Virtualized POS — And Other Software Trends
Business Solutions, November 2009
By Mike Monocello
In a recent discussion on BSM's LinkedIn group, Don Gibson, VP of sales and marketing at Pippard, Inc., asked the question, "Can the efficiencies of virtualization be applied to POS?" The concept is simple. Change POS software from being locally installed and stored, to the cloud. Of course, hardware will still be required at the point of sale so your receipt printer, cash drawer, and bar code scanner sales shouldn't suffer. The difference may come with the PCs or all-in-ones you're selling. Of course, they'll still be needed, but if POS software virtualization takes off, the days of PC and all-in-one manufacturers one-upping one another on "bigger" and "faster" could be over — virtualized software requires significantly thinner hardware. As you can imagine, responses to the LinkedIn discussion have been very interesting and thought-provoking.
Victor Guzman, VP of sales and marketing at DataAge, believes that all mainstream software applications will move to a virtualized environment over time. "Virtualization or cloud computing makes sense for software companies because of the ease of deployment and maintenance of the product being used," he says. This means cost savings and higher profits for the developing company; therefore, you will see most applications moving in this direction. He thinks we should see a dramatic change over the next five years.
Chester Ritchie, EVP sales and marketing at CAM Commerce Solutions, agrees. "I believe we are at the very beginning of SaaS [Software as a Service] for POS," he adds. "Today, small companies are implementing it as a way to reduce start-up costs. However, lack of security, reliability, and feature sets are still factors keeping larger and medium- sized retailers from virtualizing POS right now."
Ron Gillies, distribution channel manager for Intuit, adds that real-time inventory management and maximization, as well as the ability to monitor and react to customer trends, will all be enhanced by virtualization.
What Does Virtualized POS Mean To You?
Guzman says POS dealers will have easier setup and installations because customers can be up and running with an Internet connection and data terminal. "The traditional small business will benefit from minimized downtime and corruption of mission-critical applications," he says. Ritchie adds, "Many times POS dealers will not have to go on-site to install virtualized POS devices. Since they standardized upon a web browser platform, compatibility is no longer an issue.
Virtualized POS companies today also standardize on very few POS hardware peripherals so this continues to reduce the need for on-site technical time."
Finally, Gillies says that virtualization is a way for VARs to grow their business by providing products and services to the retailer that clearly improve the efficiencies and profitability of that retailer. In addition, many of the solutions are services that allow the dealer to make an initial profit as well as enjoy an ongoing revenue stream for the life of the customer.
Despite the many benefits of virtualized POS software, there are some negatives you should be aware of. Michael S. Gebb, president of Specialized Business Solutions/Keystroke POS Software, warns that, depending on the form of virtualization and how the product and service are delivered, the role of the POS VAR as "trusted advisor" could be significantly diminished. "Dealers who embrace the virtualized software model and make the necessary changes in how they do business may begin to lose some of the personal involvement and face-to-face contact they now have with their customers," he says.
Guzman says the negative effects to a POS VAR would be fewer hardware sales and/or less expensive hardware being sold to the end user. On top of that, it will be necessary for POS VARs to grasp this new paradigm, reinvent themselves, and be more adept in areas of return on investments and the overall impact of virtual solutions to the bottom line. Ritchie adds, "With virtualized software, the time horizon to profitability for a dealer is extended significantly since their sales model changes from an upfront sale to an annuity sale. The lack of staying power on the part of the customer is also a risk to the dealer because the customer may dump the solution at any time, and the dealer will never realize the entire benefit of the sale." He continues by saying that this lack of loyalty is commonplace within the SaaS industry. Regardless of the current pros and cons of virtualized software, it's something you definitely want to keep an eye on.
Retail Customer-Centric Trends
A more immediate trend and opportunity centers on payment processing. Indeed, Gebb says many of his VARs are reporting that retailers are increasingly asking for features such as the ability to use multiple merchant accounts, capture and use of the customer name off credit cards, and support for flexible spending account rules. Gillies adds that retailers are demanding more and more customer management capabilities, allowing them to track key customer trends, stay in touch with their customers, and provide better service. "It's all about boosting the retailer's bottom line, and the way to do this is to keep a close pulse on their customers," Gillies says.
"Another area gaining popularity is customer-facing displays," Gebb continues. "We believe this is partially due to trends in state laws to require retailers to display certain information to the customer at the POS. While a simple pole display can suffice, retailers are finding they can now put in a full color LCD display for about the same cost." Of course, he says the POS software needs to be capable of displaying the POS information differently on a full screen than on a one- or two-line pole display. How does this relate to digital signage? "We hear a lot in the industry about digital signage, but most such products on the market are for stand-alone applications as opposed to being integrated with the POS," Gebb concludes.