Active RFID Provider RF Code Nails $30m Deal

Real-time location systems provider RF Code today announced a $30 million contract win in the healthcare space that the company says validates its new solutions-oriented business model, also being announced today. RFID Update spoke with president and CEO Joe Dugan about the news.

Monday August 14th, 2006; http://www.rfidupdate.com/articles/index.php?id=1181

The $30 million, three-year contract is with SYMX Corporation, a provider of medical equipment services and products. The company helps hospitals manage medical assets, including deployment, organization, inventorying, maintenance, repair, and refurbishing. Under the exclusive agreement, SYMX will integrate RF Code's asset-tracking platform into its solutions portfolio, allowing it to offer track-and-trace and asset visibility services to its existing client base of 1,000 hospitals as well as all future clients. Initially, the contract will translate into about one million deployed active RFID tags.

By any measure, this deal is very substantial. Outfitting a 600-bed hospital with RTLS-based visibility solutions typically costs a few hundred thousand dollars, and many of the big deals to date are only at the one million dollar level. CEO Dugan noted that the $30 million with SYMX is only for the first three years. He hopes and expects that it will blossom into future business, ultimately making the deal value even larger.

In addition to the deal win, RF Code is unveiling a new business model that will see the company offer comprehensive, end-to-end RTLS solutions, including hardware, software, installation, services, and ongoing support. Furthermore, the solution will be targeted at select verticals, like healthcare, aerospace and defense, and corporate IT asset management. Previously, the company had offered a patchwork of active RFID hardware and devices that were neither well integrated nor tightly focused on verticals. "I think what has been missing in all this, is to take the hardware technology plus the software tools to actually build applications," asserted Dugan, who joined the company in February. "We wanted to take our technology and point it at specific verticals."

The structure of RF Code's new solutions offering is modeled after the enterprise software industry, where vendors offer a full solution, from hardware and software to the life-cycle services of installation, maintenance, support, and upgrades. "The RFID market was being serviced by a lot of hardware vendors," said Dugan, pointing out that RFID deployment often requires working with too many providers. "We're trying to redefine the market."

The company is also actively providing education on the new business model to its distributors and partners, who will make up about 75% of its business this year and 60% in 2007. "Our goal is get the ecosystem we deal with -- distributors and integrators -- to focus on complete solutions," said Dugan, noting that strategic distribution partners must now go through a certification process.

In addition to the business model change, RF Code is modifying its message, repositioning itself as a provider of RTLS rather than active RFID. While a large piece of its solution is indeed active RFID, other technologies have been blended in, like sensors and WiFi. Going forward, the company will emphasize asset visibility rather than a particular technology.

That is not to say that the company does not tout the superiority of its hardware. Its tags sport a ten-year battery life and cost between five and fifteen dollars, considerably less than competing options. Very high density environments are supported, meaning that more than ten thousand tagged items can be registered per access point. Lastly, the solution offers high resolution, achieving accuracy of up to one-square-meter.

Founded in 1997, RF Code is based in Mesa, Arizona, and has about 115 full-time employees, not to mention outsourced design engineering and contract manufacturing in South America, Japan, and Korea. When asked about the company's future in light of such a large contract win, Dugan said, "We're poised to go big places. We have the momentum and, more important, the revenue and customer base." On the possibility of the company one day going public, he was decisive. "An IPO is on our mind. It is in the plans."