Evan Schuman's StorefrontBacktalk

Analysts are giving Microsoft credit for doing better than expected in the retail POS (point of sale) space as it announces March 8 a new version that adds native support for several common peripherals.

The significance of the new support for the devices?including coin dispenser, keylock, MICR (magnetic ink character recognition), POS power, scale, signature capture and tone indicator?is found in the strong market-share held by rival Linux.

With its free license, Linux had quickly made inroads into the retail POS space, but Microsoft’s counter had always been a TCO (total cost of ownership) defense.

In short, Redmond’s position has been that the cost of adding support and increased time spent integrating various peripherals in a Linux environment would likely cost retailers more than the license fee savings.

By adding native support for new peripherals?along with support for the National Retail Federation’s Unified Point of Service device standard 1.9?Windows Embedded POS 1.1 (WEPOS) is trying to strengthen its TCO argument.

The enhanced peripheral support would also, in theory, make it easier for retailers to use those older legacy peripherals longer, further improving the TCO position.

“Open and free doesn’t equate to easy,” said Jason Stolarczyk, Microsoft’s marketing manager for mobile and embedded devices.

“We look at not only what the current state of the OS or the interaction is, but at how this will interface with customers and store managers in the future.”

Retailers have still been able to use these older legacy peripherals with the earlier version of Windows Embedded POS, but the version saves one step.

“What’s been happening is that retailers were able to use the peripherals, but they would just have to go in and install the API,” Stolarczyk said.

“Now all of that is going to be included. There will be no additional steps to use a coin dispenser or a keylock.”

The retail POS market has sharply changed in the last two years since Microsoft’s entry with WEPOS, said Greg Buzek, president of the IHL Consulting Group.

In its latest market study, which was published in January, Windows Embedded POS was being “seriously considered” by 51 percent of the surveyed retailers. “WEPOS went from zero two years ago to 51 percent now.”

While pointing out that the survey allowed multiple answers of what retailers were seriously considering, Buzek still said that he found the results significant. Much of that interest was coming from retailers who are using MS-DOS, Windows XP Pro, Linux or IBM 4690.

“A lot of [WEPOS market-share] is coming from people who used to use DOS. But a big portion is also coming from Linux and 4690,” Buzek said.

What’s behind the move? It’s much less functionality than pure economics, Buzek said.

“While the enhancements and the variety of equipment helps, the real significance and reason why the retailers are so interested is the drop in the license cost for WEPOS [compared with] Windows XP,” he said.

“XP Pro costs about $205 per terminal for a new license. WEPOS is priced at $75 or less, depending on the volume involved.”

“WEPOS has brought the price down to roughly parity with Linux,” Buzek said. “It has brought the price down to such a point that Windows is competitive from a price and security perspective.”

Buzek said “many retail IT managers think, ‘Gosh, if I do Linux then I don’t have any licensing costs,’ but they do have much service costs. They have more internal support costs or they have to hire outside.”

Paula Rosenblum, who tracks retail technology issues for the Aberdeen Group, agreed that Microsoft’s move does strengthen their TCO position.

“The big deal here is that they can support legacy devices. Point of sale is so expensive when you deal with the store multiplier,” Rosenblum said.

“This helps them avoid having to buy pieces and parts. By keeping legacy peripherals longer, you can postpone purchases. This way, you can change out pieces and not have to change out every single one.”

That does strengthen Microsoft’s ease-of-use argument against Linux, although it doesn’t eliminate it.

“This doesn’t mean that a clever Linux programmer couldn’t” write programs to do the same thing that Microsoft has, Rosenblum said.

Microsoft’s rapid move into a significant retail market-share surprised Rosenblum, she said. “If you would have asked me four years ago whether Windows would have even been part of the POS choice, I would have said ‘probably not'” because “Linux is so inexpensive.”

“Microsoft has done an excellent job at neutralizing that argument. They’ve opted for volume instead of high prices. They are going after market-share,” she said.

“Retailers on the whole are a rather conservative lot, when all is said and done. Windows has turned out to be the more conservative choice,” Rosenblum said. “Windows has succeeded as being the perceived safer choice.”

That said, she said that TCO is too amorphous a statistic to be objectively helpful. Said Rosenblum: “TCO is such a fuzzy number. It’s like MIPS [millions of instructions per second] used to be. You can’t prove the whole story with it.”