The Challenges Of Selling POS Software

Don't let Ed Doherty's casual looks fool you. Under that tan skin, long hair, and easygoing smile is a man serious about software development. He should be, especially since he is president of Software Development Inc. (SDI), a Pleasanton, CA point of sale (POS) software developer/VAR. And while many POS VARs have designed their own software in recent years to supplement falling hardware margins, SDI has focused on these applications since the early 1980s. In fact, in those early days, there was one point when SDI's POS application was installed in 70% of the chain hardware stores in the United States.

During the past eight years, SDI has diversified the markets it sells to. Besides hardware stores, the company's customers now include retailers in markets such as drug, nursery/farm supply, and automotive parts. The company also has added a full suite of back office applications such as those for POS processing, integrated credit/debit/check/gift cards processing, inventory control, computer- assisted ordering (CAO), purchase order generation, and time and attendance. These changes, along with a keen understanding of how to sell to both chains and smaller retailers, have kept SDI in business for 25 years and kept that smile on Doherty's face.

Help Clients Prepare For POS Software Deployment
"Tier-two regional chains are the hot customers for SDI right now," explains Doherty. "Those customers have been in need of new POS systems for many years, or many of them have never had in-store POS systems. Also, pricing of POS hardware has dropped in recent years to a point where this retail segment can now afford new POS systems or upgrades to their tired old systems."

Despite these positive signs of growth, Doherty warns that selling and deploying a POS system to customers with no POS software applications or just ECRs (electronic cash registers) can be a complicated and long process. This is especially true if the retailer wants to use bar code scanning technology but has no item/UPC (universal product code) file. To create such a file, the retailer must contact all of its suppliers to obtain the UPC info. SDI will not complete this step for a customer, but it will help the client structure the letters to vendors explaining the project and what data (UPC, SKU [stock keeping unit], method/nature of shipping) is needed. Once the data file is built, SDI helps make sure all of the proper fields for the POS application are populated and ensures the data will download correctly into the store's database. SDI doesn't encounter these types of clients very often. However, the company does have one right now. The retailer is using ECRs in some stores and installing a new POS system for scanning packaged produce in other locations. The chain buys a lot of clearance products from overseas with no UPC info on them.

"Typically, we know what we are getting ourselves into as far as the amount of additional services we need to provide a client," says Doherty. "Thus, we build this extra consultation expertise into the price of the solution. However, sometimes we have to charge additional consulting services, considering that much of this work is tedious and time consuming."

Expect A Three- To Six-Month Sales Cycle
Almost all of SDI's projects involve some level of customized software development. Before SDI developers write any code for a client, they do an in-depth review of the application and also discover how the customer wants the product to work. For example, some customers want receipts to look different, some want terminals' GUIs (graphical user interfaces) to have different designs, some want different error messages to prompt cashiers, and some want different help information on the screen to guide cashiers through transactions. Doherty says much of this information, called the functional specs, is found in the RFP (request for proposal), if there is one. Otherwise, the info is gathered during product demonstrations (some clients require up to three demos). Sometimes SDI compiles functional specs after spending a week at a client's site learning about the customer's business. The final functional specs are completed right after the contract is signed. The whole process averages three to six months.

With An Early Pilot You May Keep Your Retail Clients
According to Doherty, many POS software developers and VARs make a crucial mistake right after they get a customer to sign off on a project. Namely, they don't implement a pilot quickly enough. "We have seen many of our competitors not implement a pilot project for a year after a contract is signed," states Doherty. "They oversell clients by promising short deployment times. Then, when they can't follow through with their promise, they lose the account."

In contrast, SDI has customers conducting pilot tests within four months of signing a contract. These pilots include any custom software modifications, training, and host interfacing. The rationale for this quick deployment strategy is simple -- SDI doesn't get paid in full until a project is up and running at all locations. "Sometimes we sell corporate/enterprise licenses, and sometimes we get paid as each store's system is installed," explains Doherty. "Thus, it is in our best interest to set up the pilot as soon as possible. Usually, we get a percentage up front before a project is started and the remainder when the whole project is complete. However, for some enterprise projects, we structure the deal so we receive some money up front, some on delivery, and some after acceptance of the pilot."

SDI's dedication to a quick pilot was put to the test a few years ago with a large drug chain customer. A merger of several retail drugstore chains caused the FTC (Federal Trade Commission) to force the chain's management to sell 165 stores to a single entity. As part of the FTC's mandate, the new owners had to have a new POS system installed in each of the stores in 100 days. SDI accepted the project, developed the specific application requirements (including a pharmacy interface), trained the stores' management and training staff, and assisted with the deployment of new hardware and software within the 100-day timeframe.

Partner For Chain Store Projects
Single-store retailers typically do not have the infrastructure to support a complex POS system, so SDI always focuses on chain retailers. Doherty says the first points of contact at these customers are the CIOs or POS managers. Sometimes SDI will also ask for the person responsible for the POS system at the store level. In the end, it is the CFO or CIO who usually makes the final sales decision.

Once a project is approved, SDI works with one of its business partners (e.g. Scantron [www.scantron.com]) to provide staging, installation, and hardware maintenance services. That way, Doherty and his staff can focus exclusively on what they do best -- POS software development.