RTLS – the RFID autobahn or dead end
Real-time location systems (RTLS) have long offered the sexiest features in RFID. As adoption of passive RFID accelerates, the question remains, “Why hasn’t RTLS done better in the market?”
All RFID systems offer identification, location and time stamps. However, it’s the precision of the location data delivered by RTLS that gets users excited. Well engineered RTLS solutions can show you on a facility diagram, where an asset is at any given time. It is like an indoor Global Positioning System (GPS).
Typical passive RFID systems offer you event based tracking which indicates the location of the reader that identifies the asset and the time of the event. You can infer where the asset is by knowing when it last passed by a reader or occasionally by its current location within a reader’s visibility (i.e. interrogation zone). Since you are only deploying readers at choke points, the infrastructure cost is much less. Combine this with tags that cost a couple of orders of magnitude less than active RTLS systems and the cost savings further increases.
Why RTLS Adoption is Slow
Regardless of cost, that GPS-like RTLS display makes for great demonstrations and often good business value. So why is passive RFID growing like a virus and RTLS seems stuck in the mud?
Ann Grackin of ChainLink Research tackles this topic in a recent article. She posits that RTLS growth may be languishing because providers are selling to the wrong people. While end users certainly accrue the benefits from RTLS, it may drive adoption faster if the asset manufacturers (e.g. hospital equipment, manufacturing tools) integrated the capabilities in their products. This would make it easier for end users then to adopt without feeling like they must retrofit every asset as an extra step prior to tracking.
Standards Drive RFID Adoption
At ODIN, we see two key barriers to adoption of traditional, active RFID based RTLS:
- High Cost
- Lack of Standards (i.e. proprietary systems)
RTLS tags cost much more – 10’s of dollars instead of 10’s of cents. The reader infrastructure is expensive because of the density requirements (N.B. this is true even for WiFi RTLS which typically requires many additional access points to deliver accurate location). Users receive better location resolution, but do so at a higher cost. Often the cost is justified because it reduces cycle times or significantly increases asset utilization, operational efficiency and security. However, the second adoption barrier is much bigger.
RTLS Systems are Proprietary
All active RTLS systems are proprietary. The tags and software are not interchangeable among vendors. In some instances, you can use common wireless access points (WAP), but only after you install proprietary software. What this guarantees is something that Ms. Grackin captures clearly in an online forum, “there is no leverage between one installation and the next.” RTLS customers get their system, but they are hostages to a single vendor. Unless their business partners and sister divisions utilize the same vendor, the value ends at the front door.
By contrast the rapid spread of passive RFID systems in High Frequency (HF) and Ultrahigh Frequency (UHF) spectrum were catalyzed by the adoption of global ISO standards. When you install an ISO standard passive RFID system, you can mix and match hardware, tags and software from different vendors which enables better access to superior features and lower cost. An end user’s system will also interoperate with the RFID systems of other organizations. Leverage is immediate.
What the Numbers Tells Us
A 2005 study forecasted RTLS would grow from $20 million to $1.6 billion by 2010. By 2009, the total market was estimated at $153 million. That represents a 66% compound annual growth rate (CAGR) which would be the envy of many industries. However, it is far less than the projected 200% CAGR.
IDTechEx’s current estimate is that this $153 million market will only exhibit a 33% CAGR over the next ten years – half of the growth rate over the past five years. The math suggests it may end up as a $2.6 billion market in 2019 which certainly has some scale. However, the slower growth will set it up for displacement by competing technologies. Regardless of the outcome, the numbers explain the general mood that RTLS has not lived up to its projected potential.
Are RTLS Companies Selling their Technology Effectively?
I can make an argument that RTLS vendors are selling correctly based on the situation they face. They must sell to end users because they are the ones who must adopt the reader infrastructure and software. Having manufacturers tag their product may be convenient, but could also pose problems if the end user wanted to work with a different RTLS vendor’s platform. But I think this discussion misses the point. The real key to expanding RTLS growth will be standards that encourage interoperability. The vendors can only grow faster, if they agree to cede some technical control and cooperate. That cooperation will remove the key barrier of the desire of end users to adopt standards-based systems and reduce total cost of ownership at the same time. Until then, you can expect growth that is more akin to 33% annually than 200%.
What do you think will happen with the RTLS market? Comment below.