Apple's Massive POS Disruption

Franchisee Columnist Todd Michaud has spent the last 16 years trying to fight IT issues, with the last six years focused on franchisee IT issues. He is currently responsible for IT at Focus Brands (Cinnabon, Carvel, Schlotzsky’s and Moe’s Southwestern Grill).

I am holding a new iPhone4, and I am amazed at what this little device can do for less than $400. But it does make me wonder: With all this functionality, why is it that I am currently spending $10,000 for the technology required to ring up a burrito? Something is out of whack.

I am updating my earlier prediction that cloud computing and 4G would change the POS landscape. I now believe that tablet computers and smartphones will lead the charge to the next POS revolution. Although I still believe that cloud computing and 4G will be integral to the process, the biggest changes will have resulted from Steve Jobs delivering the iPad and iPhone4 to consumers in the first half of 2010.

For $500, I can buy a WiFi-enabled iPad that has a 1GHz processor and 16GB of storage. That is more than enough computing power to run the cashier functions of a POS, yet POS terminals can cost as much as $2,000 each. Do we really get $1,500 worth of value for that system?

The answer is "Maybe yes, and maybe not." (Harvard Law Professor Arthur Miller once had a panelist say that very same thing during a discussion and he shot back, "Do you really get paid to give answers like that?") Under the "maybe yes" umbrella, we have to remember the harsh environment where POS lives. How would an iPad hold up to hundreds of thousands of "touches" from a busy QSR? How would an iPad do in an environment where food, water, steam, etc., are standard? Could you manage menus on a 9.7-inch screen instead of a 15-inch one?

Under the "maybe not" answer is this question: How much money does that kind of hardening—or screen size—really cost? If we deconstructed the requirements that drive the costs, would we still "require" them? For example, if you found out that to get a screen size from 9.7 inches to 15 inches would add 20 percent to the cost, would you consider reworking your menus to fit a smaller screen? I'm just wondering if anyone is asking these questions, or whether we are all just blindly accepting that POS units are built a certain way.

Sure you can build your own POS system by piecing together a hardware package and a software solution. But that system is difficult for the franchise-based systems of owners who do not want to be in the POS support business. Most large chains that I am aware of are looking for a company that can provide a scalable solution to thousands of restaurants with one "throat to choke," if you will. Is that need for a top-tier provider inflating our costs by forcing us to purchase more than we want and need?

I am not saying that the iPhone or the iPad is going to be the next generation of POS. But I am saying that if Apple can deliver consumers this type of technology at a price of $400, then it will only be a matter of time before commercial uses of that technology take hold. Coffee shops are already using iPads and Square technology to service their customers. So far, however, there is nothing mainstream. Why?I think that in order for these newer technologies to take hold, two very important things need to happen. The first is that a major POS player needs to take it seriously and start investing serious dollars into a "new technology" program (and not something like the half-assed efforts of most kiosk programs). This investment will only happen when some of the CIOs of the bigger chains start demanding it. Until the POS providers see viable business with some of the larger retailers, these systems will be relegated to technology start-ups that service small retail organizations.

Another consideration is system functionality. I think we need to forget about self-service for a minute. Although technology that allows customers to order their own food or pay at the table would be nice, the real business driver here is a cost-effective way for the crew to ring up sales. (Think about an iPad with a Square payment device integrated into a retail-friendly form factor).

The concept of self-service brings more problems than benefits (right now anyway). But let's not worry about deciphering our cryptic menu structure. Let's not worry about the durability of devices that customers might drop or spill their fifth refill of fountain soda on. And let's not think about the line slowing down when the customer is confused. Instead, let's focus on making far more cost-effective approaches for the crew.

I know that in today's world, POS is a complex system that integrates with inventory systems, labor management, loss prevention and data warehouses. A POS also needs to be highly secure, especially when it comes to processing payment transactions.

I am not trying to oversimplify the problem. It's just that I think these hurdles can be overcome. I know that an iPad (or similar tablet) has plenty of processor, capacity and communication options to meet the needs of most retail applications. The biggest drawback I can see for using something like an iPad itself would be the screen size (9.7-inches diagonal). In my experience, most POS applications leverage 12- to 15-inch screens. Plenty of "original tablets" meet those screen-size requirements. (You remember those relics don't you? They were convertible laptops that everyone called tablets before Apple wiped your memory.)

So what am I missing? Why isn't this done already?

Typically when I write an article like this I receive two types of E-mails. The first is from the established base of vendors who tell me, "It's not that easy. You have all these other considerations that add costs and complexity." The second type is from a new breed of vendors who say, "I'm so glad you wrote this article. This is exactly what our company offers, we just need someone to buy into the vision!"

I'm looking for your feedback. If you think I'm off my rocker, let me know! E-mail me or post on the comments below. Do you have a technology you think fits my needs? E-mail me and let's talk further. Depending on the solution, I would consider a proof-of-concept test for one of my brands. I am a firm believer that we are about to witness a revolution in the POS industry similar to the fall of the mainframes in the late 1980s and early 1990s.

Again, leave a comment or E-mail me at [email protected] You can also follow me on Twitter: @todd_michaud.

And don't forget to follow my Ironman training progress at www.IronGeek.me. (My swim still sucks and there are only three weeks until my first triathlon!)

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