The ROI for Automatic IT Asset Inventory, Location and Protection Using RFID. A Case Study Analysis based on U.S. Department of Defense

Transcription

1 The ROI for Automatic IT Asset Inventory, Location and Protection Using RFID A Case Study Analysis based on U.S. Department of Defense

2 Executive Summary A study was performed in April 2005 at a U.S. Department of Defense site to analyze the cost effectiveness of using RFID for the management of IT assets in a high security government computer lab facility. The study sought to determine the viability of RFID for displacing the regular labor burden of service personnel inventorying, locating, and protecting IT assets. If RFID can be cost justifi ed in a highly controlled IT environment, then the business case for less controlled environments would be a given. A semi-active RFID solution from AXCESS International Inc. was chosen over other forms of RFID (including passive, semi-passive, and active-only) because semi-active RFID tags from AXCESS can transmit their ID at regular intervals and/or be awakened on-demand. These features are necessary to providing fully automatic counting, location, and protection of assets within a facility without any human intervention. The study included a successful technical pilot of the AXCESS ActiveTagTM Asset ActivatorTM system in operation over a three month period. This paper provides a fi nancial analysis of the business case for RFID based on the costs found in the study and therefore associated with managing IT assets in a highly controlled environment. The case included 1300 IT assets of various types in 15 lab rooms. Assets with a hardware replacement cost of greater than $5,000 each were considered for tagging. The time and costs associated with the regular inventory were measured and calculated, amounting to an unburdened $17,000 per year of displaceable labor cost, averaging approximately 12 minutes per asset per year or over 6 total annual work weeks of manual inventorying, locating, and protecting time. The system design included ten RFID receivers on the existing local area network and fourteen on-demand tag activation equipment installations at doorways covering over 20,000 total square feet. The average location precision of a control zone was approximately 1,400 square feet within which to locate an asset. Networked desktop software was included to automatically account for and provide locations for the assets and to interface to alarm equipment in the event of the loss of an asset. The pricing of the system in the base case analysis includes a total infrastructure cost of $19,000 (or $1,350 average per control zone ). Individual RFID asset tags were priced at $15.00 each. The amortized average cost per asset per month for RFID tagging came out to be $1.00 per month per asset over an assumed 36 months. The total capital cost of the entire system including installation and software on a per tag basis came to $36.35 each. In RFID systems analysis, this measure addresses the total cost of ownership by normalizing the different architectures (e.g passive, semi-passive) down to the average total cost per tag including all aspects of the system. The fi nancial analysis showed a positive business case for the capital purchase of a system capable of delivering accurate and automatic asset inventory, location determination, and protection. The base case unrealistically assumes no assets would be lost or missing for a prolonged period of time, and there would be no threat of loss accounted for in the analysis. The analysis returned a positive 63% internal rate of return (IRR) for the savings, a 2.2 year payback for the system, and over $22,000 in net present value savings (assuming a 12% discount rate or cost of capital). If lease fi nancing was chosen, the payback period dropped to less than one year. According to the 2004 Annual CIO Survey published by CIO Magazine, 90% of IT projects approved have a 2 year payback or less. Therefore, in a highly controlled IT computer lab environment, a semi-active RFID solution for automatically inventorying, locating, and protecting IT assets proved to be fi nancially (and technically) viable. 1

3 Further sensitivity analysis included the value of assets protected by the system where assets were assumed to be lost or misplaced and their value was included in the savings. Security industry statistics and case studies of asset loss at the FBI, IRS and other government locations indicate 3-4% of such an IT asset base is typically lost every year and for assets such as laptops which carry intellectual property on them. The average loss per asset reported by the insurance industry is from $28,000 for the typical laptop to over $400,000 in an R&D environment such as this. The case sensitivities included assets being lost per year at values of $5,000 as a replacement cost (not including software, re-procurement time, lost productivity, or lost intellectual property) and $28,000 based on the industry statistics. The sensitivity (see table below) showed the dramatic effect a threat of loss or the actual loss or misplacement of assets has on the business case. Assuming only 1% of the asset base (or 13 of 1300 assets) were lost or risked loss per year, the NPV was over $1 million and the payback was less than 2 months. Historically, assets don t have to be actually lost to be considered. The analysis just needs to recognize the potential effect based on the foreseeability they likely will be. # at Risk of Loss Value IRR 12% Payback Period (yrs) % $22k $5k 112% $33k $28k uncalc $107k (1%) $5k uncalc $220k.2 13 (1%) $28k uncalc $1,128k.1 The conclusion was there is a solid business case for using semi-active RFID for automatically counting, locating, and protecting IT assets. A much higher business case is available when considering the potential loss of the IT assets. In some cases as in the U.S. Dept. of Defense, the true cost of losing the information on IT assets is incalculable. Therefore, IT environments with less stringent controls than high security Dept. of Defense laboratories have a guaranteed positive fi nancial business case for justifying semi-active RFID for automatically inventorying, locating, and protecting assets. 2

4 Background The United States Department of Defense (DoD) and other departments of the U.S. Government operate many their own computer lab facilities for providing information technology for research, development, testing and evaluation, engineering and support for the various department missions. This particular multi-lab facility (a highly classifi ed operation) has assets which consist of computers, servers and clients, routers, switches, communications equipment, and certain special equipment. The system in place is based on the use of bar-codes to identify equipment and track its location. The bar code and supporting asset date has been tracked via spreadsheet. Changes including changes in location are supposed to be reported for entry into the spreadsheet. Frequently, an item is spotted being moved or an item is missing during a test setup or other process. This location and status management process includes the need to match the asset s security classifi cation with the task at hand. The desire was to determine if the use of RFID would save time and money in inventorying, locating, and managing the use of lab assets. The largely manual process is repetitive, redundant and time-consuming creating a frustrating, stressful, and sometimes diffi cult environment. Personnel have to spend the time to locate the barcode on each asset to perform a count and location inventory which is compounded by the fact the assets are in motion in and around the labs. Assets go missing for up to two weeks at a time, creating a concern as to their whereabouts and the status of the computer code and information on them. The current system also provides no manageable custodian relationship to make sure the proper personnel are using and managing the proper assets. The concept was to use RFID to automate tracking and inventory functions. RFID tags placed on the IT assets would automatically transmit a signal which could be interpreted for location consideration and for inventory counting. The RFID tag ID would be linked to the data on the asset in the system providing a total inventory snapshot and enable an exceptions-based operation. The goal would be for labor hours associated with the manual bar-code surveys to be reduced, and daily activities would be generated based upon the RFID tag read data on movements and missing assets. The inherent benefi ts of the semi-active RFID system design included the ability to offer automatic protection from assets leaving a room without being recognized. System Considerations Active RFID tags can be programmed to beacon at whatever beacon rate is desired. Tag beacons are related to each receiver s identifi cation for the square footage covered by the receiver and that coverage map is displayed on the computer screen with icons indicating the location zone. This receiver coverage area is engineered in size by each receiver to conform to the area to be managed. The precision of the location data is based therefore based upon the layout of the facility and the number of receivers used for the desired granularity. Receiver count directly relates to cost so there are system design cost trade-offs to be considered. Zonal size can range from as little as 50 square feet (e.g. a 7 ft. X 7 ft. area) to over 4,000 square feet depending on the receiver design. Beaconing active RFID tags typically last 3 to 5 years if beaconing is set for a couple of times a day. More frequent beaconing shortens the battery life. Tags transmit a signal when battery power is getting low and replaceable battery options exist. Also, tags can be programmed to wake-up and transmit only when in motion so the battery isn t constantly being used to re-affi rm location for assets not moving. This is typically called semiactive operation as in this mode, the tag isn t constantly transmitting. The real advantage of semi-active operation is gained when activating the tag only when it passes out of a control point such as through a doorway. This on-demand approach uses a 3

5 separate activation fi eld (and electronics) whereby the tag listens for a wake-up signal from an antenna placed at the control point boundary. The boundary can be an exit door, a hallway point, or a virtual place in an open area. This activation approach provides precise in or out location determination as well as the direction the asset is traveling (e.g from room A to room B). Only with this technique can personnel be certain that an asset has left a secured area or a room. Beaconing signals alone spill over doorways and security points and prevent an application called asset protection. Adding activation control points ads infrastructure cost to the system. But with asset protection, the value of the asset being protected can be considered in the ROI calculation. The full set of functions becomes inventory, location, and protection. The System Design The system design included ten receivers on the existing local area network and fourteen on- demand tag activation equipment installations at doorways covering over 20,000 total square feet. Semi-active RFID solutions are installed whereby the equipment is invisible and covert. No portals or antennas are visible which improves the aesthetic design and the security. The average location precision of a control zone was approximately 1,400 square feet within which an asset could be located within each room. Every asset which is tagged beacons a signal on a regular basis to receivers which relay the tag signal to a database. Also, as assets move between rooms (or control zones) they are awakened at the doorway. The tag reports its ID and the ID of the activation doorway over the network to the database and software. Although the system has the inherent capability to automatically link personnel with assets in a custodial relationship, this feature was not included in the analysis. Existing access control cards could be linked through the existing personnel access control system. In this confi guration, the approved check-out of an asset requires the holder to present their badge to a passive access control reader so the system can check for an authorized custodial relationship. Semi-active RFID badges can be issued which provides an automatic and non-intrusive relationship check and assignment as assets and custodians move in and around the facility. The additional security benefi ts and labor savings for this auto-check-out/check-in capability was not analyzed here. Software Microsoft Windows-based desktop software was included to automatically account for and provide locations for the assets and to interface to alarm equipment in the event of the loss of an asset. The software and computer ran on the existing facility network. The database collected tag reads and supported inventory counts and location determination. Exception reporting for unauthorized assets leaving included an interface into the security alarm system for automatic alarming in the event it occurred. Financial Analysis The ROI model here used the most common methods of fi nancial analysis for an IT project including the IRR (internal rate of return), NPV (net present value of the savings over time), and the payback period (or breakeven point). The key intangible and variable savings item for the model was the value of protecting assets from loss or misplacement. The value of the information on those lost or misplaced assets qualifi es as well. The model was used to derive a sensitivity to such a loss. Therefore, the fi rst analysis focused on asset inventorying and locating only. Subsequent analyses addressed the value of protecting assets from loss. 4

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7 Conclusions The fi nancial case is justifi ed for using semi-active RFID in a highly controlled computer operation for automatically inventorying, locating, and protecting assets, thereby saving manpower and reducing the risk of losing an asset and its intellectual property. The fi nancial case improves dramatically when asset protection is included, as when asset misplacement or loss is likely to be more prevalent. This is typical in the majority of IT installations such as in less stringently controlled government, educational, and enterprise installations. The use of semi-active RFID tag based solutions versus active-only tagging solutions is necessary for the ability to protect assets. This is because an accurate in versus out reading can be provided based upon the unique doorway activation solution provided with the AXCESS ActiveTag Asset Activator system. About the author: Allan Griebenow is President and CEO of AXCESS International Inc. AXCESS International Inc. (OTCBB:AXSI), headquartered in greater Dallas, TX, provides Semi-Active and Active RFID (radio frequency identifi cation) system for enterprise business process improvement.. The battery-powered (active) RFID tags locate, identify, track, monitor, count, and protect people, assets, inventory, and vehicles. AXCESS patented RFID technologies enable applications including: automatic hands-free personnel access control, automatic vehicle access control, automatic electronic asset management, and sensor management. AXCESS is a partner company of Amphion Innovations PLC.. Allan can be reached at or at agriebenow@axcessinc.com. The company s web site is AXCESS International Corporate Headquarters 3208 Commander Drive Carrollton, Texas tel: fax: Internet marketing@axcessinc.com Sales (toll free in N.A.) fax: Service and Support (toll free in N.A.) fax: Contact Ben Donohue, VP Business Development 6