With IBM’s POS Sale, History Really Does Make A DifferenceWritten by Greg Buzek
Greg Buzek is the president of IHL Services and is most likely the analyst who has tracked the POS space the longest.
The POS industry on Monday (April 16) had the most significant announcement in the last 10 years, as Toshiba TEC announced the purchase of the IBM Retail Store Solutions Business. The fact that IBM RSS was for sale was one of the worst kept secrets in the industry among analysts. (We had a lot of fun in those briefings on this issue, for sure.)
But it was a bit surprising as to who purchased the company. There are some great synergies here, some potential holes, and some dramatic market disruption. The new company will be a joint venture where Toshiba owns 80 percent and IBM 20 percent for the next three years to aid transition.
Several years ago, when Tom Peterson was general manager of RSS, it was a much larger group than the $1.15 billion in revenue reported in the release. Pretty much everything that wasn’t mainframe or core supply chain fit under RSS.
As IBM shifted both its strategies at a corporate level and its retail focus to a services-and-software-led sales approach, it has added acquisitions in business intelligence, analytics, CRM, supply chain, optimization and other technologies. These acquisitions expanded the retail business but split the new strategic parts into the software organization. Increasingly, more of IBM’s influence both internally and in its retail accounts has shifted to these software and services components and away from POS.
As HP and, later, Dell entered the PC-based POS market, RSS continued to get leaner and leaner as the net selling price of POS decreased. Yet, at the same time, the overall pie of retail PC-based POS has grown dramatically over the last 10 years, thanks to the lowering of the cost, the move from ROM-based cash registers in hospitality, and the rise of China, Mexico, Brazil, India and other emerging economies.
In IHL’s POS Vendor Market Share Data Service, IBM and Toshiba TEC Worldwide currently have 18.8 percent of the worldwide installed base of units and about 13.7 percent of the shipments. (Keep in mind, we count PCs and Macs being used as cash registers as POS; others may not. So if they only count retail hardened POS, these numbers would be close to double. In addition this includes all hospitality segments, such as hotels and cruises, casinos, stadiums, etc.)
The challenge for IBM has been that the growth has occurred mostly at the low end and in emerging countries, even further challenging margins. Add to this margin challenge the threat of mobile displacing POS.
In IHL’s recent Mobile POS Study, we found that, among U.S. specialty stores, 72 percent were planning to move to offer mobile POS in the next 12 to 18 months. Additionally, this same group said they would be purchasing 20 percent fewer traditional POS terminals going forward.
IBM doesn’t have a mobile story, but Toshiba TEC does.
IBM has never traditionally been strong in Japan. In fact, NCR has dwarfed IBM in the country, thanks to a local manufacturing presence. But that advantage goes away quickly with this deal.
There are certain segments of the market that IBM has just owned for the last 25 years. Ever since the 4680 was released, and that initial wave ran through the early 1990s, IBM has had an overall dominant position (70 percent or higher) in grocery, drug stores, mass merchants, supercenters and warehouse club segments in North America. Even among several software product missteps in the 1990s and 2000s, Big Blue maintained its position, enjoying the growth of Walmart, the Dollar Stores and warehouse clubs.