RFID tag, India's next?

Cost and lack of mandates are discouraging Indian companies from adopting radio frequency identification, but embracing the technology may be imminent.

INDIA--Indian IT companies and techies are doing their precious bit in promoting radio frequency identification (RFID) in their country, as industries, government authorities, libraries, shopping malls and transport systems worldwide step up their use of the technology. Yet, in the world's second most populous nation, RFID continues to be a concept--waiting to be put to practice.

There are several reasons why Indian companies are slow in adopting RFID, according to T. S. Rangarajan, head of RFID at Indian IT giant Tata Consulting Services (TCS). Foremost amongst them is size, he said.

"Indian companies are much smaller than some of their western counterparts and lack the scale to justify large-scale rollouts of any technology, including RFID," Rangarajan explained. Another barrier is the absence of mandates, established either by large market players such as Wal-Mart in the United States and Metro Group in Germany, or regulatory bodies such as the U.S. Food and Drug Administration (FDA).

TCS offers services such as track and trace, asset tracking, cold-chain tracking vehicle tracking, document management and inventory management based on RFID technology. In addition, the company has developed several filters and adaptors for software components, as well as a basic middleware tool developed on an open source platform.

Another deterrent to wider RFID adoption is cost.

According to estimates from Nagaraj Bhargava, SAP India's vice president of marketing and sales operations, an RFID chip costs about 60 cents in India. In countries such as Germany, the United States and United Kingdom, vendors including SmartCode offer tags priced at 5 cents.

"Our vendors say the price will go down to 10 or 20 cents sometime in the near future," said Bhargava told ZDNet Asia. "So in my view, the cost equation is relative."

Information technology companies are stepping up initiatives to promote RFID in India. SAP, for example, has plans to set up an RFID Centre of Excellence (CoE) in Bangalore later this year. The center will help Indian organizations choose the right products for their environment.

In fact, Indian companies are keen to adopt RFID. According to Praveen Kumar, associate secretary for the Association for Automated Identification and Mobility (AIM) India, prototype projects are being regulated at various vertical industries. AIM India is the South Asia representative of the global trade association, which membership base encompasses providers of networks, components and services--such as RFID and smart card developers--deployed to collect and integrate data with information management systems.

Skandsoft Technologies, for instance, is working closely with several Indian companies in various industry segments such as engineering, healthcare, defense and banking, on RFID initiatives that include warehouse management, supply chain management and manufacturing components. A tech company focusing on the automatic identification and data capture (AIDC) technology space--which encompasses data identification methodologies and data entry--Skandsoft's flagship products SETUTM 1.0 is an RFID-based information management platform.

Rangarajan of TCS noted that costs, interoperability and security are technical issues that all companies worldwide face in adopting RFID. "These issues can be easily overcome once the adoption rate picks up," he added.

SAP's Bhargava noted that establishing industry standards is one way of promoting RFID. Globally, SAP has 200 customers in 16 industries using the software vendor's RFID products. Bhargava believes the Indian RFID market could grow at a rate higher than the projected 70 percent per annum, over the next two years.

"Indian companies' quest for information at the right time is bound to accelerate RFID adoption in India," he said.

According to Rangarajan and Bhargava, industries such as retail, automotive, pharmaceutical logistics, FMCG (Fast Moving Consumer Goods), airlines, utilities and healthcare industries will be the early adopters of RFID in the country.

Both industry players also believe government bodies and regulators should work toward encouraging adoption of the radio frequency technology.

The Indian Defense Ministry, for instance, can issue mandates to their suppliers similar to the U.S. Department of Defense, Rangarajan noted. "Similarly, regulators can issue mandates for [RFID deployment in] food and drug traceability," he said.

Bhargava added: "Indian companies should start using the technology in the most obvious area, try and earn returns on the pallets, and then use that experience to set a timeframe to go to the next level as prices go down."

In an e-mail interview, Skandsoft CEO Kaushik Yegnan said that India will have to look at RFID as "part of a bouquet of enterprise-edge technologies" for real-time data capture/action applications. "That is when high returns on investment, and thereby, large-scale adoption will eventually happen," Yegnan said.

It appears that India's adoption of RFID technology may very well be imminent, especially since the country is gradually becoming a sourcing destination for global supply chains. This will push Indian companies exporting their products to an international market, to adopt technologies such as RFID to comply with overseas mandates.

To sustain their competitive edge, these companies will also have to leverage RFID to meet customer requirements back home.

"As Indian companies scale up their operations to cater to the large domestic market, they will realize the importance of RFID in bringing supply chain efficiencies," Rangarajan said.

Swati Prasad is a freelance IT writer based in India.