Magazine Article | April 1, 2005

RFID's ROI Dilemma

Source: Field Technologies Magazine

Unless end user companies step forward with ROI projections and business cases for RFID (radio frequency identification), the smart label technology will stall.

Integrated Solutions, April 2005
I had just finished a speaking engagement at the wildly successful RFID World 2005 when I bumped into an industry contact. He's spent better than a dozen years in the auto ID/RFID space, working on the product side for a couple of technology vendors.

We talked about the show's attendance (attendees and exhibitors), which exceeded our expectations. We talked about the buzz, which was palpable. The whole show had a real prebubble, pre-Y2K feel to it.

So, it felt like we should speak in hushed tones when we talked about a distressing sign in the RFID industry. "Have you heard of any good business case presentations or ROI projections for RFID technology?" he asked me, alluding to the fact that RFID technology has been long perceived by suppliers as a cost without benefits.

"Actually, I haven't," I replied. "I've talked to a lot of suppliers and vendors. They're all still speaking about potential areas of improvement and business process change. But, no one is bragging about their ROI or sound business case." (To be fair, the context of the conversation was in regard to open-loop systems that fall under the Wal-Mart and DoD mandates. It's understood that closed-loop systems have a good track record in ROI.)

"Don't you think that's a little odd?" he countered. "Companies have been working to meet this mandate for 18 months. These are big companies, spending millions of dollars. Isn't it odd that you can't find one company to talk about ROI? Isn't it odd that there isn't one company that is talking about how RFID really transformed its business? It's all still theory and projections."

And then he added, "As more time goes by, people are going to conclude you can't get a return from RFID -- that it's really just hype. And, that will grind this industry to a halt."

I half expected security to swoop down and drag the heretic from the event. I wish it had happened that way. Instead, I had to confront this disturbing topic.

Companies are secretive. I know. Companies don't disclose real or perceived competitive advantages. I get that. But, none of this explains why we're still waiting for a conclusive ROI report from a user of RFID technology in the field. In 2004, vendors tripped over themselves to discount products and services in an effort to win business with suppliers facing mandates and deadlines. There's no question that in return for working pro bono, vendors had to expect publicity and press releases based on that work. This type of cooperation had to be part of some contracts.

So, where are the case studies? Where are the Power Point presentations? Where are the charts and graphs and C-level testimonials?

The dearth of real-life examples of RFID saving money in an open-loop environment may portend that first real bump in the hype cycle. (No technology expands rapidly without confronting a few of its weaknesses.) Someone will eventually shout, "The emperor has no clothes."

At that point, I'm hopeful a supplier will step forward and refute that claim with metrics and justification that support RFID implementations. If not, we'll have to call security and have that troublemaker removed.