Issue #138 | Mar. 14, 2008 | by Andy Kowl

Obviously, the barcode VARs are the virtual underpinning of the RFID industry as it is. But as we discussed week, what about those IT system integrators and IT providers that service manufacturing and automation; the building trades; automotive; aeronautics; energy and petroleum; mining; retail; finance; stadiums and large sporting venues; shipping and storage? These VARs see opportunity today they did not see yesterday and we have heard from some in every one of these industries mentioned and others.

As we pointed out, the good old profit incentive will draw in the best of these VARs who are well-entrenched in their industries and/or their geography. Every day more proven, finished RFID applications are announced in all these industries and others.

[Part I: 80/20 Rule and the Two-Percenters]

The conclusion is clear, right? If your company has invested in developing new RFID solutions, and paid the dues that so many of the early innovators have, the next thing to do is to line up every established, client-rich VAR you can, get them “a sample case” and have them start selling! Proven sales teams, with their own support staff and knowledge of their market – it’s a slam dunk.

Then why are they being treated like uninvited cousins at the wedding? Nothing personal, mind you.

Out of synch market expansion
The large manufacturers already have thousands of channel partners. Last week we reported the average was less than 2% of VARs selling RFID – which means for the largest manufacturers 98% of their channel partners do not sell RFID. This is true: we spoke to one channel manager with more than 10,000 resellers on his watch, who had no idea his company had any RFID products at all.

That is rich territory to be mined. Get just another 2% of your current partners to sell RFID, companies y have relationships with, and you double your reach. Using our 80/20 rule, move some of your slow starters to the 20% club, and you are hitting home runs. In the light of this, taking on more “potential partners” is, let’s face it, extra work with spotty prospects.

The truth is many RFID manufacturers of every size feel a lot of companies have wasted their time, coming to dead ends after months of work and investment. Indeed, many companies did waste their time. This can make some of them cautious to the point of being exclusionary. Who wouldn’t be?

Most small and middle sized RFID suppliers, those for whom RFID is a significant or total part of their business, already have a core group of resellers. Many of them say they are not looking to add any new ‘partners’ now, just working with those they have. A few of these manufacturers have found that they, themselves, are the best ones to close the sale and then “bring in” the partners.

Will there come a time they find that partners can effectively handle sales? Naturally. But for now this practice is keeping some feet on the brakes. Then again, there are plenty of other suppliers. I’m not worried; but I see why they call this growing ‘pains.’

Growth in market means longer lines
Add to that the actual ability to deal with this surge in interest at the same time their best existing resellers are finding more success selling RFID and therefore requiring more support. This creates limitations on just how many newcomers anyone can realistically handle.

Remember, newbies require training and more hand-holding to get up to speed in a way satisfying to both supplier and VAR. It is in everyone’s interest to be successful and self-sustaining. So this means more effort for what existing RFID-partner support there is.

Compounding the invisible barriers of entering the RFID game, is that any smart reseller knows they should be creating relationships with more than one supplier. They need software of various types; readers and other hardware; tags, active and passive; and label conversion choices.

For the incoming VARs, it means having the wherewithal to put a handful of new suppliers together in a service offering that is manageable, and profitable, to them without wasting their time. Of course, there are more and more manufacturers offering self-contained systems which are an excellent way to get started, at the least.

Facts everywhere you look
What I cannot help smiling about again is that Computer Industry Association (CompTIA) report last June about a “survey of technology resellers, solution providers, system integrators and consultants revealed that, across the board, close to 20% of their customers are using RFID.” This alleged surveyed group falls into the category of VARs, if ever a group did.

What can this mean? If RFID Switchboard says 2% of VARs sell RFID – and we find that nearly 20% of all VAR customers use RFID – who are these customers buying it from?! (Good try, but no, the manufacturers rarely sell direct.) It simply means either their survey was wrong or our research was. But we did not do a survey – we interviewed the people who have the lists.

Anyway, the irony here is that CompTIA thought this 20% -- a wildly exaggerated number – was so low it was quite sad. "The results of our survey are reflective of the RFID market, where rosy forecasts about rapid and widespread adoption have given way to the reality of . . . murky and unclear return-on-investment,” said David Sommer, a CompTIA vice president.