Lessons Learned From ERP Can Help Drive RFID Adoption

By Kurt Hozak

Research studies and the history of enterprise resource planning systems show that RFID solutions vendors need to make their products not only easy to integrate, but also to use.

RFID Journal's founder and editor, Mark Roberti, recently wrote that the cost, time and risks associated with tying together a system of tags, readers and software from different vendors is a significant impediment to the adoption of radio frequency identification (see End Users Want An iPod). Researchers from University of Aberdeen's Business School used in-depth interviews, as well as secondary sources, to study the factors affecting RFID's adoption in the health-care industry, and reached similar conclusions (see Mapping the Benefits and Costs Associated With Process Innovation: The Case of RFID Adoption). A key finding of their research was that the lack of standardized "best-practice" applications integrated with one another is still a major deterrent preventing hospitals from investing in the technology.

This predicament is reminiscent of the era before enterprise resource planning (ERP) software became prevalent and reduced the need for clumsy, time-consuming and expensive integration between applications sold by different vendors for each functional area. RFID solutions would be much more popular if vendors were to adapt and apply lessons learned regarding the adoption and use of ERP software. As with ERP, customers do not want unproven, piecemeal RFID solutions that limit their flexibility with the remainder of their technology infrastructure. Although the software's difficulty to implement and use was not a large enough hindrance to keep most businesses from investing in ERP technologies, such shortcomings are more of a deterrent for organizations considering RFID.

The University of Aberdeen researchers found that even though RFID's adoption rate has increased in health care, the lack of standardized applications has continued to require collaboration between vendors and their customers in developing the apps. The opportunity to influence application design, and to be the first to implement an innovative application, are often insufficient to overcome the caution of organizations lacking the necessary resources to manage issues associated with co-creating and using version 1.0 products. Some of their hesitation may be driven by memories of well-publicized debacles when ERP vendors first expanded into various vertical markets—even the most successful vendors faced expensive and time-consuming glitches that needed to be overcome by early customers.

To revisit one of Roberti's points in his "End Users Want an iPod" article, a vendor able to establish wide-ranging competence across health-care applications will, by definition, be successful—but the first to do so may be able to catapult its strong market position into overall dominance if the wide base of health-care organizations that have delayed being on the bleeding edge begin to feel safe about taking the plunge to adopt RFID. The first widely proven option could not only become the industry's "gorilla," but also increase the rate of adoption across its market segment.

The Aberdeen researchers quoted an RFID standards organization representative who foresaw potential integration problems for the many hospitals that purchase technology incrementally, and "a real mess" for those that fail to plan their investments strategically. Roberti has also stressed the need for RFID end users to think about the technology as a form of technology infrastructure, in which each successive investment can build on previous ones (see Do You Really Need to Justify Your RFID Investment?).

Part of the early attraction for ERP vendors like SAP and Baan was that they certified the compatibility of their integrated software with multiple databases and hardware products. This expanded these vendors' markets, allowing their customers to build on earlier investments in hardware and software resources and staff competencies when they first implemented these ERP applications. What's more, they could later keep using the same ERP software while migrating to newer technologies.

Systems architected to apply the various technical standards developed and promoted by organizations like EPCglobal can more easily integrate the software with a variety of readers and tags. In contrast to a company like Apple—with its closed philosophy that it has successfully utilized for its simpler consumer products—RFID software vendors would be better served by employing a technology-agnostic or -neutral approach to support a range of RFID hardware, and thereby increase flexibility and simplify planning for customers. The key for software vendors is to form partnerships with hardware providers to develop rigorously tested, well-integrated solutions as part of a larger technology ecosystem. By performing the heavy lifting necessary to develop an RFID roadmap allowing customers to flexibly implement in stages at their own pace, such vendors can help potential customers to more confidently take the first steps toward employing radio frequency identification.

RFID solutions vendors need to make their products not only easy to integrate, but also simple to use. Results from health-care organizations surveyed by researchers from Bowling Green State University showed that perceived risk was negatively correlated with perceived usefulness (see RFID Technology: Implications for Healthcare Organizations). Perceived vendor support positively affected health-care organizations' views of RFID's perceived ease of use and usefulness. Respondents who perceived higher ease of use also perceived increased usefulness—which, in turn, drove intentions to utilize RFID.

ERP software has sold well despite less-than-ideal user interfaces, help and documentation, but many companies do not come close to fully using their powerful and expensive ERP systems' capabilities, due to those shortcomings. However, ERP systems are generally seen as more of a necessity compared with RFID, so vendors need to work harder to sell RFID solutions. Furthermore, although vendor marketing may focus only on making specific tasks easier with RFID, customer expectations are often raised for all aspects of a solution's ease of use, making it more challenging for RFID vendors to fully satisfy their customers.

Because many organizations struggle to understand how to take full advantage of the new types of data that can be collected via RFID, vendors should not burden users further with poorly designed interfaces that make it even more difficult to creatively analyze and apply the collected data. To reduce barriers to adoption, help customers more effectively use their systems, and facilitate success stories and positive word-of-mouth advertising, RFID vendors must focus on ease of use for all aspects of their complete solution (for example, making it easy to install a system, to use tags, other hardware and software to support changed processes, and to analyze and respond to the data).

Although the ERP giants offer RFID functionality in a variety of areas, smaller specialist vendors seem to have applied greater passion and creativity in developing innovative RFID applications, and there are still many vertical markets in which ERP vendors do not offer the comprehensive set of standardized best-practice applications described above. While ERP vendors can offer organic integration with the rest of their offerings, best-of-breed RFID solutions from specialized vendors can also be advantageous, particularly if complex integration with the remaining ERP functionality is unnecessary (see How to Integrate RFID Data Without Disrupting Your Business).

Vendors specializing in RFID are more likely to be ERP-agnostic, which may allow them to increase their potential customer base and more quickly reach critical mass in terms of the depth and breadth of their applications within a vertical market. Although large ERP vendors can leverage their many support personnel and numerous consulting partnerships, the focus of specialized RFID vendors may lead potential customers to perceive them as more capable of overcoming industry- and RFID-specific implementation complexities (see Physics Can Solve Your RFID Puzzle). ERP vendors and more specialized RFID vendors each have unique strengths, but a company in either category could radically accelerate adoption and dominate a market by offering the integrated RFID applications that organizations currently on the sidelines demand.

The importance of the issues discussed in this article will vary by vertical market, as well as the stage of the technology adoption lifecycle. For example, the Aberdeen research team found that indirect benefits (for instance, the optimization of workflow and changes in relationships with patients due to improved safety) were considered relatively more important than direct benefits (the automation of tasks, for example)—a result that they attributed to the health-care industry having progressed beyond the earliest stages of adoption.

Indirect benefits are relatively difficult to quantify and predict. While experimentation can help clarify the extent of their value with less cost and risk than a full implementation (see RFID Research Supports Real-World Experimentation), the Aberdeen researchers noted that some hospitals are hesitant to perform even pilot studies. Their paper repeatedly stressed the need for integrated best-practice solutions that link the various RFID health-care applications in order to reduce uncertainty regarding costs and benefits, as well as spur additional adoption. Similar excellent opportunities exist in other vertical markets as well. Both research studies and lessons learned from the history of ERP can help guide the way.

Kurt Hozak is assistant professor of operations management at Coastal Carolina University's E. Craig Wall Sr. College of Business Administration, and a technology and operations management consultant.