Supply chain reaction

In the irrepressibly optimistic late-'90s, even Lou Gerstner briefly suspended his traditional skepticism to reveal an inner techno-utopian.

Then the chief executive of IBM, Gerstner described how a car would one day notify its manufacturer of an engine glitch and then be repaired through a high-speed wireless network and remote diagnostic software--all without the driver's knowledge. Comparable technology would be used in everything from vending machines to VCRs.

Unfortunately, people listened.

"For a while there was the whole idea that a personal refrigerator would dial Webvan and order groceries for you." said Bulent Celebi, CEO of chip start-up Ubicom. "Well, we know that's a broken model."

Years later, however, some brave souls are taking a new tack on the concept, known variously as pervasive computing, device computing and extended Internet. Some, like Ubicom and Emware, are even developing products with practical applications that may legitimize the idea, rescuing it from its reputation as the embarrassing equivalent of a harebrained dot-com scheme.

Ubicom is hawking a $13 network processor to manufacturers of everything from overhead projectors to heating and ventilation systems. The processor will enable companies to monitor their systems remotely. Emware is pitching built-in software that lets manufacturers draw data from equipment such as industrial controllers in water treatment plants and that also allows for remote control of home thermostats.

While the vision of a hypernetworked world with a trillion interconnected devices is still decades away, the infrastructure to support pervasive computing applications is taking root slowly in the most unglamorous of places: factories, loading docks, oil refineries and the like. Such industrial settings, as opposed to the consumer market, are creating opportunities for a wealth of technologies--including chips, remote sensors, wireless networking setups, operating systems and software applications--that will collect and interpret data remotely and instantaneously.

"This is our second chance at the e-commerce revolution," said Glover Ferguson, chief scientist at Accenture Technology Labs. Accenture and IBM have established consulting practices for what they respectively call "ubiquitous computing" and "e-business to smart machines."

If it all comes together, Gerstner may be remembered not only for turning around Big Blue, but also for his prophecy.

Grassroots progress behind trend
Much of the emerging technology has come from the ground up. In nearly every industry niche, start-ups and established companies are offering some type of application that could fall under the rubric of pervasive computing.

Medical-instrument manufacturer Beckman Coulter, for example, is using software from Axeda Systems to help it follow the old adage "an ounce of prevention is worth a pound of cure." Axeda's software lets Beckman monitor its equipment in hospitals remotely, via the Internet, to spot and service problems before they become serious. Rather than send a technician only when equipment is broken, Beckman's clinical testing machines have software that sends diagnostic information directly to the company's service division. Beckman can improve reliability for its hospital customers and reduce the number of service visits by preventing equipment failures.

Pervasive computing is also being employed in the chemical industry, where SupplyNet Communications builds wireless sensors that measure how full chemical tanks are. Chemical producers like BASF install the sensors at customers' sites to transmit real-time data on inventory so that they can replenish supplies as needed and make product distribution more efficient.

A handful of software companies and services firms are cobbling together business applications that collect data from networked devices and feed it to existing enterprise systems. This can let companies gauge how quickly inventory is moving through the supply chain or how well products are working with customers, immediate information that could prove invaluable to businesses.

Maria Martinez recognized the importance of such tools early in 2000 when she left Motorola after nine years to become president and CEO of a hardware manufacturer called Kaveri Networks, a venture-backed company designing a processor that would connect any device to the Web.

But Martinez became increasingly interested in a project that a group of renegade engineers was working on: Rather than just designing a

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"I was fascinated more by the space--the whole concept of connecting devices--than by the product," she said. "And when we looked around us, we saw enabling technology everywhere. I finally concluded that a chip play would be much more of a niche market. Our ambition was to build a huge business."

The next year she changed her company's name to Embrace Networks and shifted its focus from chips to software. Today, the company's software handles such functions as feeding information from time clocks to human resource applications, and updating fingerprint databases with information from remote biometric security terminals.

Embrace Networks' success has been slow but steady. It is working with a handful of customers to connect their systems to networks, manage them securely and build applications that retrieve data or control devices remotely.

Playing tag in the warehouse
Proponents believe that pervasive computing will take a major leap forward with a technology known as RFID, for radio frequency identification tags. These are small plastic devices that can hold enough data to identify an individual product and transmit critical supply information such as the manufacturing date, where it's been and when it was stocked on store shelves.

The impact of these tags, each of which houses a chip and a radio antenna, will be profound on the supply chain because they are small enough to be sewn into clothing or attached to a packaged product. Researchers envision RFID tags on everything from boxes of detergent to airline baggage, replacing the omnipresent UPC bar code but with far more information.

"RFIDs are the amoebas of the computing world," said Kevin Ashton, executive director of the Auto-ID Center at the Massachusetts Institute of Technology. "They have tiny bits of logic and memory but because you have all this computing power distributed about, that doesn't matter."

Sponsored by retail heavyweights such as Wal-Mart, Gillette and Procter & Gamble, the Auto-ID Center is working on a standardized system for tags to exchange information with computers, scheduled to be completed in October. Although the range of their antennae and their storage capacity varies, all tags send data to "readers"--simple base stations that can receive RFID information within a certain distance.

This can eliminate the need for "safety stock"--surplus inventory that companies keep on hand to avoid running out of supplies--and save billions of dollars, said Paul Gaffney, CIO at Staples. If a fast-moving item were running low on the store shelf, he noted, the RFID tag could send a page alerting the store manager.

Analysts say that networks of devices will drive demand for both new products and services. Refrigerator makers, for instance, may not want to run their own networks and will need data-mining software and services to handle mountains of information generated by thousands of connected devices.

"Think about having a house with 10 devices each reporting 15 data points just three times a day," said Ian Barkin, a senior analyst at business consulting firm Harbor Research. "Even that can get into trillions of data points being thrown at servers somewhere."

Harbor forecasts an explosion of Internet-connected devices in the latter half of the decade, creating more than $1.5 trillion in related products and services by 2007.

Similarly, AMR Research estimates that sales of complete RFID systems will top $5 billion by 2005 and that 15 billion tags will be sold in 2006, which is when the technology is predicted to go mainstream. Although RFID tags are in use today, analysts say their price will need to drop to about 5 cents each--from current costs that range widely between 20 cents and $10--before they will be adopted universally.

If they do reach an affordable level, analysts and Auto-ID participants say these tags will revolutionize the traditional supply chain, eventually blending into larger networks of interconnected devices. At some point, the functions of tags, sensors and other intelligent technologies may start to blur.

"It will be difficult to know where the computer is or where the computing takes place because there will be little bits all over the network," Auto-ID's Ashton said. "Computing in the 21st century is the summing of all the parts."