Should you take your POS into the cloud?

Q: My store is using an older point-of-sale system and I’ve been putting off some expensive upgrades. I’m hearing a lot about “the cloud” and hosted POS applications, which would allow me to do things like integrating iPads as mobile sales terminals. Can you share insight on the pros and cons?

A: Great question. Yes, the cloud has become part of our vocabulary and as hosted applications become more mainstream. What is the cloud? Cloud computing as it applies to point-of-sale systems is the ability to use software as a web-based service rather than buying a hard copy of the software. That software and data is stored—and updated—remotely and accessed through your web browser.

Most of us are already accustomed to working with cloud solutions in our daily lives—think Neflix steaming video, Google Apps and Salesforce.com. The idea of Software-as-a-service (SaaS) is simply to pay a monthly subscription fee for the use of a hosted solution to run your business. As cloud computing is being used by more and more Fortune 500 companies, businesses are more comfortable with the idea of hosting their data off site, especially if the security level is higher than they could achieve in-house. Even the U.S. government is moving to the cloud to save costs and reduce its deficit.

The biggest reason a business moves applications to the cloud is to lower costs associated with maintaining premises-based systems, along with the time, complexity and security. They want to focus on their core business, in this case retail, and let a third party run their technology on a platform that will innovate without disruption to the business. The want all the functionality they require without the headaches of running the IT infrastructure in-house.

Cloud solutions allow for the free flow of information on a real-time basis between multiple stores and HQ, instead of the nightly polling of data that many retailers today know all too well.

But should you and your business do anything with it? What are the benefits of SaaS or Cloud for today’s business owner?

In one camp are people that think of SaaS as renting vs. buying and would rather own their software solution than just rent it. Wanting to buy and own software licenses always made business sense before the rapid pace of technological advancement and the advent of the internet and cloud computing.

If you believe that you can ride technology at a slower pace, upgrade your system every 5 or 10 years, and that no new developments are likely to come up that you business will require, you should just buy the software and stick with the current version.

There are plenty of retailers that are still running 10-year-old software, and with the hardware to match. If you are using a version of particular software that was purchased some years ago, there are heavy professional services, hardware and software upgrades involved with a major upgrade. That is why many retailers on premises-based systems feel so weighted down by their technology.

It is a complex, costly process to upgrade and many users find they do not want to deal with it when the time comes, and will instead elect to skip a generation and stay with the current, antiquated, version they are on. Meanwhile, technology advances and the next upgrade offered is even more costly, and the anxiety of knowing you need to do something builds.

It is easy for paralysis to take hold, not just because of the complexity and cost of an upgrade, but because of fear. The fear of change and the thought that they are so deeply invested in the software that they simply can’t extricate themselves. The fear that they may be in the same situation again in five more years.

However, if you believe that technology will advance and continue to bring new functional value to your business, there are strong reasons to consider the advantages of a SaaS, cloud-based system. In fact, if you feel bogged down by your current software, paralyzed by the decision to upgrade or not, moving to the right cloud application can be a fresh start without the huge upfront capital investment.

On a hosted or SaaS model, you have very little upfront capital commitments to make because it is a subscription model. You have simple upgrades which are introduced gradually by the developer so that the software is keeping pace with innovation with no disruptions or capital outlays. Plus the developer has to have the user base on the same version for their own sanity of support and for the efficiency of the model. Hosting makes this option possible, as opposed to many separately maintained versions going back years and running in closed environments.

With SaaS-based applications, since it is a monthly subscription model, the software developers need to earn their keep every day. There is no massive upfront cash outlay that financially handcuffs the client. They must innovate and keep the retail application on the cutting edge of technology to maintain the base of users. It is pay for performance or they will fall to a better breed of cloud technology down the road.

When new technologies come available, the SaaS developer should have the nimbleness and agility to take advantage of them as compared to a legacy software developer who has a major overhaul, and cost, to roll out new versions to their premises-based clients.

Another critical issue is that many premises-based, licensed POS applications become prisoners of their architecture. The software was build on older code, older architecture that cannot freely adapt to, or communicate with the newer, more open web-based technologies. As a result retail technologies such as mobile POS using iPads, are very difficult to bolt onto these older legacy systems.

The more a legacy system needs to bolt or patch new technology on top of older technology, the more difficult it is to continually advance the product in a uniform way. Everything becomes a retrofit instead of a smooth flowing addition, layered within the overall consistent architecture.

The pace of technology and innovation is daunting and magnificent all at the same time. Look at the way that Apple and other technologies have changed our lives as consumers, in what we now demand of technology to run our daily lives.

I think of the comedian Louis CK and how he says we are so spoiled that we complain if it takes a text message more than 10 seconds to reach us. “I mean, can you be a little patient, the message it is traveling up into space and back…it’s going into SPACE! Can you give it a few seconds?” We demand that technology perform and be available to us as consumers. We are impatient with inefficiency.

Retailers want leading edge technology in their stores because they are already living with iPads and mobile technologies in their own lives. They are accustomed to the ease of use of these incredible devices, and they know their customers want that experience. They are frustrated that they cannot use it at their stores to get closer to their customers…right now.

The promise of the cloud is to allow the retailer to keep pace with technology, not be outrun by it. You keep pace with technology while you focus on your business, your customers, your merchandising, and not bogged down in IT. You get to pick the fruit of innovation, like mobile iPads to run the POS, without having to wait on another version release and upgrade.

The SaaS cloud model rewards the developer for the advancement of the product and the service that goes along with it. The cloud application requires the highest level of service, support and trust. It is free market capitalism at its most pure. Innovate or die.

Deliver a low cost solution to retailers that gives them the freedom to innovate, get closer to their customers, drive engagement, analyze and run their business, respond quickly to trends, and drive revenue, without shouldering the IT burden, and they will beat a path to your door.

If you would like more information on Cloud based POS applications please contact me at michael@retailmerchantservices.com.
Michael Dattoma is President of The Bart Group Retail Merchant Services in New York. Michael has been consulting with specialty retailers for over 20 years. The Bart Group Retail Merchant Services delivers broad expertise to Independent Specialty Retailers in areas including Payment Processing, PCI Security Compliance, POS Inventory Control, as well as Mobile Marketing and Social Media. Michael and his team advocate for independent specialty retailers to help empower them with the resources, tools and expertise to thrive in an increasingly competitive marketplace.

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