Radio tags are falling off the fast track

The tech sector is full of good ideas that aren't yet mature enough to be truly useful: dictating a letter to your computer, intelligent agent software that would handle your travel arrangements or make a restaurant reservation, and Microsoft Windows.

They're ideas that are perennially hyped, but never seem to deliver. Tech companies large and small invest in developing the technology -- speech recognition for example -- but it takes a long time to get good enough to replace the incumbent, in this case, keyboards. I'm starting to wonder if RFID tags could fall into that category.

RFID, or radio frequency identification, has been one of the most-trumpeted new technologies of the past three years. The idea is to slap an inexpensive computer chip (also known as an RFID tag) on every product circulating in the global economy. Then, using networks of ''tag readers" on shipping docks, inside trucks, and on grocery store shelves, you'd be able to know at any moment the whereabouts of any individual product. Instead of conducting a manual inventory, stores could simply conduct a query and have their shelves tell them what's out of stock. Boosters say that RFID will soon replace printed bar codes on most products.

Boston is home to a number of companies hoping to profit from the RFID revolution, among them Ember Corp., ConnecTerra, SupplyScape, ThingMagic, OAT Systems, and GenuOne. Most are venture-backed start-ups. And most will have a tough time, as the revolution proceeds much more slowly than anticipated.

''The technology is still very immature," says Kara Romanow, a research director at AMR Research in Boston. ''When you cut through the hype, [the pilot tests] are not going as well as everyone wants you to think. We haven't made a lot of progress in the last six to nine months, in terms of overcoming the really hard obstacles."

Gillette, one of the biggest local proponents of RFID technology, has been slow to move from its first field trial at a manufacturing plant and distribution center at Fort Devens in Ayer. Other companies I've spoken with say they're still in evaluation mode.

What are the really hard obstacles to RFID deployment? First, the tags themselves are still too expensive, at 25 to 30 cents apiece. In many cases, companies don't believe that having information about a box's whereabouts is worth that much. And tags made so cheaply tend to have quality problems: sometimes, they don't answer the tag reader's roll call.

''You have tags coming from small companies that are still learning about quality assurance," says Kevin Ashton. Ashton is a former Procter & Gamble executive who, until last year, ran an influential RFID center at MIT, and is now vice president of marketing at Cambridge-based ThingMagic.

Another obstacle: those pesky laws of physics. Some substances, like metals and liquids, tend to scatter or absorb the radio frequency waves from the tag reader, rather than bouncing them back so the reader can interpret them. A can of Campbell's chicken noodle soup could prove every bit as undetectable to a tag reader as a stealth bomber is to enemy radar.

''It's hard to bend the laws of physics, and get certain things, like a package of baby wipes, to show up to the tag reader," says Romanow.

There's no single global standard for RFID chips, either. That creates complexity for companies that manufacture things on one continent, but sell it on another.

The places where companies hope to use RFID technology to track goods, factories and distribution centers and warehouses, tend to be rough environments, too. There are vibrations and dust and high temperatures and, worst of all, interference from high-frequency machine noise, other wireless networks that have already been installed, and even fixtures as innocuous as fluorescent lights.

''You've got a whole lot going on in a place like a warehouse," says Michael Liard, an analyst at Venture Development Corp. in Natick. It's not like setting up a wireless network inside a pristine office building.

''And each installation environment has its own unique problems, so there's no cookie-cutter approach to installing RFID technology," Liard says.

Liard says that all those obstacles can result in a very imprecise tracking system -- think of a phone book with 20 percent of the pages missing. In some RFID tests, the system has only been able to read 80 percent of the tags, Liard says. By comparison, the current generation of tracking technology, which tends to be laser bar code scanners wielded by humans, has an accuracy rate that surpasses 99 percent.

Finally, there's the question of what to do with all of the information that RFID systems produce.

''In their exuberance about the potential of the technology, people forget to ask questions like 'Can my systems handle all this data, and how do I train my people to take advantage of it?' " says Christine Oberby, an analyst at Forrester Research in Cambridge. All of a sudden, companies will have the equivalent of an air traffic control system for every item in their supply chain. It will generate unbelievable quantities of data. And more data doesn't always contribute to smarter business decisions.

I don't want to discount the amount of money and energy that's being devoted to the development of RFID technology. Organizations like Wal-Mart and the Department of Defense expect some portion of their suppliers to be affixing RFID tags to some portion of their products by 2005. Gillette is just now starting a new field trial with Wal-Mart in Texas, in which cases of Right Guard deodorant will be tagged. The technology will get better and cheaper.

The problem for Boston's start-ups is that RFID will improve -- and get adopted -- slowly. That will gives their larger competitors a chance to develop their own RFID product offerings. It's no fun being an 85-employee company like Watertown-based OAT Systems when competitors like Microsoft, Oracle, and SAP are calling on your customers.

''Everybody sees this big pie on the table, and everybody wants a slice," says Liard. ''There's a lot of market potential, but there will be a shakeout down the road."

The best-positioned local company is ThingMagic, which, unlike most of the others, hasn't taken any venture capital and has been profitable since it was founded in 2000 by five graduates of MIT's Media Lab.

Part of the reason is that ThingMagic has been working for so long (relative to other players) to develop one of the most flexible tag readers in the industry; next month, the company will release the fourth-generation ThingMagic reader, called Mercury 4. The reader looks like a small silver pizza box, and it costs about $2,500. But the other part of the reason is that ThingMagic hasn't placed all of its chips on next year being ''The Year of RFID."

''We think 2005 is still quite early," Ashton says. Every industry, he says, obsesses over the ''hockey stick" chart, which shows a slow period of growth followed by a steep jump that resembles the handle of a hockey stick.

''I look at 2008 as the inflection point, where we start heading up the curve to the point where we have about 500 million tags out there," Ashton says.

Lots of RFID start-ups won't manage to survive that long. ''Some people," he concludes, ''are going to get their timing wrong."

Scott Kirsner is a contributing editor at Fast Company. He can be reached at skirsner@verizon.net.