Better business process the No.1 driver behind RFID

While 2009 was a tough year for IT budgets, enterprises are recognizing the value that radio frequency identification technology (RFID) brings to business process efficiency, according to a recent ABI Research study.

The annual study conducted by the New-York based research firm polled 115 organizations currently using, deploying or piloting RFID.

The overwhelming majority of organizations rated business process improvement as the primary driver behind RFID adoption. And nearly half of respondents expect their RFID budgets to increase in 2010.

“Organizations, whether government or enterprises, understand it helps business processes and are reinvesting in that in 2010 as we see the global economy start to turn around,” said Michael Liard, RFID practice director with ABI Research.

C-level executives, added Liard, are becoming more aware of the value of RFID in the enterprise.

Only 11 per cent of organizations said they expect to reduce their RFID budgets. Liard said the reasons varied. Some organizations were in an assessment phase following the completion of a pilot project, while others are still constrained by budgets.

The second most important driver behind RFID adoption, respondents said, was reducing non-labour costs. RFID is often discussed in the context of reducing labour hours by automating time-consuming tasks like inventory, but Liard was surprised to find RFID being greatly valued in automating processes that did not involve people, like spare parts replenishment.

The majority of respondents’ expectations for a return on investment for RFID fell within 12 months, a decrease in timeframe compared to a year ago when the majority expected it to be 12-18 months. The reasons, said Liard, are the proliferation in the market of end-to-end RFID offerings, better technology, and lower price points.

Laurentius Human, executive vice-president with Toronto-based IPICO Inc., a vendor of supply chain RFID technology, agrees that the ROI timeframe for RFID deployments has shortened, which is important for getting executive buy-in. “That definitely is a key driver because it no longer is a five-year window,” he said.

Human has observed a shift in how enterprises approach RFID because it’s no longer the vendor pushing the technology. Instead, organizations are asking themselves whether a form of RFID, like automatic identification, can help their business. If the answer is yes, then they start delving into standards for their industry and the vendors that cater to that vertical. “It’s no longer a technology decision, but it’s a business decision,” said Human.

Liard also noted that RFID adoption is being encouraged by the novel uses for the technology that are always emerging. “Usage dynamics of RFID continue to change in very favourable ways,” said Liard.

While traditional applications for the technology, like security access control and electronic vehicle identity, will continue to anchor the market, Liard said to expect many more use cases coming to the fore that are vertical-specific, such as different forms of asset management for warehousing or transportation.

As the RFID market has quickly commoditized, said Human, numerous vendors chose to specialize with niche offerings. But the building blocks of an RFID deployment are standardized so large enterprises can easily deploy the technology now. 

Follow Kathleen Lau on Twitter: @KathleenLau

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