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Aberdeen on Getting ROI from RFID

Research firm Aberdeen Group this week released the latest installment in a series of reports on RFID adoption. Entitled , the report is available free. In this guest contribution, report author Russ Klein summarizes the key findings and recommendations for action.
Nov 10, 2006This article was originally published by RFID Update.

November 10, 2006—As a technology emerges into a mainstream business process enabler, the trail of successes, mistakes and learning blazed by early adopters becomes a roadmap for those who follow. RFID standards organizations, affiliations of technology vendors, and large enterprise users have brought a common language, educational materials for developers, security acceptable to some of the most sensitive organizations, and a level of mainstream awareness and understanding that has business line managers and corporate IT departments asking a new question: What is the ROI model for RFID?

Key Business Value Findings

Achieving positive ROI in an RFID initiative depends greatly on the business problem, the approach taken, the commitment of the organization to leveraging the technology, and the ability of the enterprise to turn RFID data into business intelligence. Aberdeen research shows that the overall, cross-industry average time it takes a best-in-class organization to recover an RFID investment is about 30 months and falling, with the low being 18 months and high estimated at about 4 years.

Implications & Analysis

New developer toolkit technology and intelligent edge devices, growing adoption of standards across industries, and the falling cost of tags and sensor hardware, are shortening the expected time to positive ROI. In particular, the once hidden costs associated with sometimes dramatic organizational changes brought about by (or necessary to) a successful RFID implementation can now be anticipated and managed.

As a result, enterprises are enjoying shorter design and pilot phases, scalable solutions, smoother rollout, and less challenging integration tasks.

Aberdeen's new benchmark demystifies the technology options, reveals the ROI, and provides a roadmap to best practices in the development, management and optimization of an RFID solution.

Recommendations for Action

In addition to the best-in-class actions, companies should evaluate their RFID initiative planning using the following guidelines:
  • Start early. The sooner you get an RFID initiative into the design phase, the more likely it is you will get a jump on your competition.
  • Understand your objectives. Start small but think about how the solution will scale across business processes throughout the enterprise.
  • Pick the right partners. Selecting the proper "flavor" of RFID and technology vendors with domain expertise is essential to a successful program.
  • Don't "self-integrate" unless you happen to be a data integration specialist. Your information architecture will make or break the long-term ROI.
  • Run a pilot. It is easy to miscalculate during the design process or underestimate the costs. A validation exercise greatly reduces the time to ROI.
  • Test "what-ifs". RFID is a powerful way to reduce the cost of exceptions. If you design using the "80% rule" the other 20% can negate the ROI.
  • Look beyond compliance. If you are implementing RFID to satisfy a compliance requirement and do not think about what you would do if the cost of tags were zero, then you are compromising the value of the effort.
Aberdeen's report discusses each of these points and many others in detail. Given the state of the RFID industry today, every organization has the opportunity to emerge as a best-in-class company and achieve positive ROI.

Valued at $399, the entire ROI in RFID is available free on Aberdeen's website for the next eight weeks, after which it will only be available for purchase or to Aberdeen Access members.
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