Will Cloud And 4G Rewrite The Franchisee IT Rules?

Written by Todd L. Michaud
September 15th, 2009

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).

The convergence of cloud computing and 4G cellular networks will revolutionize the retail technology industry the same way the PC did when it changed a cash register into a POS. It will finally allow retail CIOs to take retail technology out of the stores and put it in the data center and have it managed by IT people.

Today, my average restaurant has eight to 10 pieces of technology that are complex enough to house their own operating systems. These same restaurants now have five or more vendors providing technical support. With the high level of integration, when a problem occurs the store manager is often hit with the “It’s not us, it’s them” excuse.

The store manager, who is typically not an IT administrator, is left trying to decipher cryptic error messages, leaning on a peer group and spending hours if not days on the phone with various support organizations trying to get to the root cause of the issue. Symptoms of this situation usually manifest themselves in screams from the back office: “I have already rebooted it 14 times. I am not doing it again!”

In a cloud 4G world, things would be quite different. The POS server isn’t responding? No problem. We’ll instantly provision you a new one and tie it to the data that is accurate to your last transaction. Worried about your PCI audit? Don’t be. Ninety-eight percent of the technology is in the data center, which uses certified technology, secure communications and has implemented all the appropriate processes and procedures for you to be compliant. Upset about the rising costs of retail technology? Don’t be. By virtualizing applications and sharing infrastructure, we have been able to reduce the costs to a store by 30 percent or more.

Sure, there are some Web-based POS systems on the market today, but most have been designed around single-terminal, small company systems. Running an entire retail operating system in the cloud (at least the technical components) requires changing the way we think about these systems.

Some of you may be thinking: “Most of that technology you are describing exists today from companies like VMWare and Microsoft. Why don’t we do all this great stuff right now?” With cloud computing, the network becomes mission critical. If all the technology is off-site and you lose the capability to communicate, then you are dead. Today, DSL and cable connections are unreliable and frame-relay is expensive. It is difficult to run reliable VPN service over 3G cellular networks. You can’t risk being down during the busiest hour, so the technology is not viable today. That is where 4G networks come in.

For those of you not familiar with 4G networks, this will be the next generation of cellular data technology. Operating with traditional IP technology, these networks are expected to have between 100 Mb and 1,000 Mb of bandwidth, similar to speeds found in most office environments today. Today’s typical DSL circuits operate at less than 5 percent of that speed. If combined with a DSL or cable line, 4G networks will provide extremely reliable high-bandwidth to locations for around $100 a month. Are you really worried about network availability? Just add a secondary cellular provider to the network and, voila!, N+1 network redundancy.

The biggest hurdle to achieving the benefits of this brave new world will be getting the POS vendors on board. Traditional POS thinking involves hardened (expensive) hardware on site with complex (difficult to manage) software hosted off-site. Often these POS environments are a mixture of thick-client, thin-client and Web-based technologies all rolled into one. To be successful in this evolution of store-systems, POS companies will need to start thinking more like a Software as a Service (SaaS) provider company and less like a hardware manufacturer.

Although this transition will be tough for the major POS players, the benefits will be significant. In the end, it could mean both reduced costs for retailers and greater profitability for POS companies. By trading low-margin, one-time hardware sales for higher margin, recurring software maintenance, POS companies can establish a more predictable revenue stream and develop longer, deeper relationships with their customers.

And that’s not all. The benefits for retailers are significant. Cloud-based POS systems will offer:

  • Easier software upgrades. Simply install a new software version, test and then move sites one by one or all at once by just changing a pointer. Run multiple software versions in parallel by maintaining configuration files.
  • Faster implementation. Implement new sites by provisioning a new software instance, preconfigured with the appropriate metadata from previous sites (if applicable).
  • Enterprise hardware with data center administration. Use enterprise-class hardware with trained IT staff 24×7.
  • No more polling. Write data from each transaction directly into the central database, with easy access to aggregate into back-office applications and decision-support systems.
  • New cost models. A SaaS POS would allow POS companies to consider business models such as pay-per-transaction or percent-of-sales pricing.

At the end of the day, the most important part of this evolution will be taking the burden of IT support out of the hands of the general manager and placing it in IT where it belongs. This change is something that can’t happen soon enough for many franchisees.

What do you think? Will cloud computing and next-generation wireless networks really bring the next phase of retail technology? Or is it simply a bunch of buzzwords that mean “the latest version of nothing new”? Leave a comment or E-mail me:


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