RFID's real ROI is in IT's own backyard

Good payback found in tracking IT assets, studies show

For too many years, the value of RFID technology has been intimately (and unjustly) linked to the relative success of Wal-Mart Stores Inc.'s ambitious plans to transform its supply chain by using radio frequency identification tags laced with electronic product code data.

Over the course of five years or so, Wal-Mart, however, has not enjoyed the customary success with RFID that it has reaped from other IT initiatives. And many of its suppliers have struggled to just make RFID work as advertised, let alone take advantage of the intended supply chain benefits.

A Forrester Research Inc. report on the ROI of RFID for supply chain visibility noted that "amid the hype, the business value of deploying RFID technology across trading partners has been blurred by questions about costs, benefits and scope, and answers are elusive."

All that has led to a generally held business and IT view that RFID is too expensive, offers little business benefit and doesn't deliver any ROI.

In other words: RFID has been a technology solution in search of a problem.

That perception, to some degree, has also dogged the burgeoning tech vendor community that is hoping to build an RFID marketplace. And RFID conferences -- in 2008 no less -- with titles such as "Finding the Business Case for RFID," certainly don't help change the perception.

However, recent research has found that accurate, well-thought-out and highly targeted RFID deployments, coupled with IT-driven data integration plans, can deliver substantial benefits. And it's finally become clear that an RFID tag shouldn't to be placed on every roll of toilet paper in a retailer's supply chain.

Where RFID does make sense

Evidence of RFID's promise in IT's own backyard comes in the form of data from a couple of recent surveys and analyst reports.

First, a recent survey of 186 global organizations by ABI Research found that RFID is being used or evaluated for a growing number of applications across a wide range of vertical industry sectors, from security-based applications to supply chain management to multiple flavors of asset tracking.

Organizations of all kinds are increasingly using and evaluating RFID systems to improve tracking objects, assets, goods and materials within their "four walls," for example, in corporate yards and property, on campuses and in open-loop environments, notes the ABI report.

"Virtually every economic sector and industry where data needs to be collected or objects need to be tracked holds the potential for RFID applications," notes ABI Research director Michael Liard.

Another recent report by ABI finds that RFID is moving (albeit slowly) into companies' data centers.

"IT assets are key infrastructure for any modern business, and IT managers need to be certain that equipment is documented, traceable and secure," notes the report. "Detailed, accurate and regular auditing of IT assets is a necessity. At most companies, this is still an expensive, largely manual process, but RFID can deliver quicker, more detailed and more accurate day-to-day management of these important operational assets."

This, of course, is exactly where RFID makes perfect sense: high-value items that need to be tracked. "Managing and auditing this equipment is a serious pain point for IT departments, and automating those applications with RFID can drive clear ROI," states ABI analyst Jonathan Collins, in the report. "The environment also suits RFID: The density of valuable equipment within a restricted area limits the cost and increases the efficiency of an RFID deployment," he adds.

Though Collins notes that right now IT asset tracking is "just a fraction of a percent" of the worldwide RFID asset-tracking market, it should grow to more than 10% within five years.

One last piece of research comes from Odin Technologies, an RFID integrator and vendor in Dulles, Va. Within the last six months, passive RFID technology has delivered increased performance on IT devices such as servers, laptops, blades and other high-value assets, according to Odin's latest IT asset tracking report.

The study's results showed that, with RFID tags, IT personnel could inventory a rack of 40 servers in 12 seconds or identify all IT equipment within a typical cubicle five times faster than manual methods with 100% accurate data entry.

On the recent advances, Odin founder Patrick Sweeney stated: "It's been a perfect storm of advances in passive technology, such as chip innovations, metal mount tag formats and more sensitive reader circuitry."

This story, "RFID's real ROI is in IT's own backyard" was originally published by CIO.

Copyright © 2008 IDG Communications, Inc.

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