RFID ROI At Last: Forget Tracking Toilet Paper, Think Servers and Laptops

CIO — For too many years, the value of RFID technology has been intimately (and unjustly) linked to the relative success of Wal-Mart's ambitious plans to transform its supply chain by using radio frequency identification tags laced with electronic product code (EPC) 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. (For more on another retailer's recent RFID efforts, see "These Boots Were Made for Tracking: Nine West Tries On RFID Strategy.")

A Forrester Research 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. (See CIO's articles in 2004, 2005, 2006 and 2007 for more on Wal-Mart's efforts.)

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 out 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 there's gold in them thar hills: 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 back yard 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"—in, for example, 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 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 is, of course, 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 principal 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."

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