Tuesday, August 21, 2012

Near Field Communication & The Trough of Disillusionment

New technologies are exciting. Entrepreneurs and innovators scramble to see what they can do with the next big thing and the media proclaims that everyone will be using it within months. In the real world, technology takes time to develop, bring to market and gain adoption. One such technology, near field communications (NFC), has promised easy mobile payments for the last few years. NFC so far has been more hype rather than reality. According to research firm Gartner, the hype for NFC may soon be coming to an end.

The annual Gartner Hype Cycle is a report from the research firm identifying where different technologies are in various stages of development. Gartner has been producing the report since 1995 and identifies five phases that most innovations go through before emerging as a practical business.

  • Technology Trigger: the idea may have been around for a while, but the first steps towards viable technology are in infancy.
  • Peak of Inflated Expectations: The very top of the hype cycle when a technology has a lot of buzz but little implementation.
  • Trough of Disillusionment: When innovators and businesses realize that creating a business and implementing the new technology are not going to be as easy as they once thought. 
  • Slope of Enlightenment: When the real growth of the industry sector starts to take shape with enterprises and startups creating real-world businesses with real-world revenue.
  • Plateau of Productivity: The technology has gone from hype to reality with profits, employees and stability.

In 2011, Gartner put NFC at the very top of the Hype Cycle. 

In 2011, NFC was at the very top of the Gartner Hype Cycle

The problem that NFC has had for over a decade is that it is a technology in search of a solution. So far, the NFC industry has not matured the way people have expected, and companies, such as NFC components maker VivoTech, have been caught in the middle, running out of money and being forced to restructure operations. 

While most people associate NFC with payments, the standard can be used for a variety of operations such as information retrieval (think of tapping an NFC tag with your smartphone in a museum to get more information on an exhibit) or security purposes (replacing plastic key cards with smartphones). While these are practical implementations, NFC has proven no better than existing technologies to fully replace them. Most people and businesses believe that a tap with an NFC-enabled smartphone is no different than a swipe with a plastic card.

So NFC has slipped from the top of the Gartner Hype Cycle and is headed towards the Trough of Disillusionment. 

And that makes perfect sense.

The primary growth vector for NFC is its implementation in smartphones and in enabling payments. Growth is happening in both arenas as most new smartphones are coming enabled with NFC (except for Apple?s iPhone, which may or may not finally embrace NFC when the supposed iPhone 5 is announced in the fall). So, the first major hurdle, getting NFC in the mass of consumer pockets, will soon be solved. The second vector is not so clear-cut. As we have seen, the mobile payments industry is more or less a mess. There are too many competing interests with competing products and standards, none of which are being wholeheartedly embraced by consumers. NFC is trapped in the middle of the mobile payments sector. This is what it is like being in the Trough of Disillusionment. 

There is light in the tunnel though. NFC will not be a technology on Gartner?s Hype Cycle that dies before it reaches the Slope of Enlightenment. Products will come and eventually mobile payments will fulfill the multi-billion-dollar promise it has held for years. That might not come until 2016 or later (Juniper Research thinks mobile payments, NFC related or not, will be a $1.3 trillion industry by 2017), which puts NFC within Gartner?s prediction of two to five years to reach the Plateau of Productivity. 

 


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