IBM jumps on the RFID bandwagon

IBM expanded its presence in the market for radio frequency identification on Monday with the introduction of services to help companies adopt the supply chain management tool.

Radio frequency identification (RFID) has generated interest among retailers and consumer goods companies as a method to track inventory more effectively. The technology allows companies to follow movement of products closely via computer networks linked with microchips that are attached to specific items. Each chip transmits a unique ID code that lists a range of product information such as origin, location, expiration date and time of purchase.

IBM's new package, launched at this week's Electronic Product Code Symposium in Chicago, entails consulting services and specialised software aimed at building RFID capabilities into retailers' existing back-end inventory systems.

IBM said the package is based on non-proprietary standards and is built on its WebSphere Business Integration, WebSphere Application Server, DB2 Information Integrator, Tivoli Access Manager and WebSphere Portal Server products. IBM is offering a three-phase adoption strategy: consulting, followed by a 12-week pilot programme and then a full launch.

Faye Holland, worldwide RFID leader at IBM Global Services, said she believes the company has an enormous opportunity in the space as a provider of services and software. In the last six months IBM has expanded its RFID practice to include several hundred employees and the company has closed deals with a large number of customers, she said.

"IBM has been playing around with RFID technology for some time but over the last year we've seen a dramatic increase in interest from customers," said Holland. "We can already provide companies with the expertise and infrastructure needed to get RFID up and running."

Holland believes there is huge opportunity for RFID technology beyond the retail market for the automotive and pharmaceutical industries. The company is already in the process of designing RFID products and services that cater specifically to different vertical markets, she said.

Among the companies already working to implement RFID are retail giant WalMart Stores and clothing maker Prada. In addition to allowing businesses greater ability to follow the flow of products throughout their supply chains into stores, the technology is also aimed at cutting into employee theft, traditionally a problem for many consumer goods makers.

Despite IBM's desire to become a high-profile provider of RFID technology and consulting, some industry watchers questioned whether the company has the right approach for the space. Jeff Woods, analyst with Gartner, said the new IBM product appears for the most part to be a repackaging of existing integration technologies and services.

"The biggest question has to be whether IBM truly understands the business process issues that need to be considered in applying RFID or if they're just trying to capitalise on a hot trend," said Woods. "The most significant benefits that can be derived from RFID lie in manufacturing and warehousing aspects of a business, which aren't traditional areas of strength for IBM."

Woods believes that companies with greater experience in supply chain management software, such as SAP, will probably have the greatest opportunities related to RFID.

"If IBM is going to be successful working with RFID they'll truly need to focus on the right business processes in the warehouse, where it can have the most impact," Woods said.

Despite all the interest in RFID, the technology has also generated controversy among privacy advocates who have aired concerns that the technology can be used to track the movements of consumers.

However, both Woods and IBM's Holland discounted any near-term privacy threat found in existing RFID technologies. Holland said IBM would work hard to remain sensitive to the privacy demands of its customers but feels that the issue has been blown out of proportion. Woods agreed that the perceived threat tied to RFID remains much larger than the reality of how the tools are being used.

"I think businesses are still struggling to figure out how to use RFID on a mass level in warehouses," said Woods. "I don't see it as a big brother threat to consumers any time soon."

IBM is one of a slew of IT consulting companies attempting to tap into interest around RFID, along with rivals such as Accenture and Hewlett-Packard.

Matt Hines writes for CNET News.com.