Cheap and Easy RFID?

"Definitely, this is a revolutionary technology," Bill Gates told his influential guests, before informing them their badges were equipped with the wafer-thin tags.

What Gates didn't reveal was that his company was already working on something much more ambitious. For months, Microsoft has been ramping up development as it prepares to enter the RFID market in the first half of next year. Its engineers are coding RFID specifications into three of the company's enterprise-resource-planning applications--the Axapta, Great Plains, and Navision suites--and into BizTalk Server, which plays a central data-integration role in Windows environments.

Windows may get an RFID injection next. "The platform will be RFID-enabled," says Paul Flessner, senior vice president of Microsoft's server platform division. Within the operating system, RFID support probably would be akin to a device driver, the piece of code that allows a printer or a network device to work with a computer.

Microsoft is aiming for a share of the burgeoning market for RFID readers, which will grow 50 percent next year, to 1.5 billion devices, research firm Venture Development Corp. estimates. "If one reader costs $1,000 or more, we want to bring down that cost significantly by taking a zero off that number," says Drew Gude, a Microsoft program manager. While some companies, such as TrenStar, have done the work themselves to load Microsoft's mobile operating system, Windows CE, onto handheld RFID readers, Microsoft is assessing whether to create a version of Windows CE tailored for RFID readers, according to a source. A Microsoft spokeswoman, however, says that's not an area of focus right now.

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Partners and customers feel the gravitational pull of Microsoft's growing interest. An RFID Council, launched by Microsoft in April, already includes more than 30 technology companies, and compatibility testing is under way in an RFID lab on the Redmond campus. Matrics last week sent its RFID readers and other infrastructure products to be reviewed there.

Microsoft's goal, says Girish Rishi, Matric's senior vice president of marketing, is to "understand RFID, how it operates, what players you need, what layers exist, back-end systems requirements, and what applications work best in specific markets."

In short, Microsoft is sizing up the RFID market, from top to bottom, to see where it should push hardest. "Microsoft's expanding activity will influence the broader market," Rishi predicts. "Microsoft is expected to drive standards and influence how data is managed as it's transmitted from readers."

Customers are watching closely to see if that translates into applications that are easier and cheaper to implement. "That's the problem--RFID has been cost prohibitive," says Kevin Lehoullier, CIO and CFO of Arthur Schuman, an importer of Italian cheeses.

Axapta will be Microsoft's first suite to get an RFID overhaul. "The business applications will become more real time," Microsoft vice president Satya Nadella says.

The first Microsoft suite to get an RFID overhaul will be Axapta 4.0, due in the first half of next year. The work involves adding RFID specs to Axapta's warehouse-management module and revamping the module's inventory-tracking features to use data generated by RFID readers. "The business applications will become more real time," says Satya Nadella, corporate vice president of development with Microsoft Business Solutions.

The plan calls for those same capabilities to be added to Microsoft's Great Plains and Navision suites sometime in 2006, though that will be cutting it close for midsize suppliers that need to get on board with Wal-Mart Stores's RFID initiative by then. "I'll be pushing for it sooner," Arthur Schuman's Lehoullier says.

Microsoft is gearing up for more than a dozen RFID trials. A pilot project with Dutch snack maker KiMs, under way since December, gives a clue about some of the technology pieces Microsoft will incorporate in its RFID environment. They include an application called Demand Planner, based on the Excel spreadsheet, that applies real-time data to sales forecasts, and a notification system that fires off messages within supply-chain environments.

Microsoft's business applications will require BizTalk Server to do some of the work. Flessner characterizes BizTalk Server's role as providing "high-level integration" between an RFID reader and enterprise applications, including those from other software companies.

Arthur Schuman operates an 87,000-square-foot refrigerated warehouse in Edison, N.J., where 50,000-pound containers of pecorino and feta cheeses are unloaded 24 hours a day. It's the kind of facility that could benefit from RFID's promised efficiencies, but Lehoullier says he has yet to come across a workable solution for a midsize company.

"It's got to be easy to use, it's got to integrate directly into the ERP system, it's got to fulfill Wal-Mart's mandate, and it's got to have some ROI," Lehoullier says. As a Great Plains user, Lehoullier would like Microsoft to help. "They know there are a lot of people out there like me."

Microsoft isn't alone in going after that business. This week, IBM will unveil an enhanced Websphere Product Center that, among other things, will let companies more easily associate data generated by RFID readers with product data stored in enterprise databases. Lyle Ginsburg, a partner with Accenture, believes the entrance of big players such as IBM and Microsoft should help drive down costs. "Companies want a low-cost, shrink-wrapped platform," he says. That "will play right into Microsoft."

But Microsoft's RFID strategy hasn't been without wrinkles. According to a confidential Microsoft document that became public in the ongoing Justice Department v. Oracle trial, Microsoft had planned to add RFID support to its Retail Management System applications in 2006.

However, Microsoft's Nadella was noncommittal when asked about that. "RFID at the small retailer [level] is not where it's happening today," he says. "My priority is supply chains." And the time line to add RFID to the Navision applications seems to have slipped. Microsoft originally planned to deliver that next year, according to the same document.

Systems integrator Altara has helped midsize companies such as Arthur Schuman and Sleep Innovations Inc., a pillow manufacturer, deploy ERP systems using Microsoft products. Altara CEO Helene Cole says there's pent-up demand in the midmarket for no-fuss, end-to-end RFID infrastructures, and Microsoft is in a good position to deliver that. "We're finding that $30 million distributors and manufacturers have the same needs as everybody else," Cole says. "What Microsoft will do is make it easy to implement."

That's the plan, anyway. Now it's up to Microsoft to make it happen.

-- with Paul McDougall

For more on RFID, see CRN.

This story courtesy of InformationWeek.