Given the currently struggling global economy, companies considering the possibility of deploying RFID technology may be scrutinizing more closely just how quickly such a system would yield a positive return on investment (ROI). A recent survey of companies that already have on-hands experience with the technology, however, indicates a positive ROI may come quickly, within 18 months or less.
According to data gathered by ABI Research, a market research firm focused on wireless technologies, for its Annual RFID End-User Survey report, 74 percent of companies that currently have RFID systems installed and are piloting and/or evaluating additional RFID applications expect to achieve a positive ROI within 18 months of deployment. The data, collected during a survey of 185 organizations conducted in mid-2008, also revealed that 42 percent of those firms expect to achieve a positive ROI within 12 months.
That so many current RFID users expect such a quick return on investment is especially important to potential RFID users, and to the overall growth of the RFID market, says Michael Liard, ABI Research’s RFID practice director. Liard says he pulled the ROI figures from the overall survey data, in order to more closely examine how ROI expectations were faring against an economy that has been backsliding for months. “I’ve noticed that expectations for RFID’s ROI are shortening,” he says, “because the feelings are that price points [for RFID technology] are coming down, the value of data [from RFID systems] is being demonstrated, and implementations are going more smoothly. All this is helping to fuel shortened ROI expectation timeframes.”
Even companies that are currently testing, piloting and evaluating RFID have optimistic expectations of a positive return on investment, the data indicates, with 44 percent of respondents expecting a positive return in 18 months or less, and 26 percent expecting such a result within 12 months.
Combining all of the respondents together (those with systems installed, those with systems installed that are also piloting and/or evaluating additional RFID applications, and those currently evaluating RFID), 62 percent expect a positive ROI within 18 months, while more than one-third (37 percent) expect that result within a year. Only a small percentage—approximately 7 percent—expect a positive return on investment to take more than two years, though 18 percent are not sure when to expect a positive ROI.
ROI will continue to be an important metric in the RFID market Liard says—a metric that vendors and users should continue to discuss and evaluate. He encourages companies to share their own ROI experiences, he adds, so that more companies can understand RFID’s impact.
But Liard cautions companies to take a more holistic and comprehensive view of ROI. “ROI is a piece of the puzzle,” he states. “You need to start getting into conversations about total cost of ownership. For example, what about maintaining the systems long term? And you should start talking about soft ROI and hard ROI. Soft ROI is very hard to measure. Say there’s an item-level RFID system in a store with a customer-facing application. The warm and fuzzy a customer gets from the shopping experience because of that application is pretty hard to quantify, but it matters—and that’s the soft ROI. Hard ROI is easier, such as RFID-tagged promotions put out on the store floor at the right time that coincide with a measured uptick in sales.”
Despite the rough economy, Liard says, RFID projects are moving forward. In some cases, projects were already budgeted for, or were spared the chopping block because they were smaller and less costly than other larger, more expensive IT projects. “And in some cases,” he notes, “the ROI was so compelling that companies believe RFID will not only impact the bottom line, but also the top line.”
During a recent survey conducted by RFID Journal of 100 end users and potential end users of RFID, three-quarters of respondents revealed plans to slow or reduce their RFID deployments this year due to the current economic conditions. However, 47 percent indicated they would do so only “somewhat” or “a little,” while 20 percent predicted the economic downturn would not impact their deployments at all (see End Users Plan to Invest Strategically in RFID in 2009).
The RFID Journal survey also found that approximately 35 percent of respondents said their companies are deploying RFID to gain a competitive edge, while 48 percent reported that they are choosing RFID applications that can deliver both a short- and long-term return on investment.