ABI Revises RFID Software and Services 2007 Revenue Forecast Down

Consolidation and integration issues among factors putting a drag on top-line growth in this segment, research firm finds

Consolidation and integration issues among factors putting a drag on top-line growth in this segment, research firm finds

Oyster Bay, NY — August 14, 2006 — ABI Research has reduced its 2007 market forecast for radio frequency identification (RFID) software and services revenue downward as consolidation, integration and other industry issues slow top-line growth in this sector.

Last week ABI said that it was reducing its 2007 market forecast for RFID software and services revenue to $3.1 billion, which represents a downward adjustment of approximately 15 percent from the firm's previous estimates. According to RFID practice director Michael Liard, the lowered revenue expectations result from the current direction of RFID's evolution, not from any decline in the industry.

"Four interrelated factors, particularly within asset-management and supply chain management RFID markets, have led us to revise our forecasts," Liard said. "They are: market consolidation; collaborative solutions; the growing availability of off-the-shelf commercial RFID software packages; and the improving level of skills in RFID project planning."

"Considerable Consolidation"

ABI said it expects to see considerable consolidation across companies as well as within companies as RFID solutions evolve. Consolidation among industry vendors and service providers will eliminate significant overlap and will lead to better-managed, more efficient solutions, the research firm believes. These issues range from reader-level enhanced efficiency through cross-industry software and applications.

"The goal is seamless integration," noted Liard. "Companies wishing to integrate RFID into the enterprise will naturally turn to their established software and service providers. If those vendors don't have a solution, they will frequently either build or buy one."

In addition, RFID technology is becoming increasingly standardized, which is fostering — in a variation on the market consolidation just mentioned — "ecosystems of partners," each contributing elements to a common solution. These collaborative efforts mitigate software costs because users do not need to seek multiple sources.

Planning Skills Improving

Also, custom software by definition costs more than commercial software, and today many larger developers are offering off-the-shelf packages that fit lower RFID integration budgets. Over time, ABI Research expects many parts of RFID logic-, event- and business process-oriented challenges to be met with software that requires limited change.

Finally, as companies gain experience in how to fit the data collected using RFID into their wider corporate strategies, their project planning skills improve. "'Install in haste, repent at leisure' used to be a common pattern in growing RFID deployments," said Liard. "But with today's better planning, there's less waste, and less software needing premature replacement. End users are taking a more managed approach to budgeting and integrating RFID solutions internally."

ABI Research's latest RFID update, "Focus on RFID Software: Investigating New Solutions and Approaches," discusses these trends, examines many of the past quarter's RFID industry developments and updates the service's forecast database.

Additional Articles of Interest

— RFID technology has the potential to change the way supply chains are managed, but in order to be effective businesses need to take a holistic look at the deployment. Read more in the SDCExec.com article "Time for RFID: Applying RFID in the Supply Chain."

— For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.