This is the year for radio frequency identification, judging from 500 companies responding to a new survey by AMR Research, Inc. According to AMR analysts Marianne D'Aquila and Dennis Gaughan, the majority plan to evaluate, pilot or implement RFID this year. But don't get too excited about the immediate prospects for the technology. "While it is a pivotal year for RFID, moderate spending through 2007 means that, like many emerging business technologies, RFID will take its time to evolve and be broadly deployed," the analysts say.

Compliance is the primary driver behind adoption of RFID. Big retailers such as Wal-Mart Stores, along with the U.S. Department of Defense, are forcing their major suppliers to get on board with RFID tags for cases and pallets. Process manufacturers in particular are moving faster than they might otherwise have done. Their efforts will hasten RFID adoption, but they will also lead to "painful and costly" deployments for companies forced to deal with a technology that is immature yet rapidly developing.

Although 69 percent of respondents are tackling some stage of RFID this year, only 8 percent are in full deployment. They need to combine long-term strategies with short-term tactical plans, AMR says. One big obstacle is the lack of a clear or rapid return on investment (unless keeping Wal-Mart as a customer can be figured into the equation). Still, companies are pressing on. According to AMR, RFID budgets will average just over $500,000 in 2005, increasing by 16 percent in 2006 and another 20 percent in 2007.