Traditional Versus Cloud POS Systems, and Why Now Is the Time to Make the Change

Portions of this blog first appeared in Great Taste Magazine.

I remember my very first cell phone.

I was a teenager. I recall the freedom of not having to wait until I got home to see if a friend left a voicemail on the answering machine. Well, that’s if it wasn’t already deleted by another family member. We were constantly playing phone tag and nobody ever knew where we were.

There’s no doubt that mobile phones changed our lives, making it easier to stay connected to friends, family and our businesses.

Even more so, on June 29th, 2007, the iPhone was introduced by Apple. It was at that time that the “smartphone” started its climb to become more powerful than supercomputers, eventually allowing us to connect every moving part of our world. From high definition photography and live video to banking and navigation, we can do nearly everything imaginable from the palm of our hand, which is why 81% of Americans use one every day.

Much like cell phones, the restaurant business is undergoing a major technology shift in an area that is equally as important to its livelihood; the point-of-sale system.

When I first started in the transaction industry nearly 20 years ago, I was still convincing many restaurants to start accepting credit cards or to use point-of-sale systems instead of basic credit card machines. I remember at that time if their system had the ability to automatically split a check it was a big deal. Wow, how times changed.

Although we’ve hit mass smartphone adoption, only a small percentage of restaurants have changed from their traditional point-of-sale (or POS) systems to cloud POS systems.

Before we dive in further, let’s talk about the major difference between the two;

A traditional, or legacy POS, stores all data on a local server which is located within the restaurant.

Cloud-based POS or Software as a Service POS (SaaS-POS), is web-based and runs on a cloud service, meaning that the data is stored online.

So, why are so many restaurants late to the game when it comes to making this change?

When Cloud systems were first introduced in the market, the biggest worries from potential adopters can be summed up in these two common questions;

Question 1; Security:

What is “the cloud” and who can access my data?

Answer: In reality, with traditional POS systems, security is more of a concern as the restaurant must protect their own internal network to eliminate a potential breach, which also complicates PCI Compliance.

When a POS system runs on the cloud, this means that the restaurant is outsourcing data storage to a 3rd party, most commonly, Amazon Web Services or Microsoft Azure (read: someone who likely takes far more security measures than a local steakhouse).

Question 2, Uptime:

Should I trust a system that operates on my restaurant’s Wi-Fi network? Will this system go down when the restaurant gets busy?

Answer: Legacy systems have historically taken bragging rights over cloud POS in this area until recently. Although cloud systems started on iPads and tablets where wifi was the only connectivity option making for spotty network connection (and thus, making the restaurant nearly non-operational), they have since moved to hardware that provides hardline internet connectivity. This gives users the best of both worlds; the benefits of the cloud and the reliability of traditional systems.

Not that security and reliability aren’t important, but let’s cut to the chase and talk about the real reasons why it’s worth making the move to the cloud now.

1. It’s Less Expensive

Cloud technology is nowhere near the cost of a legacy system. This holds true for upfront and ongoing costs. As opposed to requiring a restaurant to write a huge check every few years for the latest software (and withholding support until it’s paid in many cases) cloud systems typically charge monthly software fees which include unlimited upgrades to the platform. Many cloud POS providers update their features so regularly that its users have new bells and whistles every week. And, they can count on quick updates for the latest security standard requirements.

2. Increased Revenue

With a streamlined process, restaurants are now able to create a culture built on quality service. Cloud POS systems allow customers to pay faster and also offer the benefit or connecting in a mobile environment to keep restaurant employees on the floor (rather than running back and forth between the kitchen and POS terminal). This means more time to serve the next guest along with more upsell opportunities.

3. Decreased Labor Costs

With modern POS systems, it’s easier to be smart about distributing labor. Data at your fingertips let you know when to staff employees and comes standard with tools to manage things like early clock-ins and breaks to avoid costly mistakes.

4. Keep Guests Returning

The latest technology offers restaurant owners the ability to know who their customers are, how much they’re spending, what their favorite dishes are, where they’re from, and how long it’s been since their last visit. The more a restaurant knows its guests, the better their experience will be. The better the experience, the more likely they are to continue to return and tell their friends.

5. Staff Accountability

No matter what type of establishment, a cloud-based POS can track every last drop of product, allowing discrepancies to be spotted in an instant and fix gaps before they become problematic.

6. Integrated EMV/Chip Readers

Traditional systems were built before the introduction of EMV/Chip readers, so legacy systems that have added them have adopted a tethered, “semi-integrated” chip reader that tends to cause lag time. With fully integrated chip readers, chip cards can process just as fast as magnetic stripe transactions. And, it’s imperative to adopt EMV because eventually, the magnetic stripe will go the way of the dinosaur.

7. Real-Time Updates & Adjustments

Know what’s happening at table 108, which dishes are selling well tonight, how today’s happy hour sales compare to yesterday, what the current average table turn time is, change menu prices and inventory for tomorrows brunch menu and even send a note to all staff members working tomorrow night -- all from the palm of your hand, anywhere in the world.

8. Simple Adoption

If you have a smartphone, you’ll ace learning a cloud POS in a matter of minutes. They’re built like phones, complete with touch, taps, swipes, and apps. Which, brings me to my final point;

9. Applications

Choose from the restaurant industry’s best scheduling, payroll, online ordering, delivery, kitchen display system, customer rewards programs and more to integrate with a cloud point-of-sale system. With every piece of vital software working together the restaurant can operate most efficiently.

When cell phones were first introduced, many were opposed to the idea. Even when Apple first introduced the iPhone, not everyone thought it would catch on, but we all know how that played out.

When it comes to the restaurant POS systems, I’ve got a fairly good idea where that’s headed as well. And, my guess is, so do you.

Like my old cell phone, maybe someday we’ll have a conversation about your memories from your old legacy POS system and just how far you’ve come.

About:

Paul Hadfield is a veteran of the payments industry and the founder of Hadfield Group which partners with businesses to design, implement and support custom point-of-sale solutions. He is a recipient of the Electronic Transaction Associations inaugural “40 under Forty” award as is a member of Forbes Finance Council. Hadfield Group is also a member of the Payment Card Industry (PCI) Security Standards Council which is responsible for payment card security policies, procedures, and guidelines.