The Land Grab

At this point, most consulting firms can fill two roles in RFID. "Consulting firms can work on change management — the implications of using this technology — and implementation and selection of the technology," says Tom Friedman, president of Retail Systems Alert Group, a B2B information services company. But the implementation work, due to the immaturity of the technology, requires specialized skills and hands-on knowledge about the compatibility of the various components.
It is not surprising, therefore, that a dozen or more specialized RFID consulting firms already are jumping into the market. Reston, VA–based Odin Technologies, which bills itself as the leader in the physics of RFID infrastructure testing, selection, solution design, and deployment, likes to point to citations of the company in reports on RFID by investment firms Smith Barney and Goldman Sachs. R4 Global Solutions, San Francisco, is talking up its R4 Enable RFID methodology, while Xterprise, Dallas, cites its success in helping three Fortune 500 companies meet Wal-Mart RFID deadlines with its Xterprise Automated RFID Module (XARM) slap-'n'-ship approach.
"These specialized companies are making a business out of RFID. They are similar to firms like Sapient and Viant in the early days of e-commerce," says Peter Regen, vice president/global visible commerce, a consulting practice at Unisys Corp. Such companies got their starts building Web sites and e-commerce systems for companies willing to pay almost any price to get online fast.
The issue with the RFID specialists, which Regen refers to as RFID pure plays, is their staying power. "They bring expertise in the physics of RFID, but that will become a commodity," he believes. For now, with the technology just moving out of the lab, the early adopters need to master the physics of RFID, which addresses the ability to consistently and accurately capture the tag information at high speed. By the time the next revision of the technology rolls out, the emphasis will shift from how to make the pieces actually work to how to get the most out of the technology. This is where the full-service IT consulting firms can shine, bringing their strategy, process design, data analysis and management, and integration skills to bear on the challenge.

Consulting firms that have opted not to develop and promote expertise in RFID physics are using this time while the technology is going through its initial implementation shakedown to craft their own RFID strategy. "Yes, we can do RFID, and yes, customers are asking us about it. Getting the timing right for broad deployment, however, is a tough call. All the firms are trying to figure out the right timing and investment for RFID," says John Parkinson, Capgemini's chief technologist for the Americas.
The holdup, from a technical standpoint, appears to be the wait for the arrival of the next generation of tags. These are tags that are effective, reliable, and, most important, cheap. "Maybe in the third or fourth quarter of 2005, we will see tags become available at a price point that works," says Parkinson. That's also about the time consulting firms will likely be ramping up their RFID capabilities in earnest. However, it all depends on getting the physics to consistently work right.

The physics of RFID hasn't slowed Deloitte Consulting, which has offered the services of an RF Solutions group for the past 18 months. It operates an assessment center in Chicago that will validate whether given RFID technologies will work for a client, reports John Greaves, global leader and senior manager of Deloitte's RFID technology initiative. The company, for example, is working with a global consortium of leading consumer appliance manufacturers on the use of RFID.
The hot spot for RFID today is the retail industry — particularly the retail supply chain. "We're doing a lot of work in the retail-consumer product space," says Cummings. Wal-Mart, Target, Tesco, and Metro AG (Europe) have taken lead roles in driving RFID. January 1, 2005, was the target date Wal-Mart set for its top 100 suppliers to become RFID-capable. "Most of the action now is in the supply chain for retailers and manufacturers," adds Ginsburg.
In retail, the big barrier will be the cost of the RFID tag. "The cheapest tags today cost about five cents, and that's still too high," says Friedman. At that price, the retailers and their supply chain partners involved in pilot projects are putting RFID tags only on pallets and cartons. "We're a far cry from item-level tags. Pallet-level tags give you asset tracking. Item-level tags give you inventory tracking," says Friedman. The big payback will come when the industry gets to item-level tags.

RFID has wide application beyond retail and its consumer products supply chain. Deloitte's Greaves sees it being applied in healthcare, pharmaceuticals, aerospace, defense industries, the automotive industry, and more. Some applications will require low-cost passive tags, like those used in the retail industry. Others will use more costly active tags.
Although the consulting firms report any number of RFID engagements, it is not clear how profitable this work is. "This is not the firm's most profitable practice today," concedes Greaves.
Part of the problem is the low prices clients are able to pay for RFID work. With conventional consulting firms and the RFID pure plays eager to get some early RFID engagement experience, "a lot of firms are giving their work away to gain market share," says Regen. This may take the form of deep discounts or contingent fees.
"We're mainly getting calls for prep work, things like strategy and brainstorming around RFID. We're making a little money, but it is not a volume business yet. The only people making any money today are probably the device manufacturers," says Parkinson.
The money will come as the technology matures and widespread adoption begins. A more difficult question is what form RFID will take in the firm when the money does start to roll in. Right now, the idea of an RFID practice modeled after the pure plays might sound appealing, but that may not be the best approach in the long run. "We're not building a centralized RFID practice as other firms are. It is too hard to hit P&L goals," says Hitachi's Helton.

Instead, the firm is building RFID knowledge into practices where the technology is appropriate.
"This technology will follow the same path as other disruptive technologies. For a while, it can be a business unto itself. Over time, it will become just another technology in the firm's toolkit," says Ginsburg. If that's the case, dedicated RFID practices will go the way of Internet and e-commerce ones, although as with Internet and e-commerce assignments, lucrative consulting engagements revolving around RFID technology will still be available. The RFID expertise, however, simply will be woven throughout the consulting firm just as Internet or e-commerce expertise is today — something to be called upon as needed.