Magazine Article | November 13, 2006

Cash In On POS Service

This POS (point of sale) VAR has grown to $30 million in sales by developing its hardware sales organization to complement its successful service group.

Business Solutions, December 2006
Written by: Chris Loringer
Why Sell All-In-One POS?

AM/PM Service Limited is a Canadian VAR that sells approximately $30 million per year in POS (point of sale) equipment and services. That revenue is split between POS hardware, software, and services. Surprisingly, most of the POS hardware AM/PM sells is all-in-one POS terminals from PioneerPOS. “All-in-one POS just makes more sense for most of our customers,” explains Dale Sapieha, national accounts manager for AM/PM. “The cost is slightly higher than conventional component-based POS equipment, but an all-in-one terminal has a smaller footprint than a component-based system.”

All-in-one POS terminals are popular in hospitality environments where counter space is at a premium. Plus, they are gaining popularity in other markets such as retail, liquor stores, and even grocery stores. Customer perceptions are the biggest objections that AM/PM has faced with all-in-one technology. “Customers think that all-in-one units are more expensive to repair (or not repairable at all) than component-based POS units,” says Sapieha. “That’s not the case. Our technicians can repair the touch screen, motherboard, hard drive, or most other components in the field without replacing the entire unit.”

To illustrate his point, Sapieha told us about a recent all-in-one POS win at Northland Properties Corp., an operator of Denny’s and Moxies restaurants. AM/PM sold each restaurant POSitouch POS software and PioneerPOS all-in-one POS stations to run the software. The all-in-one units cost about 5% more than the conventional POS components, but only required half of the counter space. “As an experiment, Northland evaluated five all-in-one POS units from a different brand-name vendor,” says Sapieha. “They didn’t last long. Northland called and asked us to replace those units with PioneerPOS all-in-one stations. The other products cost more than the PioneerPOS terminals, and the failure rate was double that of the Pioneer terminals. In addition, the Pioneer all-in-one’s were less expensive for Northland to repair.”

PioneerPOS has manufactured all-in-one touchscreen systems for 12 years. “Our previous all-in-one vendor had about a 1-in-10 failure rate out of the box,” explains Sapieha. “When we switched to Pioneer, that rate was reduced by a multiple of 10.  Many of our customers ask for PioneerPOS all-in-one products by name.” PioneerPOS systems range from 12 inches to 17 inches in screen size. All units are powered by Intel Pentium processors and come with four serial ports, five USB ports, and are network-ready. PioneerPOS also offers options such as card readers, fingerprint readers, wireless connectivity, RAID (redundant array of independent disks)-1 and CD-RW (read-write) drives.

www.pioneerpos.com

With projected sales of $30 million and an estimated growth rate of 15%, you might think that AM/PM Service Limited is a VAR that sells a wide variety of technology products. However, that
is not the case. Vancouver, British Columbia-based AM/PM sells and supports only POS hardware and software products. AM/PM is achieving this level of success in a  competitive POS market where some VARs are happy just to maintain existing sales levels. Dale Sapieha, national accounts manager for AM/PM, explains what it took to reach the top of the POS market in Canada — and what it takes to stay there.

Make POS Service Your Top Priority
AM/PM started as a POS service company in 1987. “When I joined the company in 1989, we had only two salespeople covering all of western Canada,” says Sapieha. “We knew that POS was [and is] a very competitive market, and in order to survive, it was necessary to add a stronger nationwide POS product sales presence.”

The theory was that by selling more POS hardware, AM/PM would produce more service revenue. Since 1989, AM/PM has grown its nationwide sales team to 20 — a team that works in conjunction with 110 POS service technicians. “We now have sales and service teams located in our major service hubs of Calgary, Alberta; Toronto; and Vancouver;  and 35 other satellite service locations,” adds Sapieha.  The VAR probably could have maintained its sales volume with a small sales team, but a business that is not growing is probably not healthy. It turns out that AM/PM was correct; the combination of POS products and services led to 10% sales growth last year and 15% projected sales growth this year.

AM/PM relies on revenue generated from service contracts to support all 38 locations. Sixty-five percent of AM/PM’s customers purchase service contracts for their POS equipment. POS services account for 50% of AM/PM’s total annual revenue, with the balance derived from POS software and hardware. What about the other 35% of customers that don’t buy service contracts? “It’s not realistic to expect to sell 100% of your POS clients service contracts,” explains Sapieha. “There will always be companies that don’t believe in service contracts. They are willing to take chances with their POS equipment.” However, there is still a service opportunity with noncontract customers. AM/PM provides noncontract customers with POS services on a time-and-materials basis. Based on individual service calls, time-and-materials services are more expensive to the customer than contract-based services. After several time-and-materials-based charges, some customers convert to a service contract.

Use SLAs To Win POS Service Business
An SLA is a service-level agreement that ensures a level of service to the customer. It is a best-faith attempt to provide specific services within a specified time frame. In the case of AM/PM, SLAs are a critical component of the company’s service offerings. For instance, one of AM/PM’s agreements ensures a phone response to a customer within 15 minutes of the incoming call. If the problem can’t be resolved on the phone, a technician is promised to arrive at the customer’s site within four hours.

If AM/PM is not able to meet the terms of the SLA, it has to cover the cost of the repair and must issue some type of credit to the customer. The cost of an SLA is based on the type of POS equipment and the type of service desired. “For instance, a PioneerPOS all-in-one unit costs less to repair than many other brands, so it costs less to cover under a service contract,” explains Sapieha. AM/PM sells service contracts on an à la carte basis for each type of POS component or based on all POS equipment at an entire location.

Partner With Third Party Service Providers
AM/PM faces a daunting challenge when it comes to adding service locations — specifically the geographic spread between cities in Canada. Sapieha used an example of Churchhill, Manitoba to illustrate just how remote these locations may be. Churchill is publicized as the polar bear capital of the world. The city is located in the northern part of Manitoba on the Hudson Bay.

When considering a new service location such as Churchhill, AM/PM’s national service manager performs a detailed market analysis of the region before AM/PM makes an investment. In cases where it is not feasible to operate a remote location, AM/PM contracts with third party service providers such as Techno 90 Ltd. to service its POS equipment. Farming out service to third party providers is not as profitable as performing the service in-house, but it does give AM/PM the reach into areas where an office cannot be justified. Sapieha advises VARs to look for CompTIA A+ certified technicians — for third party contractors or full-time hires.

Not many of you will face the challenge of putting an office in the polar bear capital of the world, but you may still have customers in remote locations. Knowing your options for supporting remote customers may help you to set an appropriate level of expectation for a service contract with the customer at the time of the sale. In case you’re wondering, Churchhill isn’t ready for an AM/PM remote location — yet.

One of the biggest struggles AM/PM faces is the hiring of employees. Sapieha says Canada is experiencing a nationwide labor shortage, so hiring qualified people is very difficult. When it’s time to hire, AM/PM uses many of the standard methods including Internet-based employment sites. “Most of our new hires come from outside the POS industry,” adds Sapieha. “It’s nearly impossible to find qualified people with POS experience. Once hired, we pay our people above-industry wages in order to keep them here.” Sapieha attributes much of AM/PM’s success to the experience of its senior management team. “We have 150 years of POS industry experience among the five most-senior executives in the company,” he says.

In 1989, AM/PM acquired Gold Medal Equipment, a POS VAR that had a strong presence in Alberta, Saskatchewan, and Manitoba. This acquisition brought AM/PM an additional 60 years of industry experience in the form of two top executives. The acquisition also added middle-Canada to AM/PM’s growing geographical reach. The lesson here is that the inorganic method of growth is sometimes the fastest way to cheat time and grow quickly. None of us has 150 years to gain experience, so it may be best to hire and/or acquire the experience needed to make you successful now.

There is no playbook for becoming a dominant POS VAR. However, some of the tips that AM/PM shared may help you to set realistic goals. Measure your success in achieving those goals, and then make appropriate adjustments to your plan to compensate for weak areas. Whether you refocus your POS business on service, add more service locations, begin offering SLAs, or acquire another POS VAR, AM/PM has demonstrated that POS is still a market in which you can thrive.