Market expands with acquisitions, funding

The global market for RFID middleware exceeded $24 million in 2005, with growth projected at a compounded annual rate of 50 percent through the year 2010, says Venture Development Corp. (VDC), a Natick, Mass.-based research firm that focuses on auto-ID, data collection, and other technologies.

RFID middleware translates tag data into useful information for higher-level systems, and according to VDC, the market is likely to be changed by new entrants.

"Pure-play vendors like RF Code, GlobeRanger, and OATSystems will have to change their business models as a part of the natural evolution of the market," says Louis Bianchin, senior RFID analyst and program manager for VDC. "Network-centric suppliers that are hardware-based at the edge of the network—including Cisco, Omnitrol, and Reva Systems—are adding software functionality."

IBM, Oracle, SAP, and Microsoft also are in the mix, along with a new class of competitors: academics with expertise in training the next generation of engineers in the field. Mergers and consolidations are inevitable, Bianchin says.

Motorola will acquire Symbol Technologies for nearly $4 billion in cash, and, in doing so, is registering seismic interest among industry analysts—all generally favorable. The buy doubles Motorola's $1-billion annual enterprise business, and opens the way for interesting convergence of mobile wireless and RFID.

"Everything is going digital, and everything digital is going mobile. This is especially evident in the way businesses are run today," says Motorola CEO Ed Zander.

"It's another example of consolidation and convergence," explains Michael J. Liard, a director with Oyster Bay, N.Y.-based ABI Research. "RFID is not an island; it is part of a larger picture. Motorola sees it as part of mobility, whether in the home, workforce, or enterprise. It embraces the concept of being increasingly wireless."

Eric Austvold, a director with Boston-based AMR Research, says the merger bodes well for integrating scanning technology with mobile devices. "It just became universally unattractive to be stand-alone RFID," he says, adding, "It's like being at the dance, and everyone has a partner but you."

Reva Systems, which offers a network appliance approach to managing RFID data, is seeing further endorsement from SAP Ventures, Cisco Systems, and its original investors in the form of $13.5-million, second-round funding.

"We see ourselves as a next-gen player for how to cost-effectively deploy and manage RFID in large enterprise implementations," says Peter Blair, Reva Systems product marketing director.

John Fontanella, a VP of supply chain for Boston-based AMR Research, concurs. "Reva is bundling middleware into a network appliance, allowing access from anywhere—to anywhere," he says. "This is critical for companies doing multisite implementations. It makes RFID more user-friendly and cost-effective as the technology matures and is scaled. It's right in line with where Cisco is going."

Discrete manufacturers that impart collaborative manufacturing processes—e.g., aerospace, automotive, and heavy equipment suppliers—are turning to RFID as a prime mechanism for linking distributed production and enabling visibility of decentralized operations, says a survey from New York-based Frost & Sullivan.

"The structure of manufacturing and logistics is moving beyond the scope of a single enterprise or location," says Analyst Priyanka Gouthaman. "RFID enables real-time visibility of inventory, thereby ensuring integrated operational control across diverse manufacturing and logistics points."

Ensuring visibility and integration will continue to drive RFID sales in discrete and heavy equipment manufacturing, outpacing other markets. Growth is expected to continue at nearly 18 percent through 2012—reaching $225.7 million—according to survey data.