With IBM’s POS Sale, History Really Does Make A Difference

Written by Greg Buzek
April 18th, 2012

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.


3 Comments | Read With IBM’s POS Sale, History Really Does Make A Difference

  1. Rick Legue Says:

    Excellent analysis. It would appear that a huge challenge to IBM POS System users will be, how to maintain the integrity of the IBM POS platform they have installed. How long willl the existing models be available before changes are made? Standardization within the store would appear to potentially be in jeopardy. As stated, one of the biggest changes in the POS landscape in history. The market for used, refurbished IBM POS equipment may have just grown exponentially!

  2. Jeff Ketner Says:

    Great analysis, and I agree that mobile is one of the huge disruptive trends that are hastening the demise of the traditional POS business. Margins were already razor-thin,and with demand declining rapidly, it’s a tough time overall for traditional POS hardware vendors.

  3. Michael Koploy Says:

    Great stuff, Greg. As the importance of hardware seemingly decreases, I wonder if other providers make similar moves in the near future.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.