Pros and Cons of Cloud-Based POS Systems
Cloud computing has been all the rage the past few years. According to Forrester research, annual worldwide public IT cloud services spending has grown from $47.4 billion in 2013 to $107.2 billion in 2017. Software companies in both the B2B and B2C sectors are increasingly pushing toward cloud-based, software-as-a-service business models, but is it really worth it for your business?
The debate almost makes it appear that your only two options are traditional cash registers and a cloud-based POS. There are still options that aren’t cloud-based, and some of the services that are even have localized features. Just as there are businesses of all shapes and sizes, so, too, are there POS platforms to match.
Our goal in this article is to lay out the differences between a local, software-based POS platform and a cloud-based POS system. The benefits and pain points will be addressed in this context. If you’re unsure whether you’re using a cloud-based POS platform, feel free to browse our comprehensive database of POS systems to learn more about your specific solution.
- Pros of Cloud-Based POS Systems
- Cons of Cloud-Based POS Systems
- Popular Cloud-Based POS Systems 2017
Pros of Cloud-Based POS Systems
First, let’s tackle the pros: data redundancy, real-time reporting, remote access, automation, and scalability. How much any individual factor matters to you will depend on the specifics of your business and your needs.
The biggest benefit of a cloud-based POS solution is data backup and redundancy. There’s nothing worse than losing valuable data or having utilities cut off on-site with no way of recovering or returning to work. Operations shut down, and it can possibly shutter your business. A report from the White House in 2013 estimated weather-related power outages alone costs the economy $18-33 billion each year.
With a cloud-based POS platform, critical systems, reporting, and data storage happens offsite, broadening the available pool of devices that can access them. Many have mobile solutions as well, so if the power does go out, you can still perform transactions on the battery power of smartphones and tablets.
Important for: All businesses. Data loss and system downtime affects sales, customer satisfaction, and productivity across many different business types.
Most cloud-based POS platforms offer in-depth, customizable reporting, data analytics, and even specialty programs for specific projects (frequent customer programs, discounts, coupons, etc.) and industries (restaurants, gyms, retail.) Sometimes the features are included in the base price, while other times, they’re add-ons. Be sure to keep an eye on this distinction in the fine print of any contract you sign.
Of course, software-based POS platforms offer reporting as well, but they have difficulty covering multiple locations or don’t offer real-time data. It also becomes difficult (although not impossible, as we’ll discuss next) to access those reports when working outside the office, and if you have a remote team at a local event, you won’t know how well they’re performing until they return, when it’s too late to make adjustments.
Important for: Owners with multiple store/restaurant locations or those that need to know how sales are going on the road or at tradeshows. Real-time reporting and multi-branch reporting are crucial functions that you may find more readily available in a cloud-based POS system.
Cloud-based POS platforms provide remote access, allowing for virtual teams, multiple locations, and peace of mind for everyone involved in running the business. Inventory management can be streamlined across locations, scheduling can be done from home or during a commute, and much more.
To accomplish this with a software-based POS platform, you’ll need to set up a manual VPN, host (and secure) a local server, and take a much longer workaround. For many, using a cloud-based option is faster and more convenient.
Important for: Owners and executives that want the flexibility to manage their business from anywhere. Remote access allows for greater efficiency since you won’t need to go to the store or office to handle some functions.
You’ll be able to scale your business much more quickly and cheaply using a cloud-based POS platform. Up-front costs are often minimized in exchange for lengthy subscription fees. It’s essentially an a la carte model in which you’re only paying for the functionality and space you need. As you grow and require more, you can just add it on.
With a software-based platform, you’ll pay larger up-front costs that are necessary each time you expand. You’ll need to do a fresh install and start from scratch each time. Cloud-based POS platforms can sync more easily and take a modular approach to resolve this headache. If you need to run an update across all devices, you’ll find it’s much easier leveraging the cloud.
Important for: Businesses that plan to expand but don’t want to commit to high upfront POS costs, or businesses that need to adjust the number of machines on their account quickly and easily.
Related Article: Replacing Your Cash Register with a POS System.
Cons of Cloud-Based POS Systems
Now that you know the benefits of cloud-based POS systems, what are the drawbacks? The primary cons include cost, security, need for internet, and training.
While all the benefits sound great, they do come with a price. Lower up-front costs are balanced out by a subscription pricing and you can easily overspend if you don’t carefully analyze the math. The a la carte business model that lures you in can quickly create a scenario where you’re spending much more than you need to.
With most software-based POS systems, you simply purchase the equipment and install the software. It’s a one-and-done deal, and allows you to focus on generating revenue instead of paying another monthly bill. At the end of the day, the cloud-based SaaS business model transforms your cash register and other equipment from assets to liabilities.
Spending on cybersecurity is expected to top $60 billion in 2017 according to analysts, and cyberattacks are on the rise. Your business may not directly be attacked, but by using the cloud, you’ll become part of a bigger, more valuable target for hackers.
With a software-based POS platform, you can simply keep your data off the internet, which is where it’s safest. You lose a lot of convenience, but gain a level of security. Keep in mind, however, you’ll still need backup plans and if your data is compromised, the only technical support you’ll have is what’s in-house or available through your credit card processor.
It’s also important to note that data breaches can still happen to software-based POS systems, and that no matter what POS system you use, you’ll need to adhere to PCI compliance regulations to help minimize your risk of security problems.
Related Article: What is PCI Compliance?
Some cloud-based POS platforms only work online or on mobile devices. This can become a problem if internet connectivity is spotty. I once sat at a Shell station for 20 minutes watching management troubleshoot a cloud-based register that completely shut down operations. Gas pumps were connected to the malfunctioning system as well, so one employee had to stand outside in the cold to drive customers away.
This inefficiency is a rare, but unavoidable, scenario that will inevitably happen. I’ve personally seen it at Walmart, grocery self-checkouts, and even the occasional bar or restaurant. When the internet goes down, you need a localized system to keep things going.
When considering cloud-based systems, be sure to check what options (if any) exist for times when internet goes down. Does the system offer capability to connect via phone line or 3G? Is there an “offline” mode that will still allow you to take cards and the machine will process them when a connection becomes available?
The biggest concern with training of course is associated with costs, but it’s a matter worth exploring all its own. Any time you implement a new system, you need to train employees on how to use it. It’s also important to make it clear it’s a job expectation and enforce usage. Otherwise, you risk dividing your staff into those doing things the new way and the old way.
Popular Cloud-Based POS Systems 2017
There are many cloud-based POS systems already, with more coming on scene regularly.
Here are a few of the more popular systems available:
Clover Station (pictured above)
The sleek Clover POS system works on the First Data platform and allows you to create a custom setup by adding the accessories necessary for your specific business. Read more…
An iPad-based system that’s designed for retail and food service, Shopkeep offers help features like QuickBooks integration, EMV chip card acceptance, and more. Read more…
A robust POS system that works with many different credit card processors, helping you get competitive pricing and the right fit for your business. Lightspeed is compatible with optional accessories including barcode scanners, cash registers, and more. Read more…
Though not yet available, the Verifone Carbon has been generating buzz as a universal and stylish cloud-based POS system that works with almost any credit card processor. Read more…
Want to see pricing for cloud-based POS systems and credit card processing? Try CardFellow’s free, no-obligation pricing comparison tool. It’s easy and shows you the actual costs for your business. Try it now!
Brian Penny is a former Business Analyst and Operations Manager at Bank of America turned freelance writer focused on business and technology. His work appears in Huffington Post, Fast Company, and The Street.