Does the 'cloud' have a tipping point for QSR operators?

| by Christopher Sebes
Does the 'cloud' have a tipping point for QSR operators?

Not long ago, when I was speaking to a group of CFO's in the restaurant industry, a member of the audience asked, "Why has it taken so long for Cloud POS to get here?"

Well, since I've been working in hospitality longer than most quick-serve restaurants have been in business, I can tell you that existing client-server POS technologies have been around a long time. They have a lot of depth and breadth in terms of functionality, too. 

Likewise, their code base is mature and largely stable, and the ecosystem of compatible hardware is highly developed since many POS systems have been developed over a period of decades. Re-sellers know these systems, as well as what makes them tick and how to install them. 

That's why — if your restaurant or chain has been around awhile — you probably have one of these systems, or have used one. So, simply put, bringing client-server POS systems to where they are today took years.

But, unfortunately, you can't port a POS application from its client-server technology into a cloud architecture/environment with the push of a button. Essentially it requires a rewrite and the cost to rewrite a POS application for cloud architecture is significant. 

You also must have a certain size development staff or the timetable for completion is very long. The companies that do this must have the funding. If they already offer an existing application, they must maintain the resources to keep that solution functioning for existing customers while they're also developing something new for the cloud.

The technology and the price 'tipping point'
To offer cloud POS at a competitive price-point, a number of factors had to be in place and we didn't arrive at that place until recently. So now, POS providers can finally deliver a cloud POS cost-effectively because a new application can be realistically developed using cloud-based architecture in considerably less time and for less money than was possible to do some years back.

So here we are at that point when everything that must go into creating and running a cloud POS finally makes economic sense. Some of these elements include: 

  • Availability of rent-able computing power from Amazon Web Services or Microsoft Azure.
  • Advancements in the application development tools to create the POS software, user interface and database.
  • Availability of technology building blocks, including mini-app-like web services and micro-services.

All these factors have finally come to fruition to now make it economically feasible — advantageous, even — to develop and sell cloud POS. Cloud providers can now package up the computing power, tools and services needed and they now do this with advantageous economies of scale.

So we are here. This is the tipping point today when it is economically advantageous for POS providers to create cloud POS systems that now not only offer price-points comparable to, or below those for client-server solutions. We all win now because now we can offer a cloud product at a significant cost reduction compared to traditional POS and still make a reasonable profit ourselves.
One good 'tipping point' leads to another

This tipping point has been accompanied by others in a sort of cascade effect. For instance, we've also reached a breakthrough position in the way everyone views "cloud." For instance now we're likely to hear refrains like, "If you're not in a cloud environment, you're falling behind."

Sound familiar? This same kind of change happened when people switched from typewriters to word processors, and then from DOS to Windows Operating System. So now, we see one-time cloud-doubters not only adopt, but enthusiastically go "all-in." We're even now seeing general acceptance of, and preference for, cloud-based applications.

Along with the acceptance of cloud came the acceptance of an "As-a-Service" payment model. Think of your own home or work computer: Rather than buying your software on a disc and installing it on your computer like you would have done in the 1980s and 1990s, you probably now rent your software, paying for access to it as a service. 

In the QSR space, many businesses used to be fine with dropping $30K upfront on equipment and installation. But with shrinking margins and rising operating costs, that number is dangerous on a number of fronts. Not only is it intimidating and a hit to any business's regular cash flow, but it's an enormous risk.

However, with an "As-a-Service" or rental model, you eliminate that risk almost entirely because through your monthly payments you are renting the software and hardware, rather than owning it, which offers these advantages:

No big upfront payment required along with the huge dip in restaurant cash flow, allowing restaurant owners to spread system costs out over its usage lifetime. 
Monthly expenses are predictable since support, maintenance, updates and fees are factored into a fixed regular payment that includes these services. 
More global leverage since by renting from an established provider, you harness their power, scale, expertise, technology and service/support.
Large capital expenditures are eliminated since everything is rented, freeing capital for other business expansion, debt reduction and dividend payment uses. 

So a lot of elements have now converged at this point in time to make a cloud POS solution appealing. In fact, so much so that I'm willing to predict that half of the top 250 franchise systems will convert to cloud POS and the related technologies in the next seven years and only you as your brand's leader can make that decision, but this background hopefully helps you make that choice more easily. 

Photo: iStock

Topics: Back Office, Business Strategy and Profitability, Credit/Cashless, Equipment & Supplies, Food Cost Management, Hot Products, Online / Mobile / Social, POS, Research & Development / Innovation, Systems / Technology

Christopher Sebes

Christopher Sebes has spent his entire career in hospitality management and technology. He received a degree in Hotel and Restaurant Management in England and managed hotels and restaurants on three continents including multi-unit restaurant operations in Europe and the US. He created the first Microsoft Windows point-of-sale company, Twenty20 Visual Systems, which he sold to Radiant Systems. He went on to become the CEO of Progressive Software before founding XPIENT in 2004. XPIENT was sold to Heartland Payments Systems in 2015, and he was tapped to become the President of Heartland Commerce, a major player in restaurant and retail management technology. Today Christopher is the President of Xenial Inc., formerly known as Heartland Commerce.

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