The adoption of RFID continues to gather momentum, and spending on related hardware and software is expected to skyrocket over the next five years, according to Gartner.

The analyst firm said that worldwide RFID spending is expected to total $504m in 2005, up 39 per cent from 2004, growing again to $751m in 2006 and reaching over $3bn by 2010.

Gartner does not see the technology as a straight replacement for barcodes, expecting growth in RFID to be driven by sectors outside the retail industry.

"Just because barcodes are used extensively in distribution centres does not mean that RFID will be," said Jeff Woods, research vice president at Gartner.

"Companies are beginning to discover business value in places where they cannot use bar coding, which will be the force that moves RFID forward.

"For the most part, barcodes are better at collecting data in highly structured and engineered processes, such as warehouses, and this is likely to continue for the next five to seven years.

"However, RFID tags will be used for the data collection of mobile assets and in largely chaotic or unstructured business processes, ranging from retail environments to hospitals, enabling those environments that lack sophisticated process engineering or controls to be systematically managed."

In many cases, RFID will be used in areas where the process is not controlled by an incumbent business application, according to the analyst firm.

Rather than integrating RFID data into established transactional applications, companies will need to develop new business applications if they want to put RFID at the centre of a process, Gartner said.