Among all of the insightful findings from the 2010 RIS News/IHL Group Store Systems Study, one of the hidden gems was a section that looked at the maintenance costs associated with software types. The study not only showed significant variations in average costs 
by vertical, but also shed light on the opportunity to reduce cost with best of breed solutions versus enterprise packages
The good news for the POS category was that POS software fees averaged 12% of the license, compared to 13.6 for accounting/finance/HR solutions and 13.5% for merchandising/supply chain software. However, the survey also found significant variations in POS maintenance fees by vertical, with department stores averaging just 9%, while grocers averaged 13.5% and drug stores topped the list at 15.8% fees.
Greg Buzek, President of IHL Group, explained the variations are driven primarily by the dominant software vendors in each sector. “Where Oracle and SAP are more commonly installed, the amount of software maintenance was higher,” Buzek said. He pointed out that retailers are switching over to these larger vendors can see software maintenance fees run as high as 22%.
Given the increased push to lower capital expenses, Buzek said the trend toward buying integrated systems from a single vendor is being reconsidered by many retailers. “Retailers are reviewing the vendors and their solutions. There is a strong desire for integrated systems from retailers, however, the software maintenance fees being charged by some large vendors are forcing retailers to consider best of breed integration or extending the life of current systems because of price increases,” Buzek said.
With an expanded menu of metrics being factored in to TCO for POS implementations, Buzek added retailers now weigh long-term costs for the upfront investment as well as ongoing maintenance against feature/fit benefits. “What has happened in POS is that the market is far more open. Retailers are thinking twice because of the maintenance cost to simply add their ERP or SCM supplier as their POS,” he said. “Overall, the market has changed since 2006 when the movement was to more integrated packages with ERP and SCM providers. Due to the economy and pricing policies, there are more opportunities for other POS applications that are not integrated into existing ERP components.”
While Oracle and SAP have been gaining momentum with their existing retail customers adding their POS software to other existing applications, Buzek said that has become a more challenging financial decision in this climate. “It has to be the absolute perfect fit for these vendors now and POS is rarely the first module for Oracle and SAP now within an organization. They tend to win mostly where they are already installed in some capacity,” he added. “In fact, for one integrated vendor, the market awareness/consideration has dropped by 50% from where it was in 2006. Pricing and maintenance is a big part of that.”
Another trend underscored by the 2010 RIS News/IHL Group Store Systems Study was the increased interest in new operating systems to help reduce costs. When asked which operating systems they were considering for their next POS, Windows XP Embedded was the dominant choice at 38%, followed by Linux at 33% and Windows 7 at 29%. The IBM 4690 remained a stalwart, with 13% of retailers still selecting it for their next upgrade.
“Clearly these new operating systems are having an impact on lowering costs,” Buzek said. “Particularly with the low power states in off-hours, and wake-on-LAN technologies, the retailers utilizing these new systems are able to dramatically reduce the cost of operation for store systems. Add to this increased warranty periods being offered from vendors and the ROI for equipment such as new POS and servers has never been better.”
Overall, the outlook for the POS category in 2010 was upbeat, with 37% of respondents indicating they are in the market for a new POS purchase (compared to 30% in 2009 projections). The key functionality retailers will be looking for in their next POS, according to the study are:
- CRM/coupon and loyalty management (57%)
- Returns/Refunds management (47%)
- Gift card/phone card activations (40%)
- Inventory visibility (40%)
- Employee portal (40%)
- Training (36%)
- Sales transfers across stores (34%)
