Cloud POS, Cloud ERP, and Hybrid Cloud POS Solutions for Retail
Although tempered by caution around security and data ownership, corporate adoption of cloud-hosted software and services has become increasingly widespread. For retailers, the question of whether cloud-based POS is right for their business has rocketed to one of the top considerations when looking at moving to a new system. In this article we endeavor to define and explain some of the options available to retailers today when it comes to POS, breaking down common terms and exploring advantages and disadvantages.
Service-Oriented Architecture (SOA)
The essential point of Service-Oriented Architecture is that instead of providing users with a bundled process, every piece you offer is its own service. This means that you’re breaking up larger applications into smaller chunks that are utilized individually instead of as a part of a whole any time they’re needed. For example, if you look up the price of an item, SOA will reference just one purpose-specific chunk of the system (the SKU service or price service) to get that data. SOA is really more intended for the developers than the end users, in terms of who it impacts; typically, the advantages of SOA are that it’s easier to maintain and easier to integrate with.
Software as a Service (SaaS)
The idea of Software as a Service model is that a company can essentially ‘subscribe’ to a piece of software they need without purchasing the software itself, installing or hosting it on any of their machines, and accessing it entirely through a web browser. An example might be a small retailer that decides to buy a subscription to an accounting tool, accessing it via a login through a web browser.
Today, many people have begun to regard Software as a Service as a financial model rather than an architectural model. Although initially the premise of SaaS was irrevocably bundled with the idea of hosting on the cloud, more and more companies are positioning themselves as SaaS by offering regular monthly payments over a multi-year contract in lieu of one upfront license fee. It’s not as clear-cut as it used to be, because of this, and some SaaS offerings don’t even involve “the cloud” as you might think of it.
Multi-Tenant Architecture refers to when an application is built to handle multiple users at the same time. The distinction being made is that while many applications actually run duplicate versions of themselves for each user in order to provide a customized view to match their login credentials, an application with Multi-Tenant Architecture is able to present multiple versioned data and views based on which user is logged in while still only running one application. When someone logs in to the system, if the application can adjust itself natively to show their personalized UI without having to provide a new version of the application itself, it has a Multi-Tenant Architecture.
Three Hosting Options for POS
When a retailer is looking at what kind of hosting they want for their POS and ERP system, they have, roughly speaking, three core options:
- Pure Cloud POS: users access the system entirely through a web browser, no data is stored at the retail location or the head office, the Cloud is updated in real time, but without an internet connection the system is disconnected and cannot process transactions.
- Traditional In-House POS: users access the system through a locally hosted software interface installed on the computers and devices themselves, data is stored at the retail location, the POS sends transactional data in once-daily batch uploads to the head office, and an internet connection is not required to sell something to a customer.
- Hybrid Cloud POS: users access the system through a locally hosted software interface, data is centralized in the Cloud but is also stored in the POS itself; if the internet connection is lost, the POS is still able to process a sale because it retrieves the needed product data locally, and once internet is restored it will update the cloud database with information about any transactions processed as well as download any new product data that has been changed or updated in the cloud in the mean time.
In terms of simplified functionality, you might think about the difference between the three as the difference between Facebook, Excel, and Google Drive.
Facebook (Pure Cloud) doesn’t require you to ‘own’ any software, but doesn’t actually function without an internet connection.
Excel (Traditional In-House) requires that you purchase the software and have it installed on your own hardware, but it has no requirement at all for an internet connection in order to function.
Google Drive (Hybrid Cloud) exists as both an in-browser application and a piece of software you can download to your desktop, and when the internet is unavailable can still be used without any problems. Once the internet is back up, it syncs your data again and saves the changes you made to the cloud.
The diagrams below represent the process of a sale to a customer on two different types of hosting: cloud, and hybrid cloud. The labelled steps of this process are:
- Having scanned an item, the POS requests Masterfile information about that item from wherever such data is stored
- Once the request from the POS is received, that information is sent to the POS (product information, price, etc.)
- The customer pays and the record of the transaction is stored
- Hybrid only: the local record of the transaction is sent to the cloud to update the central data repository
- Hybrid only: the central data repository located in the cloud sends any needed updates to the product masterfiles located in the local storage
Steps 1, 2 and 3 are essential to the process of selling a product to a customer. Without being able to complete these steps, no sale can be made. Note the difference between the two solutions: when the internet is down for pure cloud, all functionality is lost. When the internet is down for hybrid cloud, only steps 4 and 5 cannot be completed.
The History of Hybrid Cloud
ERP and POS solution providers have, technically speaking, been offering hybrid cloud solutions for many years. Historically, the combination of on-premise and off-premise hosting that enabled regular updates of the data in a steady stream while also ensuring systems would continue to function without that connection was known as trickle polling. ERP software providers still talk about offering trickle polling as part of their POS packages today; understandably, sometimes people don’t make the connection required to realize this standardized practice is very much a cloud-based solution.
Determining How Frequently you Need Your POS to Update
How often should a retailer want their POS to send updates to their database? The standard used to be once daily in a batch process, but now it’s possible for your system to update with every single transaction. So what’s the ideal? Often it depends on the kind of bandwidth a retailer has access to. Systems often find a balance between demanding too much from the connection and updating slowly or en-masse by prioritizing certain types of data (customer files, product files, etc.) and allowing those to update as they’re changed or added, while sending other files in a regular smaller batch like once per hour. What works best will you will be determined by your setup and your needs.
Examining Price Differences between Cloud POS and Traditional POS
At first glance, Cloud POS just looks cheaper. You pay for the services, the server hosting, and the POS hardware, and you get access to an entire functioning POS. Side by side with the costs of traditional or hybrid POS solutions, which require you to invest in the server hardware to do at least some of the hosting yourself, as well as the license fees for the software, it seems like a no-brainer.
As mentioned above, however, more and more companies are offering SaaS payment models even when you aren’t in a fully cloud hosted environment. Hybrid models may offer you the flexibility of financial terms that comes with cloud and the lowered cost of hosting while still providing the stability and reassurance of having robust systems that function fine with the internet is down.
You also have to take into account the costs of system failures. When the internet goes down, whether through storms, ISP issues, or other problems outside of a retailer’s control, a solution that depends on the connection renders that store helpless and unable to conduct business. For remote locations without reliable access, that’s a big risk to take; even stores in the heart of bustling malls in big cities can find sometimes the internet just goes down for no discernible reason. During a busy season or an important time of day, this can be devastating financially, costing the company every transaction they lost during the period of time that they couldn’t process a sale.
Should I get Cloud POS?
In today’s marketplace, there’s no reason to settle for old, outdated technology – but there is wisdom in looking for solutions that use the best practices from previous generations of software to improve the stability and reliability of new, innovative offerings. One day pure cloud POS may be the best option out there, but until the internet is unfailingly redundant and can be counted on anywhere in the world, it’s best to investigate if a hybrid solution can meet your business needs.
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