Magazine Article | March 18, 2013

3 Roadblocks To Retail's 'As a Service' Transition

By Mike Monocello, editor in chief, Business Solutions magazine.

While assembling the editorial for our Partner Program Insider (built into this issue), we performed an outreach for thought leadership where we asked industry experts to weigh in on the biggest topics for key verticals. When it came to retail, a common theme referenced was the “as a Service” business model. Not surprising, really.

Since RSPA INSPIRE, I can’t tell you how many meetings and calls I’ve been on to discuss this topic. After speaking with various readers, vendors, and coworkers, I’ve noticed some trends worth sharing that are probably blocking or at least hindering the retail industry’s transition to the “as a Service” model.

1. There Is A Lack Of Education On The Topic Of The “as a Service” Model
This is a two-parter. First, there’s a lack of understanding how the financial model is better. That one can be overcome with some simple education. Of course, actually making the switch is a bigger challenge (I’ll get to that one later).

Second, and more importantly, is a lack of understanding of what this “as a Service” model actually is. Let me explain. When I write about this model, I’m not talking about your traditional service and support. Sure, that can be part of the model, but that’s very short-sighted. We’ve spoken with readers recently who’ve said that they’ve been doing the services model for years (referring to performing servicing) and dismissed the point we’re trying to make. I hope they’re not passing over articles on this topic because they think they’ve got nothing to learn.

When I talk about the “as a Service” model, I’m referring to bundling your hardware, software (cloud- or premise-based), payment processing, gift/loyalty, service & support, etc. into one service your customers pay for in monthly payments.

This lack of understanding made me realize that we need a term to describe this bundle being offered. It’s not SaaS; that’s Software as a Service. In a previous article, I threw out POS as a Service as an option. That’s kind of limiting, particularly since I’ve been trying to get resellers to think beyond the POS. Retail as a Service? Maybe. “Here Mr. Merchant, I give you complete retail IT hardware, software, security, card processing, gift cards, and so on, and you pay me each month for that bundled service.” Get it?

2. There’s An Issue Of Funding, Responsibility
As discussed in a previous article, there’s the whole dilemma of who’s going to help VARs pay for the switch to this model. I’ve covered this in recent blog articles.

I know that many vendors and distributors are hard at work trying to figure out how they can help VARs. Currently, if you decided that you wanted to make this switch to a services model, many vendors aren’t equipped to even help you. That said, the more I look into this, the more I think that it’s dependent on the VAR to get itself in the position (bank loan, maybe?) to be able to make the switch and not rely on its vendors.

3. Anyone Ask If Customers Want Their Retail IT As A Service?
Assuming you created a bundle tomorrow, how much interest will your customers show in paying a monthly fee for their POS? If they do the math, it’s going to be cheaper to just drop $25,000 on a new system rather than make monthly payments for years. Some customers will be interested, and some won’t. This is a reality seen on the networking side of our magazine where managed services have been a way of life for years.

So, even if you decide to drink 100% pure Services Kool-Aid, your customers might hinder your progress. That is, until you sharpen your sales pitch to convince them they’re better off making the switch. But, that’s a conversation for a later time.