiny computer chips connected to miniature antennae that can be affixed to physical objects. The most commonly application of RFID contains an Electronic Product Code (EPC) with sufficient capacity to provide unique identifiers for all items produced worldwide.

When an RFID reader emits a radio signal, tags in the vicinity respond by transmitting their stored data to the reader. Passive (battery-less) RFID tags, read-range can vary from less than an inch to 20-30 feet, while active (self-powered) tags can have a much longer read range. The data is then sent to a distributed computing system involved in supply chain management or inventory control.

Related topics Processing & Packaging

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