Rethinking tCO fOR POS Dell

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					A RIS News Whitepaper

Today’s POS revolution broadens the definition of Total Cost of Ownership

Retail point-of-sale is in the midst of evolutionary — some would say revolutionary — change. And

as is the case with both evolutions and revolutions, the ultimate result of all the various changes

that occur is difficult to predict with any level of accuracy. In fact, sometimes it seems that the only

truly certain thing is that retailers will have a far wider array of choices for their POS software,

hardware, solution platforms and peripherals than they have ever had before.

In a way it’s appropriate that the entire POS “menu” is expanding, since retailers are continually

asking their POS systems to do more: provide more data from back-office and headquarters

systems; access transactions and order history from more sales channels (online, m-commerce,

catalog/call center); accept more payment types; and link to more devices in the store, both mobile

(line-busting tablets or fully transactional mobile POS units) and fixed (interactive kiosks and self-

checkout terminals). And of course, retailers want their POS to accomplish all this “more” in the

same — or even less — time than before.

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           A RIS News Whitepaper

                            POS PRiORitieS
                            The 2012 RIS/IHL Group Store Systems Study reveals how retailers’ requirements and expectations
                            for their POS and store technologies have changed and expanded. (See Figure 1.) Mobility is
                            certainly a high priority, taking the top two spots (63% choosing mobility for associates, 48%
                            choosing mobility for customers), but followed closely (47%) by cross-channel integration. PCI
                            (Payment Card Industry) compliance, a top priority for the past several years, is still recognized as
                            important, coming in fourth with 42% of respondents.

                            Multiple industry studies indicate that numerous retailers have already made moves to upgrade
                            or replace outdated POS technology, or are well along the path to doing so. The 13th Annual
                            POS Benchmarking Survey from Boston Retail Partners indicates that over half (60%) of retailers
                            are forecasting no more than two years’ of additional use for both their POS software and POS
                            hardware (see Figure 2.)

                            The April 2012 RIS/Gartner Tech Trends Study reveals that retailers recognize the need for modern
                            POS technology in their stores. (See Figure 3.) For the categories of POS terminals, software and
                            peripherals, a majority of respondents either already have up-to-date technology in place or are
                            in the midst of a major tech upgrade: a combined 62% for terminal hardware, 56% for peripherals
                            and 55% for software.

                             fi gU R e 1

                                                        TOP STORE SYSTEM PRIORITIES

                                               Mobile for Associates                                      63%

                                               Mobile for Consumers                                48%

                                           Cross Channel Integration                             47%

                                                     PCI Compliance                           42%

                                              Advanced CRM/Loyalty                           39%

                                           Better Tools for Associates                    35%

                                                 BI at the Store Level                  31%

                                             Workforce Management                      29%

                                      Updated Payment Terminals                        29%

                            In AddITIOn TO MOBILITy, ReTAILeRS ARe SeekInG STORe SySTeMS THAT eMPOweR THeIR
                            ASSOCIATeS, LeveRAGe CROSS-CHAnneL CAPABILITIeS In STOReS, And MAInTAIn Ad-
                            equATe LeveLS OF PAyMenT And dATA SeCuRITy

                            Source: RIS/IHL Group 2012 Store Systems Study

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                     2
           A RIS News Whitepaper

                            Changing DefinitiOnS Of tCO
                            while retailers have shifted their views about the roles POS systems play, many are still operating
                            with older ways of measuring the true value of their investment in these mission-critical systems
                            — their Total Cost of Ownership (TCO). Traditionally, and particularly in transaction-heavy verticals
                            such as grocery and convenience retailing, a POS system was prized for offering stability, durability,
                            security and consistent uptime performance.

                            It’s something of an oversimplification, but essentially the old ideal of a POS system was one that
                            did just a few things, but did them very well — and for a fairly long period of time. Calculating
                            a TCO for these solutions was a matter of balancing upfront investment costs with the returns
                            provided by a multi-year product lifecycle, factoring in the costs of periodic software upgrades
                            and ongoing service and maintenance agreements.

                            Retailers still prize stability, durability and security in their POS solutions: these systems are too
                            important operationally, and represent too much of an IT investment, to ever make such factors
                            unimportant. But as noted above, today’s retailers also prize POS solutions that are nimble, flexible
                            quick-change artists.

                            Today’s POS solutions need to access, add to and complete transactions that were started online,
                            on a customer’s smartphone or on a retailer’s in-store mobile device. POS systems, both fixed and
                            mobile, need to connect with loyalty program databases, draw on real-time inventory updates and
                            interface with omni-channel order management and optimized fulfillment engines. They need to
                            provide analytics-based insights and integrate with CRM and clienteling applications.

                             fi gU R e 2

                                                 AddITIOnAl YEARS Of PlAnnEd USE
                                                  fOR CURREnT STORE TEChnOlOgY

                                Mobile devices     9%                      48%                                  35%             9%

                                 POS software          20%                           40%                       23%           10% 7%

                                 POS terminals    10%                       50%                          17%             17%        7%

                                 Store network    7%               28%                      34%                  14%          17%

                                                 0%                20%               40%           60%                80%            100%

                                                        < 1 year         1-2 years     2-4 years   4-5 years     > 5 years

                            MORe THAn HALF (60%) OF ReTAILeRS wILL Be MAkInG PuRCHASeS TO RePLACe THeIR CuR-
                            RenT POS HARdwARe And SOFTwARe In TwO yeARS OR LeSS

                            Source: Boston Retail Partners 2012 POS Benchmarking Survey

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                                 3
           A RIS News Whitepaper

                            Today’s advanced POS systems are equipped to capture a wide range of data about customers,
                            products and transactions, as well as facilitating “save the sale” and cross-channel functionalities
                            such as buy online/pick up in store. These expanded roles for POS systems, and their moves into
                            earlier stages of the buying process via in-store mobile devices, informational kiosks and signage,
                            bring the benefits of personalization and customer experience enhancement to a wider range of
                            retailers. The upselling and cross-selling that were once the exclusive province of high-end retailing
                            can be adopted by specialty retailers and mass merchants.

                            even something as basic as having a POS system that prompts cashiers to ask customers about
                            buying a product warranty or other value-added service can make a significant difference to a
                            retailer’s margins and bottom line — even if only a small percentage of customers take the offer.

                            So along with the changes in the solutions themselves, retailers also need to broaden their
                            definition of TCO for POS. In addition to all the “traditional” values, retailers seeking a more
                            accurate, forward-thinking method of calculating and comparing the TCO of various systems
                            should consider:
                            	   •	 The	ability	to	choose	from	a	wide	range	of	software	applications	and	peripherals	as	the	
                                   retailer’s business requirements change
                            	   •	 Options	for	using	virtualization,	cloud	and	SaaS	support/delivery	methods
                            	   •	 Meeting	PCI	and	other	security	requirements

                             fi gU R e 3

                                                       STATUS Of POS TEChnOlOgY

                                               POS terminals                            44%                                18%            8%        13%
                                              POS peripherals                          40%                            16%           11%        10%
                                                POS software                        35%                            20%               14%              16%

                              Thin-client hardware/software                 18%               9%        13%        1%

                                      Self-checkout terminals            13%          6%5% 1%

                    Mobile POS with suspend (line busting)              9%       8%         13%                 24%
                                   Mobile POS with payment             8% 6%               20%                        28%

                                                                    0%                   20%                   40%                  60%                  80%        100%

                                                      Up-to-date tech in place       Started but not finished major tech upgrade
                                                      Will start major tech upgrade in next 12 months      Will start major tech upgrade in next 12-24 months

                            ReTAILeRS HAve COnSISTenTLy Seen THe need FOR uP-TO-dATe POS TeCHnOLOGy TO
                            MeeT CHAnGInG CuSTOMeR needS And BuSIneSS RequIReMenTS. In AddITIOn TO TRA-
                            dITIOnAL POS HARdwARe, SOFTwARe And PeRIPHeRALS, MOBILe TeCHnOLOGy IS nOw
                            BeCOMInG A SIGnIFICAnT PART OF THe STORe SySTeMS MIx.

                            RIS/Gartner 2012 Tech Trends Study

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                                                     4
           A RIS News Whitepaper

                            	   •		Maintenance,	support	and	upgrades
                            	   •	 	Interfaces	with	a	range	of	mobile	devices
                            	   •	 	Availability	of	POS	systems	and	device	management,	including	mobile	device	
                            	   •	 The	benefits	of	omni-channel	integration	in	areas	including	sales,	margins	and	customer	

                            MiniMizing in-StORe COMPuting
                            At the same time as POS roles are becoming more complex and numerous, retail IT professionals
                            are seeking ways to simplify their administration, management and maintenance. when this can
                            be accomplished, these retailers will have taken large steps toward lowering TCO.

                            Cloud or Software as a Service (SaaS) application delivery vehicles have become popular tools for
                            streamlining IT operations and cutting their costs, but adoption levels for retail POS have remained
                            relatively low. Some retail CIOs remain reluctant to move their data processing and storage for
                            such a mission-critical system out of their own stores and/or data centers.

  With virtualization,                             However, as more and more business (and consumer) technologies move to
                                                   the cloud, this is likely to change. while RIS research conducted in April 2012
 not only do retailers                             revealed that only 16% of retailers currently deliver their POS applications

    get access to the
                                                   through cloud/SaaS vehicles, nearly 20% of surveyed retailers indicate they
                                                   will be making such deployments by the end of 2013. even if some of these
       wider range of                              planned deployments don’t materialize, cloud POS penetration rates could
                                                   reach 25% to 30%.
business applications
      written for the                              POS technology vendors with expertise in cloud-based deployments as well
                                                   as a strong knowledge of the retail environment will be in the best position
 Windows operating                                 to ensure these POS solutions enjoy stability and uninterrupted uptime.

     system, they are                              virtualization, broadly defined as the ability to run software applications
  also able to choose                              on devices that don’t have their own hard drives, is another technology
                                                   tactic that can lower TCO. In the retail space, virtualization allows for
    virtually any kind                             greater flexibility with mobile deployments. For example, retailers can
  of mobile hardware                               run windows applications even on devices using Android or Apple iOS
                                                   operating systems, because with virtualization the applications are not
  on which to run the                              dependent on the end-user device’s native operating system.

        applications.                               with virtualization, not only do retailers get access to the wider range of
                                                    business applications written for the windows operating system, they are
                            also able to choose virtually any kind of mobile hardware on which to run the applications.

                            An added bonus is that because no data resides on the mobile devices themselves, security risks if
                            a tablet is lost or stolen are for the most part eliminated.

                            In addition, when the computing power behind a POS system is taken out of the store, the
                            hardware that’s used, whether fixed or mobile, becomes more of a “dumb” appliance — even
                            though these “dumb” appliances still have access to sophisticated applications and deep databases.

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                      5
           A RIS News Whitepaper

                            If such a device malfunctions or breaks, it can easily be switched out for a spare device — and
                            hardware price points have come down far enough that retailers can keep these spares on hand in
                            their stores. Re-imaging and reconnecting these appliance - like devices becomes a simple process.

                            Retailers also get the advantage of a uniform POS infrastructure that, by its nature, operates with a
                            single version of every application. Retailers can adopt a “test once, deploy multiple times” model
                            for changes and upgrades, minimizing concerns about variations in IT environments at different
                            store locations as well as POS hardware variations over the deployment period.

                            WiReleSS aS in-StORe enableR
                            As retailers increasingly see the value of in-store technologies to enhance the shopping experience,
                            they are also seeing the necessity of maintaining a solid wireless support network in their stores.
                                                     Mobile POS deployments, interactive touchscreen kiosks and digital signage
                                                     are just a few of the technologies that will depend on wiFi or its equivalents
                                                     to support their independent operation or to connect them with the POS
          Establishing a                             and other store and back-office systems. These devices are taking on POS
                                                     -like roles by gathering data, such as customer traffic and dwell times in
         secure, robust,                             front of interactive signage, so they need to remain connected to back-
                                                     office and headquarters systems that aggregate and analyze the data.
       scalable, easy to
                                                    In addition, wiFi support for consumers’ technology will soon move from
    deploy and manage                               being a differentiating factor to an expected service. establishing a secure,
                                                    robust, scalable, easy to deploy and manage wireless solution is fast
      wireless solution                             becoming a key enabler for many types of operational and customer-facing
                                                    initiatives. working with technology vendors that offer comprehensive,
     is fast becoming a                             secure wireless support, encompassing site surveys, deployment,
                                                    management and ongoing proactive monitoring, provides retailers with
  key enabler for many                              another way to create value and lower TCO.

  types of operational                              As devices multiply, retailers are also recognizing the need to take a more
                                                    comprehensive approach to security. when fixed-terminal POS was still
  and customer-facing                               the primary store technology, PCI compliance was a key area of focus.
                                                    even then, security experts warned that becoming PCI compliant, while
             initiatives.                           important, did not necessarily mean a retailer had addressed all its data
                                                    security issues.

                            Today, there are the added complications of mobility. Mobile devices, even those with limited
                            POS transactional functions, need to be managed in order to deal with loss, theft or hacking
                            attempts. Mobile POS technology requires even higher levels of device and security management,
                            to ensure that customers’ payment card data and Personally Identifiable Information (PII) reach
                            their destinations without getting “sidetracked” into a hacker’s device. Retailers need to be able
                            to easily deploy and manage these kinds of systems across multiple stores from a central location
                            while also keeping them up to date and secure.

                            PCI compliance (including assessment, scanning, auditing and remediation) is top of mind for
                            retailers, but their security needs extend beyond keeping transaction data secure. The overall
                            security landscape has become more complex, and retailers are being asked to do more with less.

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                      6
           A RIS News Whitepaper

                            Technology vendors offering a holistic, comprehensive approach to security therefore provide
                            significant value.

                            DeliveRing Data
                            As the POS (and stores in general) increasingly operate as one node within multi-channel
                            operations, retailers want to both speed and simplify their data management across channels.
                            They would like to be able to access customer data, inventory and order management information,
                            analytics insights, employee information, etc. on the devices they’re using at the time, essentially

                            Being able to quickly map data fields from either cloud or on-premise systems, connecting them
                            in cloud-to-cloud and cloud-to-on-premise configurations, gives retailers agility. Achieving this
                            cost-effectively makes them competitive. Those retailers who solve their integration challenges
                            are better positioned to deliver an omni-channel experience to their customers.

                            As with almost everything else about POS and store technology, calculating TCO has become a
                            more complex affair. Previously, POS hardware’s five- to seven-year lifecycle was the key virtue
                            that kept its TCO low. now, retail is such a fast-changing business that products providing greater
                            value over a shorter lifecycle may actually be a better bargain.

                            while the POS revolution is far from over, it’s certainly progressed far enough for retailers to begin
                            rethinking how they define, measure and calculate these technologies’ value. Redefining TCO to
                            factor in not only what the technology itself provides, but also what the full spectrum of vendor
                            services and relationships add to the mix, makes sense in an increasingly connected, customer-
                            driven technology and business environment.

Reth i nki ng tCO fOR PO S | J U LY 2 0 1 2                                                                                     7
A RIS News Whitepaper

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