Although RFID technology has been featured prominently in the press over the last few years and has generated interest among industry members (e.g., logistics, retail, manufacturing, healthcare, automotive), successful adoption stories are few. The high cost of RFID tags is often cited as the primary reason hindering companies from adopting RFID. However, companies tend to overlook the fact that the cost of RFID tags and readers form one component of the overall cost of an RFID project. There are other cost aspects that need to be considered before an RFID project can or should be implemented.
Some of the things contributing to sluggish RFID adoption are uncertainties regarding the future of the technology, the inability to identify appropriate business cases for the technology, problems with integrating RFID with other IT applications, and the cost of adopting the technology. Further, it has been reported that IT projects are often plagued by project delays and huge budget overruns due to the underestimation of costs during the project onset. Since RFID projects are not just hardware projects, but comprise a major IT component, one of the objectives of the project “RFID in the SME Sector” is to develop a relatively simple and accurate method for assessing the cost of RFID projects, particularly the IT aspects of a RFID project.
The expertise and capabilities at the Chair for Information Systems at Technische Universität München allows us to combine research results from the domain of IT Project Management and Software Engineering with industry experience and practical findings in order to develop such a cost estimation method. A multi-step modeling methodology is used to identify and classify the different components of an RFID project (such as hardware, software and middleware) and calculate the cost contribution of each factor.
Characteristics of the Cost Estimation Method:The cost assessment method will guide managers and decision makers in a step-by-step fashion towards assessing the cost of each component in the RFID project. For example, RFID projects are often viewed as consisting of RFID tags and readers. However, a typical RFID project also requires investments in additional computing infrastructure such as database servers, web servers and different application servers. Therefore, the cost of hardware is not just made up of the price of the tags, tag readers and the servers, but also of evaluating the different available options for each of these hardware components and accounting for the time and effort spent in such an evaluation. Similarly, integration cost involves developing or buying integration modules of middleware components. In addition to the price of such components other cost factors, such as testing the components, and their maintenance, will contribute to the overall cost of the project. Further, there is also a need to assess the extent to which the new RFID system impacts existing applications.
Our cost assessment method will provide a tool (consisting of forms, checklists and spreadsheets) that can be systematically used to document the different cost factors and cost components within each factor which will calculate the overall cost of a RFID project. By doing so, this project will alleviate some of the existing complexity and uncertainty associated with RFID projects.
Among the many challenges and uncertainties faced by companies considering RFID, determining the cost of the overall project is an important step that can affect the adoption decision. This is particularly true for small and medium scale enterprises (SME) that often operate on more stringent information technology budgets. Therefore, being able to get a reliable assessment of the project cost is of particular interest to SMEs. As part of the project “RFID in the SME Sector,” we are developing a cost estimation method for RFID projects that will provide an accurate assessment of cost while being relatively easy to use from practitioners’ standpoint.
Technische Universität München, Chair for Information Systems (Prof. Dr. Krcmar)
The project is part of the project "RFID in the SME Sector ". Therefore the project is coordinated within the RFID AZM.
Goswami, S., Krcmar, H. (2010): A Method for Assessing RFID Project Costs. In: RFID im Blick. Sonderausgabe "RFID in der Region München". Verlag & Freie Medien, Amelinghausen 2010.
Prof. Dr. Krcmar
Suparna Goswami, Ph.D.