Radio frequency identification (RFID) technology is already common in systems such as the Oyster cards used by commuters in London. It will soon become even more widely used because several major retailers - including Tesco, Marks & Spencer and Wal-Mart - have asked their leading suppliers to adopt RFID tags by 2005.

These developments will cause many IT managers to pilot RFID this year. Many more will monitor developments to ensure their firms do not fall behind as the price of RFID gear falls and new applications emerge.

However, standards are still to be agreed, and reliable integrated hardware, software and support will have to be put in place - and for many organisations these pieces of the jigsaw are unlikely to come together before 2005.

Speaking at the RFID ROI Forum in London last month, Colin Cobain, UK IT director at Tesco, described RFID tags as "radio barcodes". But there are significant differences - the main one being that unlike barcodes, RFID tags do not always need a clear line of sight. Some tags can be read at a distance of several feet or more, though for others the distance may be only a few inches. The range depends on the type of tag, the scanner and the environment.

For big retailers, benefits may include faster stocktaking with fewer errors, more updates and less manpower, as well as better integration through the supply chain, resulting in less inventory, quicker deliveries and lower costs. Adrian Segens, business development manager of Intellident, a supplier of RFID systems, said retailers are saving time by taking data from RFID instead of barcodes. For a large lorry with 1,600 trays the input time has been cut "from 22 minutes to four minutes", he said.

Many tags will be on pallets rather than individual items. Some will be of the read-write variety, costing under £1 each, but most will be write-once tags, typically costing 10p to 20p - though prices are falling fast. However, this cost is only one part of the total. Paul Roberts, manufacturing systems manager at Nestl?Ž Rowntree UK, calculated that tags for a pallet and its cases might cost £35. But the cost of labour to apply them could be five times that if the tags are only required for a small percentage of output.

Additionally there is the price of scanners and other hardware. But for many firms the biggest difficulty may be in re-engineering processes to use RFID, and in integrating the data generated. And there is the problem that though most major software makers are working to support RFID, few of their products are ready. Many believe that currently retailers have most to gain from RFID, while their suppliers face most of the costs.

At the RFID Forum, it was clear that IT services firms see a growing demand - IBM, Siemens, and Cap Gemini Ernst & Young all had stands. But the retailers' deadlines may pose a problem. Nestlé's Roberts said a shortage of expertise might cause delays. And in the US, H Lee Scott, chief executive of Wal-Mart, said his firm may "back off" if it finds its schedule is unrealistic.