Guest Column | February 12, 2009

Ten Things VARs Should Know Before Selling RFID

Written by: John Rommel, director of RFID channel development, Motorola, Inc.

RFID is a technology that holds great potential for Value Added Resellers, especially those who traditionally have sold bar code and other AutoID systems. With over two thousand companies required to install an RFID system to meet a retail or government mandate, along with hundreds of others who see in-house uses for the technology, the revenue potential for VARs and System Integrators is enormous. Several industry estimates see the market topping $3 billion by 2010.

Still, before jumping headfirst into the RFID pool, it is wise for VARs to understand what they might be diving into. RFID can be a tricky technology to both sell and deploy. Failure to ensure your company is properly positioned to compete in this new space will prove costly. Several firms that rushed into selling RFID in recent years have already exited the space, realizing too late that they either were not adequately staffed or did not have a winning go to market plan to meet the opportunities and challenges that RFID provides.
Most all industry experts agree that RFID will continue to grow at an attractive pace for the next several years. They also agree that most systems will be implemented by VARs and System Integrators who have the right combination of products and services to ensure properly working configurations. If you are considering offering RFID as part of your solution mix, make sure you have thought through your plan carefully. Use the following list to help ensure you have covered all of the bases.

#1 - Know What You Are Getting Into
The number one trap that most VARs fall into is thinking that RFID is “Just like Bar Codes” or “Just like WiFi.” While the data collection system is similar to both of these AutoID technologies, there are very real differences that require varying skills to sell and install them. RFID is certainly not “out of the box” technology. So before you start attempting to sell it you should make sure you have the proper skill sets for the job.

RFID requires an in-depth knowledge of radio signals and the ability to control a radio field. Unlike most radio systems where you typically want to maximize the radio’s distance as much as possible, RFID often requires the need to shorten and shape the field to meet the application requirements. Knowledge of antenna designs and field propagation is important, as is understanding what factors can impact radio performance – both positively and negatively. Having a good radio technician on staff is vital to providing successful installations.

RFID also requires a more consultative sales approach than many VARs are used to. With many customers unfamiliar with the potential capabilities of RFID and how it can be best integrated into existing processes and systems, they often look to System Integrators to handle much of the process design and evaluation and testing. Therefore, having someone with a solid knowledge of supply chain systems and processes is also important. And if you do not have people who can properly design, sell, and manage multi-facetted projects that incorporate both material movement and IT issues, then RFID may not be for you.

Finally, look at your customer base. Are they asking you about RFID or do they have problems that typical data collection systems can’t handle? If not, then it may be best to stay on the sidelines for a while. Don’t fool yourself by thinking that adding RFID to your product portfolio will automatically make you a player in new markets. It is extremely challenging to introduce a new technology into a new market where you have little knowledge of either. Best to start where you are familiar and look for bar code applications where bar code technology does not adequately solve the problem.

#2 - RFID is Not a Technology Sale
The most important component of an RFID sale is not the tag or the reader or the printer – it is the application. RFID is a technology that can speed up data collection, improve product visibility, and enhance data security, but it cannot do any of these things without the proper application software behind it.

Even the simplest of retail compliance systems requires an effective application that manages Electronic Product Code (EPC) numbers, assigns them to specific items, manages the collection of read data, and interfaces that data with an existing IT system. While RFID tags do provide unique capabilities (no line of sight, multiple simultaneous reads, etc.) that enable fast data collection, if you do not provide your customers with an integrated hardware/software solution you may find your sales limited.

In fact, this has been one of the primary factors holding the industry back. There is a lack of established RFID applications available to the market. Several firms offer RFID middleware that feeds data into existing IT systems, but these only replace alternative data collection sources with RFID. Few vendors have released new applications that utilize the power of RFID to solve new business problems.

If you are looking to make a mark with RFID, look at your current application offerings. Can you make them work with RFID? Can you develop new apps that use RFID to better enable customers to track their assets, people, products? Can you create the right Value Proposition for your customers so that they can see how RFID will save them money and streamline their current processes?
Remember, whoever owns the application owns the sale. Good performing hardware is important, but it will do little without the right software managing the data. Also remember this software mantra: “We can create that” is not as strong as “We’ve already done that.”

#3 – Know How Will You Make Money

There are four primary components of an RFID sale: hardware, tags, software, and services. All provide revenue opportunities for smart integrators.

One of the primary reasons that VARs are attracted to RFID is that the hardware, so far, has maintained decent margins. RFID systems have not reached commodity stage and customers are willing to pay higher prices in order to get the better performing equipment. Early RFID installs typically have a minimal amount of hardware, but as customers expand, the number of readers and printers increases, providing for an ongoing revenue stream.

Tags have taken the opposite route. Cut rate pricing by tag manufacturers has driven RFID tag prices (and profits) down. Though disposable RFID labels represent an annuity year after year, many RFID VARs have turned to selling re-useable tags that command a higher price but offer their customers a better ROI in multiple read environments. There are many factors that may dictate which tag to use on a project but before you quote anything make sure you know what your cost model is today as well as what it will be tomorrow.
As mentioned, RFID software drives the sale, and thus can command a significant portion of the revenue. Unlike with more traditional IT products where savvy customers may write their own code, RFID still is new and “scary” enough to most end users who are happy to pay for the expertise. Fortunately there are a growing number of application tools coming to market that will manage the low level RFID transactions, freeing you to focus on the business applications. There’s no longer a need for you to slog through low-level interface code anymore, and this should allow you to provide the higher level business solutions your customers need.

Services, to date, have been the most lucrative piece of the RFID pie. Often running 40% to 60% of the total project, VARs have been able to reap large profits by performing such tasks as site surveys, in-house product testing, system installation, process analysis, and overall project management. Do not miss out on a lucrative business by failing to provide at least some of these services.
No matter the combination, make sure you have a offering in all of these areas. Though different VARs will focus on different aspects of the overall system, having the ability to provide all of these components not only generates multiple revenue streams, it keeps you in control of the sale.

#4 – Understand The Technology
As with all new technologies, your ability as an integrator to understand it and make educated recommendations to your customers is vital. This is especially true with RFID as many end users do not understand that there are various flavors of RFID, each having their own characteristics. Too often customers hear multiple claims from various products and want to merge them together into one “holy grail” of a solution that does not exist. The more you can set them straight early on, the better off you will be.

But even more so, customers will be turning to you to recommend the right technology to satisfy their business problem. Unlike some technologies, RFID installs will vary from job to job as the read requirements and radio conditions are rarely ever the same. It will be up to you to make sure you are proposing a solution that will meet the customer’s needs and will work the best in their environment. So make sure you understand the technology. Know the differences between Active and Passive tags. Be able to explain how liquids and metals impact RFID performance. Understand when to recommend linear polarized antennas versus circular polarized antennas. Have knowledge of why the EPC and ISO standards are so important to your customers.

If you currently do not know the answers to these questions then seek out help. There is plenty of it to be found. Most manufacturers provide training on their products and several independent companies teach even more in-depth classes. Check out the web’s many resources. Visit trade shows and learn from what others have done. Most of all, get as much hands-on training as you can. Set up and in-house lab or find a local university that will allow you to come in and work. There are so many factors that impact the performance of RFID systems (both for better and worse) that the only way to truly understand it is to play with it.

The ability to properly configure and install a well-working RFID system is still in short supply. See this as an opportunity and act upon it.

#5 – Build Your Ecosystem
There is no one vendor who manufactures everything you will need for a fully functional RFID system, so you will have to assemble the various pieces from multiple suppliers. Though this makes the process more arduous (having to research various companies) it does allow you to assemble a “best of breed” solution for your clients. Realize that at a minimum you will need the following for a passive RFID system:

• RFID Inlays – these are the core component of the system as they contain the tiny RFID chip and a printed antenna on a flexible mylar type material. You may source these directly but often you will want the inlays converted into some style of tag.
• Converted Tags – these come from companies who buy inlays and encapsulate them into various form factors. The two primary styles are (1) peel and stick labels that typically are attached to product packaging, and (2) rigid hard tags that are made of plastic, rubber, or some other durable material.
• RFID Printer – To encode data on RFID labels the easiest was is to run them through a special printer that can print bar code and human readable information on the front and encode the required data onto the RFID chip at the same time.
• RFID Reader/Writer – This is the device that reads the tags and sends the data to a host system. Sometimes called an interrogator, there are several styles of these including fixed mount, handheld, forklift mounted, portals, etc. They typically can write to tags as well.
• RFID Middleware – When tags are read they are often read more than once. Something needs to filter out the duplicate reads, marry the tag data with the proper reader location, and generally arrange the data into a format that the host application can handle. This is termed middleware. This may reside on a separate server, on the reader, or may be pre-built into a specific application.
• Application Software – the final application for the data. This may be an existing ERP or WMS system or something completely stand alone. This is what the customer will use to view the relevant information and make business decisions.
As you assemble all of these pay particular attention to how well they interact. Not all middleware supports all readers for example.

#6 – Offer a Broad Array of Options
As mentioned, not all RFID systems are the same. So to properly cover the field you may choose to carry multiple RFID types. Offering your clients a broad set of options will allow you to provide them the best optimal choice for their requirements

Active Tags provide the longest read distances, often well over 100 feet. This read distance makes them ideal for outdoor applications where hanging multiple readers may be challenging. The tags are costly ($20-$50 each) and contain a battery that will need to be replaced after a few years, but they also allow you to triangulate and determine the exact location of your object.

Passive HF Tags (13.56 MHz) have a read distance of less then 2 feet but are very small and are easily embedded into various form factors. The tags are inexpensive ($0.25 - $0.75) but also have relatively slow read speed less than 100 per second. HF readers are also very small, inexpensive, and are easy to integrate into various devices.

Passive UHF Tags (915 MHz) have read distances up to 40 feet and typically have read speeds of hundreds of tags per second. They also are inexpensive ($0.15 - $0.70) but are more susceptible to interference from liquids than HF. UHF readers are also typically larger and more costly then HF.

Other tag types include Low Frequency (various types in the KHz range) and Microwave (2.4 GHz). These variants lack formal standards and are currently used primarily in niche markets, but each contains characteristics that may be attractive.

A well rounded product portfolio will contain offerings of each type.

#7 – Select Your Suppliers Carefully

RFID technology is still changing rapidly, so it is imperative to select suppliers who will not only be able to provide you with good systems today, but will also be able to help you tomorrow. Sourcing from multiple suppliers who might offer leap-frogging technology certainly will cover your bases, but is also costly, The time to test, interface and integrate numerous hardware platforms with your software can become quite extreme. It is often better to focus one or two top suppliers who you trust will be able to provide you leading edge products continuously over the long haul.

So examine your eco-system providers carefully. Can they keep up? Are they leaders or followers? Are they proven and widely installed? Do they provide capable technical support? What service plans do they offer? Are they fiscally sound with heavy investment into RFID? Can they scale their operations? All of these are important to evaluate.

Also look at how then can help your business. Do they offer you more than just a product? What kind of leads can they provide you? What marketing activities can you participate in? Evaluate their reseller program. Are there any unrealistic demands? What more can they be doing for you than just supplying you RFID products. If you are going to build a partnership with an RFID company, best that you get the maximum bang for the buck.

#8 – Design For The Future
End users today are already ripping out RFID systems that were installed less than two years ago. The primary reason is that they, and their integrator, did not think beyond the initial scope of the project. Make sure this doesn’t happen to you. Even if the customer is thinking small, design the system for growth. Make sure the system can scale with an increasing number of tags. This means having software that can handle the load as well as ensuring there is enough network and processing capacity to cover the additional amount of data. Also, unless there is a compelling reason otherwise, always use standards based products. Even if the current solution is a “closed loop” process, you never know when it might become part of an “open loop” process connecting to customers and other business partners. With the availability and performance of standards based products, you are doing your customer a disservice not to recommend them.

#9 - Don’t be Afraid to Partner
There are many components needed to create a top performing RFID system, but you do not need to re-invent the wheel and create them. If you are new to RFID it is wise that you partner with other integrators who might be able to help you. In addition to your component eco-system (#5 above) there are a range of services that your customers may require from you. A partial list includes:
• System design
• Business process analysis/consulting
• ROI calculation
• Tag/product testing, evaluation
• RF Site survey
• Custom software creation
• System installation and testing
• Stress testing
• RFID training
• Etc.
Don’t feel you have to go it alone when offering these. There is plenty of expertise available to you from companies that specialize in all of these areas and who have no desire to sell hardware or software solutions to your customers. Seek out the partners that will help you to succeed early. Learn from them. Understand their business model and core capabilities. Then, if the time is right and you feel capable, you may start offering a few on your own. Better to lose a few dollars early to get a few successful installations under your belt than to have higher margins on non-referenceable accounts.

#10 Leverage Your Successes
Finally, leverage your early wins as widely as you can. Research shows that the number one factor guiding potential clients is their speaking with a VAR’s existing customers. With RFID being new and not widely implemented, customers want to get assurances from others in their position who have gone through the process and come out successfully at the end. The more good customer references, in a variety of industries, that you have, the better off you will be.

But it’s not just for marketing sake. Use your early installs to gain that hands-on knowledge you need to grow your practice. Make sure your best and brightest people have run through the installation and become familiar with the technology. A happy customer who lets you use his system as a real world test bed is an awesome asset.

Finally, realize that your best potential customer for a new RFID sale is the one you successfully installed before. You shouldn’t have to convince them on the merits of the technology nor have to spend time educating them on how RFID works. As with all technology, spend the time to get their initial system up to speed so that they will quickly expand their installations internally.

RFID holds tremendous promise for enterprising VARs who can collect the right mix of technical and application expertise and bundle it together with leading edge products to create a solution focused system. Those who apply a little advanced planning and create the proper strategic alignments will quickly become the experts in a rapidly growing market.

About The Author

John Rommel is a fifteen year Auto ID veteran and he has worked for some of the industry’s top technology companies. In his first nine years at Symbol Technologies – the world’s largest supplier of integrated bar code, RF, and handheld computer solutions – he identified RFID as an emerging technology early on and was the lead on one of Symbol’s first RFID installations: a parts warranty tracking application for Amtrak. He left Symbol in 2000 to enter the world of RFID full time and became the North American General Manager for TAGSYS, a French based manufacturer of High Frequency RFID systems. There he guided that company’s efforts as they installed RFID systems at places such as the Seattle Public Library, Disney World, and Ford. He then joined industry leader Matrics in 2003 and was focused on managing the company’s supply chain partnerships. With acquisitions of Matrics by first Symbol and recently Motorola, he has now come full circle and is helping shape Motorola’s RFID direction for the future by being the primary RFID interface to the company’s vast network of reseller partners.