Time for CIO’s to step up their game with RFID & ROI

  

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McKinsey is telling CIOs to raise their game and “embrace disruptive technologies”. In August 2009 Gartner’s Hype Curve analysis for the first time ever called RFID “Transformational” their highest rating of impact on an organization. The conclusion is plain to see; using skilled, expensive labor to manually count (whether with human readable or barcodes) is as wasteful today as using a typerwriter and carbon paper to send memos within your organization. 

Yesterday I toured a 550,000 square foot data center facility just outside of London’s Heathrow airport. Our Dublin office requested I visit so they could leverage my operational background running data centers in the 1990s. What I found will make an ideal case study for the adoption of RFID by a CIO who wants to transform the data center through disruptive technology.

Based on measurable and demonstrable metrics there is a 61% savings in effort to provision and location verification by using RFID instead of the 35 year old barcode. If you have a 50,000 square foot data center that receives 1,500 devices annually the annual savings on provisioning alone is $377,618 (this does not include increased productivity through provisioning the server in a much faster manner).

If the same data center costs $250,000 to deploy and integrate an RFID network the ROI is less than seven (7) months. Assuming a 3% weighted average cost of capital (WACC) the net present value (NPV) over three years is an astounding $794,305 or nearly eight million dollars of value created across an enterprise of ten data centers.

If you look at inventory and audit requirement for Sarbanes Oxley, tracking requirement for hard drives containing sensitive customer information and loss due to manual data entry errors, the savings for a data center described above tops out well over $500,000 per year. Many CIOs would first think about laying-off almost five full time staff members as a way to get that savings. Wouldn’t you rather save the money on counting equipment and use it to keep staff for more value-add processes or billable services?

If your organization had ten data centers RFID can drive an annual $5,000,000 savings through process improvement. Remember with RFID it is not about the technology.  It’s all about the process improvement and ROI.