According to IBM, RFID technology is already highly economical for companies looking to track inventory, streamline production and reduce theft, as the cost of tags and readers has been dramatically reduced over the last 18 months. "Cost is a really interesting debate," IBM's Holland said. "The business case for RFID is most definitely around cases and pallets, but we believe that by 2009, 50 percent of 'high value' items (such as items with warranties) will be tagged."
However, Jeff Woods. principal analyst at Gartner Inc., said that even people who sell high-value items (regardless of the definition), are struggling to make the business case for RFID.
"Everyone's got a hunch that this is such an important technology, so no one wants to be the nay-sayer," Woods said Thursday.
In his report, "Prepare for Disillusionment With RFID," published Wednesday, Woods writes that the benefits of RFID have been oversold, and that it is unlikely the technology will be able to live up to its near-term promises.
"There are great aspects to RFID and Gartner remains positive about the technology for the long term," Woods said, "but there are downsides including, of course, the cost, but also other things like security."
People are often surprised to find out that RFID isn't totally secure, Woods said. "In some cases, RFID tags have been shown to have failure rates as high at 30 percent. And where there is an incentive to subvert the technology, like in the retailing grey market, it takes some effort but it can be done. For example, the key links are short enough to just brute force break," he said.
According to Woods, through 2007, the strategic business cases for RFID will be meaningfully explored by only a limited number of early adopters. Additionally, by 2007, at least 50 percent of RFID projects under way in 2004 will fail. "In many cases bar code technology is, and will remain superior to, RFID," he said.
Where RFID does have success is in chaotic situations, such as in hospitals and in battlefields, where bar coding isn't practical, Woods said. "Another area where RFID works well is in situations were the person collecting the data doesn't really care about data collection. For example, a 16-year-old working a part-time retail job may not be very motivated about data collection."
So while a country's defense industry may have a great business case for RFID, Woods finds many other business cases, such as for ports, less interesting. He added that he thought Delta's RFID business case was marginal.
"The business cases for RFID aren't nearly as easy to achieve as has been advertised," Woods said.