Point-of-sale (POS) hardware continues to be commoditized, and is driving the disaggregation of the traditional POS hardware-software bundle.
This trend is evidenced—and being accelerated—by intensifying competition from IT vendors such as Dell and Intuit. These suppliers, along with other budget-oriented competitors, offer low-cost POS hardware platforms that support a number of technical standards. So, too do the software packages from a growing community of independent POS software vendors.
As a result, opportunities for hardware-driven differentiation are few, and the importance of vertical-specific, feature-rich software POS offerings—or partnerships with ISVs who can provide the same—is increasing.
In a recent VDC study examining the usage of POS terminals, over 68% of end users reported software functionality as the primary consideration when evaluating a new POS solution. Software-oriented focus was particularly prevalent among larger, more sophisticated tier 1 and tier 2 organizations, which generally have more specific and extensive functionality requirements for their POS systems relative to smaller scale users.
The message this trend sends to POS terminal suppliers is clear: Defending market share on hardware alone is becoming an increasingly difficult proposition—and will only get harder.
Today’s POS terminal market leaders—companies such as IBM, NCR, and Wincor Nixdorf, for example—have the capability, either in-house or through partner organizations, to deliver fully integrated end-to-end POS solutions. As hardware commoditization continues, suppliers of all tiers that wish to remain competitive will need to develop similar capabilities, either organically or via strategic partnerships.
For POS solutions, there is no one-type-fits-all system. Each vertical and tier level has unique and particular functionality and integration requirements.
While this ongoing shift in POS solution development and deployment will challenge suppliers—particularly those whose business models are based entirely on the aggregated hardware/software paradigm—it also will present opportunities for differentiation on more defensible software-based functionality.
The increasingly important role of software in POS terminals and other retail automation technology will be explored in VDC’s CET coverage—contact us for more details.