Research by
Sameer Tandon
& Vijay Hegde
Exploring untapped RFID potential for Asset Management in
IT/Data Center and Oil and Gas sector

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
Integrated 5 lens framework
IT Asset Management
Oil and Gas industry
Page 2

Asset Intensive Industries
Page 3

The need of the hour
The fact is that only 7% are
completely satisfied with their
service and maintenance
performance.
Page 4

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
Integrated 5 lens framework
IT Asset Management
Oil and Gas industry
Page 5

Straight from the horse’s mouth
\"RFID is one of those rare
'change the world' technologies “The use of RFID goes beyond
that will force a rethinking of the supply chain. Companies
many value-chain strategies” are seeing the benefits in areas
like asset tracking and drug
authentication. ”
Mark Bauhaus, VP, Juniper Networks
Julie Sarbacker, Director, Sun
Micrsosytems RFID BU
\" RFID is being used today by their customers to
grow business and to benefit consumers: from
increasing visibility in the supply chain to
decreasing counterfeit drugs; from providing asset
tracking in hospitals to ensuring the safety of
miners; from streamlining baggage handling at US
airports to tagging valuable documents in the
Vatican Library”
Mark Bauhaus, VP, Juniper Networks
Linda Young, Director, Business Development, AIM Global
Page 6

Taking over from the legacy
Barcodes have been around for decades
But they are far from perfect…
Page 7

Technology Basics
Essentials
RFID Tags
Passive Semi-passive
Active
Host PC
RFID Readers
Page 8

RFID operating frequencies and associated
characteristics
Page 9

RFID market size and applications of RFID
The Market
is
Booming!
RFID Market 2004 - 2010
Page 10

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
Integrated 5 lens framework
IT Asset Management
Oil and Gas industry
Page 11

Typical questions when you are starting the project
How to best use selected How to build
solution capabilities? internal
expertise?
Do we have internal
capabilities
and capacity to
How and where staff the project?
do we start?
How expensive will
this project be? How
Who does what
do we keep the costs low?
in this project?
How to manage
project and business How do we assure
risks involved? success?
Page 12

RFID
Research Objective
To assess the untapped business potential of RFID applications for asset
tracking and management in Information Technology/Data Centers and
Oil/Gas Sector
Research Methodology
Phase 1: Data Collection
Phase 2: Development of Framework
Phase 3: Application of framework
Page 13

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
Integrated 5 lens framework
IT Asset Management
Oil and Gas industry
Page 14

Integrated 5 Lens Framework
Value Business Challenges Return Proof
Chain Impact On Of
Analysis
Analysis Investment Concept
(ROI)
Integrated 5 Lens Method
Page 15

Integrated 5 Lens Framework Contd.
Value Chain analysis
• Identify areas of applicability for RFID, develop use cases and the
benefits involved
Business Impact Analysis
• Prioritize the benefits and the associated use cases in the order of
their impact on the business
Challenges
• Identify the various challenges involved
ROI
• ROI calculations to substantiate the business case for RFID
adoption
Proof-of-Concept
• Select priority use cases and run a pilot test in the field environment
Page 16

Integrated 5 Lens Framework Contd. ROI
 Forrester’s Total Economic Impact (TIE) based ROI Analysis
 “Risk” adjusted ROI
 Risk-to-benefit and Risk-to-cost
 Most likely benefits and Most likely costs
Page 17

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
Integrated 5 lens framework
IT Asset Management
Oil and Gas industry
Page 18

Information Technology Asset Management (ITAM)
Description
N
The growth has outstripped the
manpower available to look
after the resources! IT Assets
Exponential Growth in:
•Servers/Storage
•Desktops/laptops
•Memory cards
Manpower
•I/O Hardware
•Peripherals (printers, routers)
The Challenges:
YoY server footprint growth of 13.5% (IDC)
Blade servers and small IT assets account for majority
“Run Book” automation depends on human intervention
Page 19

The Manager’s perspective
Key Drivers for RFID enabled IT Asset
Management
5x times faster inventory management
A Manager wants to…
10x times reduction in inventory errors
Gain accurate IT asset visibility
Reduce inventory management
No line of site requirement for managing assets
man hours
Asset visibility – tracking the location of assets Automate data entry and reduce
errors
Includes human readable and barcode data on tags
Reduce SOX compliance costs
Enhance the security of critical
Hands-off security – millions of dollar savings in potential
security threat mitigation/insurance costs assts
Become greener!
Energy savings due to optimum asset utilization
Small enough tags available for tracking hardware like
blades, RAM and other assets
Page 20

Survey Results
Page 21

Lens 1: IT Asset Value Chain analysis
Receive Assign IT Manage Maintain Locate IT Secure
Shipments Assets Inventory and Retire Assets and Alert
Highly Labor intensive process
SOX Compliance
Pain Points and
Green
Concerns
IT Security / Data Assurance
Theft / Loss
Page 22

Lens 1: Use Cases
Output
1 2 3 4 5
Automated Control point Manage rack Cubicle or Asset
receiving of monitoring of level IT asset distributed maintenance
assets assets inventory inventory and retrieval
•Reduces •Asset visibility
•Asset visibility •Rapid data * Faster asset
shipment capture of location within
•Generate and •Faster
errors distributed a facility
maintain inventory assets
•Billing comprehensive management
•Paper
Sequence audit trail of less
•Accuracy of
assets process
•Reduces IT audits limiting human
•Access
manual error
•Security
labour management
Page 23

Lens 2: Business Impact Analysis
Business Drivers of an organization
Security
Operational Efficiency
Asset accounting and accuracy
Asset utilization
Output
Quantified Business Benefits according to the above business
drivers
Priority list of use cases
Higher priority to the use cases with higher business impact
Page 24

Lens 3: Challenges
Business Process Analysis
Integration
Infrastructure cost
Recurring Cost
Organizational acceptance
Environmental/Scenario challenges
Output
Total cost (including pre-RFID labour rate for ITAM)
Page 25

Lens 4: ROI
Total benefits from priority list of use cases (lens #2)
Total costs from challenges and pre-RFID labour costs
(lens#3)
ITAM Risks: risk-to-cost and risk-to-benefit
TEI based ROI analysis
Output
Risk adjusted ROI, Payback
Page 26

Sample Illustration
Present
Year I Year II Year III Total Value (PV)
Total benefit $969,117 $1,453,675 $2,422,792 $4,845,583 $3,603,973
Total cost $2,479,983 $264,433 $294,500 $3,038,917 $2,577,676
Net cash flow -$1,510,867 $1,189,242 $2,128,292 $1,806,667 $1,026,297
Cumulative cash
flow -$1,510,867 -$321,625 $1,806,667 $3,613,333
NPV $1,026,297
ROI 40%
Payback Over 2 Years
Page 27

Lens 5: Proof – of – Concept
Each implementation is unique
Pilot run by Vendors
Priority use cases chosen for pilot run
 Control point IT Asset tracking
 Rack level inventory management
Check whether perceived benefits meet the required
expectations
Produce performance benchmark results
Pilot results used to develop implementation
roadmaps
Page 28

Conclusions
RFID based solutions add significant value to IT
Asset management (ITAM)
RFID tag selection decisions will drive
performance of RFID based solutions for ITAM
Surging end user demand for RFID based ITAM
Growing need for performance standards to
spur ITAM adoption
Limitations of ITAM usage
Page 29

Flow of events
The motivation and direction
RFID as a technology and as an enabler
Research objective and methodology
The 5 lens integrated framework
IT Asset Management
Oil and Gas industry
Page 30

Oil and Gas Industry
The growth of the energy
industry is astounding!
And almost all of it is driven by
the Oil and Gas industry…
Page 31

IT Spending on Oil and Gas
The Growth in IT
spending has
increased in the same
vein!
And as the graph on
the left shows, the
industry has to keep up
with the demand…
Page 32

Lens 1: Value Chain Analysis
Bird’s eye view of
Oil and Gas
Supply Chain
Exploration Production Refining Marketing Consumer
Upstream
•Exploration & Production Midstream
of crude oil
•Services and Repair Downstream
•Refining Operations
•Refinery transport •Sale and Delivery of
•Storage and Distribution
product
•Terminal Management
•Inventory tracking
•CRM
•Inventory Management
•Marketing planning
Page 33

Use Cases
Output
1 2 3
Seismic and Human Capital Facilities
Exploration wells Management
•Monitoring and •Increases safety and •Quality control
management of security of personnel at
•Dyamic KPI collection
mobile and fixed drilling and rig operations
assets
•Measure location and •Geo-fencing
•Performance operational safety
•Supply chain visibility
monitoring in down- environment
hole conditions
•More directed •Inventory control
•Faster location of emergency operations
assets
•CSR measures
•Improve operational
efficiency
Page 34

Lens 2: Business Impact Analysis
Business Drivers of an organization
Supply chain collaboration and visibility
Simplify and enhance operations
Asset security
Asset utilization
Personnel management and security
Output
Quantified Business Benefits according to the above business
drivers
Priority list of use cases
Higher priority to the use cases with higher business impact
Page 35

Lens 3: Challenges
Infrastructure cost
Organizational acceptance across the ranks
Scenario of implementation
Integration across the supply chain
Evolving standards and technology specifications
Recurring costs (upgrade and maintenance cost)
Damage to tags and readers owing to the harsh environment
 List of challenges under the above category
 Tag life time and performance under harsh
Output
physical conditions
 Total costs including the pre-RFID labour costs
Page 36

Lens 4: ROI
Total benefits from priority list of use cases (lens #2)
Total costs from challenges and pre-RFID labour costs
(lens#3)
Risks: risk-to-cost and risk-to-benefit
Total Economic Impact (TEI) based ROI analysis
Output
Risk adjusted ROI, Payback
Page 37

Sample Illustration
Present
Year I Year II Year III Total Value (PV)
Total benefit $2,095,145 $4,190,291 $4,190,291 $10,475,727 $7,890,467
Total cost $3,015,498 $720,513 $720,513 $5,689,857 $3,685,910
Net cash flow -$920,353 $3,469,778 $3,469,778 $4,785,870 $4,204,556
Cumulative cash
flow -$920,353 $2,549,426 $6,019,204 $10,805,074
NPV $4,204,556
ROI 114%
Between 12
Payback and 24 months
Page 38

Lens 5: Proof – of – Concept
Each implementation is unique
Pilot run by Vendors
Priority use cases chosen for pilot run
 Seismic and exploration wells
 Human capital management
 Facilities and asset utilization/maintenance
Check whether perceived benefits meet the required
expectations
Produce performance benchmark results
Pilot results used to develop implementation
roadmaps
Page 39

Conclusion
Asset management using RFID adds
significant value to the bottom line
RFID enables effective maintenance and
security of critical mobile and fixed asset
Enables collaboration and visibility in
vast and complex supply chain
RFID based asset management ensures
better safety of personnel
Limitations with respect to usage of tags
and readers in harsh environments
Page 40

Thank You!
Questions?
Page 41