Simple Cost Analysis for RFID Options – Choice Must Fit the Organization’s Needs and Budget

By Thomas Watson, AMI

Not surprisingly, IT Asset Managers have been asking more and more about the use of RFID to reduce the time and effort tracking assets, especially by implementing RFID technology in as many places as possible.   As prices drop on RFID technology, the benefits become more and more realistic.

A customer recently asked me how much he should spend on asset tags and should they do barcode, passive or active RFID.  I responded, “It depends.”  But in more fully answering his question, we explored some important basics to be considered before committing to an RFID investment.

Technology Overview

Barcodes are straightforward.  Everyone knows how they work.  They were magic forty years ago, but not today.  The most current barcodes are “QR Codes,” which we’ve all seen.  The benefits of the codes are still the same, but they support easier scanning with smart device cameras.  Let’s move on to RFID.

RFID tags come in two basic forms:  passive and active.  Passive tags have tiny internal, unpowered chips that are programmed with data, typically the ID of the asset for asset tracking purposes, but they can store additional data as well.  These passive chips must be near a “reader” to be read.  The reader itself powers the chip, which means the passive chip lasts forever.  Often, passive RFID tags also sport traditional barcodes so that they can be read with both an RFID reader and – if necessary – a barcode scanner.

Passive RFID is a standard, meaning you can mix and match tags with reader hardware.  This is an important distinction from active.

The advantages of a passive RFID tag over a barcode are range and speed.  Under ideal conditions, a passive RFID tag can be detected and read from as far as 30 feet between the tag and the scanner, and you don’t need line of sight, so you can detect tags you can’t access easily with a barcode laser.

Passive RFID scanners can take the form of handheld units or fixed-position readers set up at entrances and exits.  In either case, it’s unnecessary to scan each piece of inventory individually.  A pallet of tagged boxes passing through a portal-mounted reader, for example, records all the boxes simultaneously.   Your asset tracking software must then receive the RFID reads, record that information, and update the database accordingly.

Active RFID is the next level up in terms of performance (and cost).  As their name implies, active tags are internally powered so they can broadcast a low level radio “beacon” carrying the asset description.  These radio signals have a range of hundreds of feet, and so can be detected by a single centrally located reader.  For example, a single reader in the ceiling of a warehouse can detect thousands of assets, and alert the database whenever an asset enters, changes zones or disappears.

Active RFID is proprietary which means that as of today, you cannot mix tag and reader technology.  You get readers from the same people who sell you the tags.  Also, since active tags have batteries, they don’t last forever.  You should figure five to seven years life for a standard IT active asset tag, to be safe.

For those organizations thinking about making the leap to implement RFID in their environment, here is a brief summary of the options described above, including current pricing and applications.

Costs for RFID Tags and Readers

For tags:

  • Basic passive RFID: 10 cents USD each – Good for paper or other non-metal, liquid material.  Will not work for IT or metal assets
  • Metal passive RFID: $1 USD each – Larger passive tags that work on metal surfaces.  Required for servers or metal-equipment, especially in a data center
  • Active RFID: $15-$20 USD each – Powered RFID tags that emit a signal every 30 seconds.  Active RFID is fully automated and highly accurate.  No human involvement is required and has nearly 100% read rates.  Gives immediate notification as things move around or disappear

For readers:

  • Handheld – Passive RFID handheld readers.  A human being waves the scanner near assets. Great for manual auditing of a location, data center rack, etc.  About $3,000 each
  • Fixed Position passive RFID – Portal readers installed in a doorway and detect assets moving through.  Figure on $10,000″“20,000 per portal for hardware, installation and configuration
  • Active RFID readers -Zonal readers that cover about 3000 square feet and detect active RFID tags in their zone.  Fully automated, notifying administrators and updating the database in real time.  Figure on $1,250-$1,500 each.
  • Active RFID Rack/Room Locators ““These work in conjunction with Active RFID readers to report the precise rack or room location of the active RFID-tagged asset.  Figure on $150-$200 each.


Virtually any RFID system can be integrated by publishing CSV file asset updates of asset information that has changed. Commercial software products exist that can receive and automate updates from RFID readers with ITAM repositories like ServiceNow, HP Asset Manager or CA ITAM should you not wish to develop the software yourself.


The bottom line is that the more you pay up front, the more automation you get.  You will need to do some analysis to determine if the value of a particular RFID choice justifies the cost.

The ROI of RFID depends on your labor costs and the value of real-time data accuracy.  If you don’t need real time data and labor is cheap, use passive RFID and handhelds.  If labor is expensive and real time data is critical, invest in active RFID.

So, I think you can now understand my “it depends” response.  Each organization has a unique profile of asset receiving, distribution and volume.  And, of course, there is always the issue of capital expenditures.  However, armed with a clearer understanding of the advantages and disadvantages of each tagging technology, it’s possible to make an informed choice as to which one (or combination) provides the best return on investment.

This is quite a complex topic, but I hope this article provides you with a high level view of the decisions that you need to make.  Companies need to build a business case and evaluate the choices in order to make the correct RFID choice.

By Tom Watson

Tom Watson, IT technology expert and entrepreneur, is the founder and chief executive of AMI. Since 2003, Tom has grown AMI and its flagship application, AssetTrack, into the industry leader in hardware asset management. Tom previously worked as a software developer for several technology startups, including senior architect for Micropath’s asset inventory software. At Micropath, he saw how hard it was for companies to keep track of hardware, which served as the impetus for AMI and AssetTrack. Tom graduated from the University of Washington. When he’s not playing soccer, Tom writes songs, plays guitar and takes lead vocals for a Seattle band called Crown Hill.