will buy RFID
The deal brings 26 experienced consultants to VeriSign’s Intelligent Supply Chain Services Group, along with new revenue opportunities while VeriSign waits for demand for its EPC Network, which gives products in a supply chain unique IP addresses.
VeriSign was awarded the contract to manage the Object Naming Service for the EPCglobal Network in January 2004. The EPC NEtwork will combine RFID technology with electronic product codes (EPC) to create a standard way for partners to trade information about goods moving through a supply chain.
“In late 2004, we decided that rather than wait for that market to evolve, we wanted to get more proactive and engage with clients earlier on to identify the business processes that could benefit from that data sharing,” said Brian Matthews, vice president of directory services for VeriSign.
Matthews said he expects use of the EPC Network to take off in 2006 or 2007. He said the acquisition, which closed today, was less about increasing revenue for VeriSign’s RFID unit in the short term and more about accelerating the marketplace and getting enterprises to use and benefit from the technology.
“RF is just the data input mechanism,” Matthews said. “The benefits from RFID and the transformation of the supply chain will come from sharing the data across enterprises.” But the complexities of navigating multiple networks and regulatory requirements make professional services essential, he added.
R4 Global has offices in Dallas, Boston, Atlanta and San Francisco, where it operates an RFID testing center. It brings customer relationships with Global 2000 companies including Levi Strauss & Co., McKesson, and Land O’Lakes, as well as expertise in supply chain scenarios including “cold chain,” the verification of temperature control during shipping.
“One challenge in the RFID marketplace is that a lot of the work is being done by small companies like ours, but most buyers are large, global 2000 companies,” said R4 CEO Jeff Richards. “Now we’re part of an organization with a global presence and a very strong balance sheet. From the customer standpoint, this is terrific.”
In an April 2005 report, ABI Research analyst Erik Michielsen said that small companies such as R4 provide value to larger players.
“They really understand RFID at the network edge and are now partnering with larger organizations that provide more enterprise focus, more company-wide integration services and global customer support,” Michielsen wrote. “Not only do these smaller companies’ products win accolades from end-users, but they themselves have end-user relationships, from earlier work on smaller projects. They must be taken seriously.”
Both Matthews and Richards acknowledged that R4’s talent was a key part of the deal, because qualified RFID consultants are in high demand.
A March 2005 survey by Computing Technology Industry Association (CompTIA) found that 80 percent of companies participating in the survey didn’t believe there were sufficient numbers of professionals skilled in RFID to hire. Two-thirds of the organizations said training and educating their employees in the technology was one of their biggest challenges.
CompTIA said the market needs hundreds of systems integration companies with RFID capabilities and hundreds of thousands of individuals knowledgeable in the technology to meet current and future demand.
VeriSign’s Matthews said acquiring R4’s consulting services was not a detour for the company, which already has a services organization for its managed security services division.
While VeriSign wants to add still more RFID consultants, it won’t acquire any hardware companies, according to Matthews. “VeriSign is a network services company,” he said. “I would not anticipate us making any acquisitions on the hardware side. That would be very much off-strategy.”