Business owners will tell you that their customers return because of great service. One critical part of this is the payment process. Customers want the flexibility to pay by whatever means suits them (and let's face it, there are many). And the speed of payment matters too. In this blog, we will explore the world of point of sale (POS) systems and explain how they have improved and why more retailers and hospitality businesses are switching from legacy POS systems to cloud-based POS.
What is a POS?
A point of sale, affectionately known as ‘POS’, is a place where people pay for goods or services. When customers walk up to a checkout counter or click on an online checkout, they are at the point of sale. For over 100 years, the traditional point of sale was at a cash register. The first cash register was built in 1879 by an Ohio Saloon keeper called James Ritty, who was fed up with his staff pocketing cash from sales. Ritty’s ‘incorruptible cashier’ underwent several iterations before it became popular. However, what Ritty created was the notion of accepting a payment whilst simultaneously recording a transaction of the sale. And that’s exactly what POS systems do today, whether the customer is online or in a physical store.
Microsoft Windows released the first POS software in 1992, kick-starting the era of point of sale systems. The first cloud-based POS system was built 10 years later.
What is the difference between a legacy and a cloud-based POS system?
There are two types of POS systems: legacy POS systems and cloud-based POS systems.
A legacy POS system, also known as ‘traditional POS’, carries out simple transactions with cash or credit cards. It stores basic information on physical hard drives and runs on a closed internal network. For this reason, it is also known as an ‘on-premises POS’ because transaction data is stored on the shop premises. And therein lies one major disadvantage of a legacy POS system. The owner must be on-site to input, analyse, or retrieve information from a legacy POS.
A cloud POS system, also known as web-based POS and cloud-based POS, is an online point-of-sale solution that stores all data on remote servers. With this approach, the software, and not the hardware (as with legacy POS systems), is important. For this reason, cloud-based POS systems are typically run using a software as a service (SaaS) model, with businesses purchasing a subscription-based license.
Cloud-based POS systems for retail
Cloud-based POS systems provide retailers the versatility that legacy POS systems couldn’t deliver. The terminals are often customisable, with real-time business reporting and powerful performance analytics. They can create customer profiles and link them with customer relationship management (CRM) systems so retailers can contact customers with special offers and incentives. Built with advanced inventory management capabilities, they will often be API-friendly and capable of integrating with many app integrations.
Cloud-based POS systems for restaurants
When the POS system restaurant software was first devised, its principal role was to facilitate and streamline the ordering and payment processes. This would enable the waiting staff to order directly from the table, transmit this to the kitchen, generate customer bills, and take payment by cash, credit card and debit card.
Every restaurant operates differently. And restaurants come in different forms, from quick service restaurants to franchises, from family-owned businesses to food trucks and pop-ups. Cloud-based POS systems for restaurants can cater for this whilst taking payment in various forms, including by credit and debit card, gift card, phone, and watch. They can also cover inventory management, table management, menu customisation, reservations, staff schedules, performance tracking, customer relationship management, integration with online ordering systems and delivery platforms, reporting, and analytics.
11 differences between a Cloud POS and a Legacy POS
So far, we have explained that a POS is where people pay for goods or services at a point-of-sale (POS). POS systems store transactional data. Legacy POS systems store this data on hard drives. Cloud-based POS systems store this data on remote servers. We are ready to explore the differences between a cloud POS system and a legacy POS system.
1. Cost
- Cloud-based POS – In line with the SaaS pricing model, customers typically pay via a monthly subscription fee.
- Legacy POS - Traditionally, customers pay for legacy POS systems by paying an upfront fee in addition to installation and software maintenance fees. And if the system goes down because it is installed on-premises, you will have to pay someone to fix it.
2. Installation
- Cloud-based POS – As is typical of SaaS products, the software is ready to be used with no additional installation necessary.
- Legacy POS – This can be a cumbersome process, with someone needing to physically visit your premises to install the hardware, programs, and updates.
3. Ease of use
- Cloud-based POS – Whilst most cloud-based POS systems are intuitive, they have various functionalities. Extensive training isn’t usually necessary, but it takes time to learn how to use them efficiently.
- Legacy POS – If you have used more than one legacy system before, then you’ll know that they are easy to use and have a familiar feel to them. Their capabilities are limited to processing payments and charging via credit card or cash. So, no extensive training on functionalities is necessary, you can have it set up and start using it.
4. Flexibility
- Cloud-based POS – Most cloud-based systems are designed to be user-first. That puts the business owner in the driving seat, enabling them to adapt the software to their needs. Plus, the system can be accessed from anywhere worldwide – all you need is an internet connection.
- Legacy POS – These weren’t designed to be flexible. They were designed to do a job. What you see with a legacy POS is what you get. And it would be best if you were on-premises to get it.
5. Reporting
- Cloud-based POS – Cloud-based POS vendors provide a wide range of data, including sales reports, inventory control, sales reporting, customer reporting customer profiling, and multi-site comparisons for businesses operating from multiple sites.
- Legacy POS - Legacy systems are built to provide simple sales reports and customer data.
6. Scalability
- Cloud-based POS – SaaS has the advantage of being as mobile as you want. Want to test an online store? No problem. About to open a pop-up? Sure, that’s easy, too. Cloud-based POS subscriptions can be flexibly upgraded or reduced to match the needs of your business.
- Legacy POS – These systems weren’t designed with modern day needs in mind. If you have a legacy POS and want to open a temporary pop-up shop, you must buy new systems and hardware if you're going to stick with a legacy POS system.
7. Integration capability
- Cloud-based POS – Integration using APIs is standard with cloud-based POS, enabling users to coordinate a variety of jobs on a single machine. For example, communicating via social media or e-commerce platforms with your online channels.
- Legacy POS – These systems weren’t designed to be integrated, so attempting to add different software or tools can be clunky. To this extent, legacy POSs are a one-trick pony.
8. Data storage
- Cloud-based POS – Transactional information is saved in the cloud. Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP) and Alibaba Cloud are some of the most popular cloud service providers.
- Legacy POS - The information is stored on-premises on physical hard drives.
9. Updates and upgrades
- Cloud-based POS – Software updates and upgrades are mostly done without fuss, in real-time, by the cloud-based POS vendor.
- Legacy POS – Any updates or upgrades must be done on-premises through a physical installation. This gives the cloud-based POS vendors a significant advantage because they can implement an update in real time, and the customer can benefit immediately. In contrast, legacy POS upgrades must be planned well in advance and are far less frequent.
10. Security
- Cloud-based POS – Cloud storage often offers significant protection against cyberattacks because it's backed up regularly and stored off-site in an encrypted format. It can be accessed anywhere in the world and is simple to restore in case of a system crash, meaning the data is not lost.
- Legacy POS – There are inherent risks of storing data on-premises. Data will be lost if the servers malfunction, crash, get hacked, or are stolen or damaged.
11. Hardware
- Cloud-based POS – SaaS software is designed to be hardware agnostic. It is quick and inexpensive to install because it lacks hardware. And it means that restaurants, for example, can accept table orders using tablets and smartphones.
- Legacy POS - Legacy POS are hardware dependent and need to be physically installed, often taking up space on the counters.
Summary
We are grateful to James Ritty and his ‘incorruptible cashier’ for creating a ‘point of sale’ way back in 1879. And we owe our thanks to Microsoft Windows for creating the first POS software over 30 years ago. Since then, customer expectations and technology continue to progress at pace. We now find ourselves with customers who can pay with their watch and business owners who can sell products in Florida whilst at a conference in Frankfurt.
And so the gap between legacy POS systems and cloud-based POS systems widens. Business owners can choose a cloud-based POS and avoid a hefty one-off upfront fee in favour of a low monthly subscription. Software installations can take place in real time without fuss. Cloud-based systems can be accessed anywhere that there is an internet connection. And the reporting options and insights are unmatched by legacy POS systems. I could go on. But I’ve made my point. As time goes on, the differences between the two types of systems increase, leaving the legacy POS, well, stuck in time.
Key takeaways
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A point of sale (POS) is where people pay for goods or services.
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There are two types of POS systems: Legacy POS systems and Cloud-based POS systems.
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A legacy POS system carries out simple transactions with cash or credit cards and stores basic information on physical hard drives running on a closed internal network.
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A Cloud-based POS system is an online point of sale solution that stores all data on remote servers. They are more flexible than the legacy systems and, in addition to taking payment, can help business owners with a wide variety of tasks, including inventory management, performance tracking, customer relationship management, online ordering, reporting and analytics.
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Differences between a Cloud POS and a Legacy POS include:
1. Cost structure - Cloud-based POS on a monthly subscription fee and legacy POS requiring an upfront fee in addition to installation and servicing costs.
2. Installation - Cloud-based POS don’t require a physical installation, but legacy POS systems do.
3. Ease of use – The restrictive nature of the legacy POS can make them easier to use at first compared to cloud-based systems that have many more functions.
4. Flexibility - Cloud-based systems are very flexible, enabling the business owner to adapt it to suit their needs, including adding additional Apps. Plus, the system can be accessed from anywhere in the world – all you need is an internet connection. Legacy POS aren’t flexible. What you see is what you get. And you need to be on-premises to get it.
5. Reporting – Customers with cloud-based POS are spoilt for choice when it comes to sales reports, inventory control, sales reporting, customer reporting and customer profiling. Legacy systems provide simple sales reports and customer data.
6. Scalability - Cloud-based POS are by their nature, scalable. Subscriptions can be flexibly upgraded or reduced to match the needs of your business. Legacy POS systems aren’t at all flexible.
7. Integration capability - Cloud-based POS offer lots of integration opportunities, enabling users to coordinate a variety of jobs on a single machine. Legacy POS weren’t designed with this capability in mind.
8. Data storage - Cloud-based POS transactional information is saved in the cloud compared to legacy POS information which is stored on-premises on physical hard drives.
9. Updates and upgrades - Cloud-based POS software updates and upgrades are done in real-time. Legacy POS updates or upgrades would need to be done on-premises through a physical installation.
10. Security - Cloud storage often offers significant protection against cyberattacks because it's backed up regularly and stored off-site in an encrypted format. Legacy POS systems are vulnerable to losing data through malfunction, crashing, hacking or being stolen or damaged.
11. Hardware – Most cloud-based POS systems are hardware agnostic. Legacy POS systems are hardware dependent and need to be physically installed, often taking up space on the counters.
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