Technology is the great equalizer in business. The right tech stack can help you operate more efficiently, identity opportunities, and stay organized. And one of the most trusted pieces of retail tech is a POS system.
An effective POS system – whether cloud-based or a traditional hardwired system – can transform your business. But which type of POS should you choose?
There are two main options: Cloud-based POS vs on-premise POS.
Cloud POS systems store and process data in the cloud, while legacy POS systems store and manage data locally on hardware located within the business.
Both types of systems require tools like a barcode scanner or register terminal. However, with a cloud system, the POS software and your database (sales, inventory, financial data) are stored in the cloud, rather than on a physical server or computer on-site.
Making a Choice
Traditional POS systems and newer cloud-based systems can both help your business grow. However, cloud-based systems offer key advantages, especially for growing businesses or newer start-ups.
Ultimately, making the right choice depends on your needs, future plans, and what you need your system to do. This guide offers a look at cloud-based vs traditional POS systems, including benefits and limitations.
What Is a Cloud POS?
A cloud POS is a system that stores your data and software in the cloud. Think of it like streaming a movie.
With streaming, you connect to data (the movie’s content) and the software you use to watch it (the movie player), which are both stored in the cloud. Cloud-based POS systems, therefore, store all transactional and inventory data in the cloud.
Using a cloud-connected POS, you don’t have to build a server or elaborate network in-store. Instead, you need a reliable WiFi connection, and your tools and hardware will be ready to go. As such, a key advantage of this type of POS is faster set-ups that require far less technical expertise.
Generally, web-based POS systems are pay-as-you-go SaaS software. This means you pay a monthly fee (or a license) to use the software and store your data each month. Ultimately, cloud point of sale systems offer several key advantages, with fewer drawbacks.
For small and medium-sized enterprises, cloud point of sale systems have a number of benefits, including:
- Accessible Data – With cloud systems, you can keep track of all transactions and monitor sale history from any location at any time.
- Cost Efficiency – Since a hard drive or server is not required to store the data, you pay less up front for cloud POS. With a legacy POS system, you pay more upfront in hardware and a large one-time licensing fee.
- Real-Time Updates – You can sync data across your entire operation instantly. For example, if you need to update the price of an item, you can do that in minutes and it will instantly sync across your entire operation (which is great for operations with several locations).
- On-Demand Data – Cloud systems make your data accessible from anywhere. You can login to a dashboard and view transactional data for each location (and can even filter this data down to the POS level). This provides you better insights into your operation.
- Scalability – A cloud system can grow alongside your operation. The beauty is you can add machines quickly, and get them connected to your system. Scalability is a lot easier with cloud systems.
- Security – Another advantage: Cloud systems generally offer more secure data backup. Plus, the software can be updated faster with new patches to stop new or emerging risks.
Along with its many benefits, a cloud POS also has limitations. A few drawbacks to consider include:
- Internet Dependence – A reliable internet connection is necessary to access all features of a cloud POS. However, many do offer offline modes to allow you to continue to operate and process credit cards even without.
- Recurring Costs – Cloud systems require you to pay a monthly license fee. Although this includes regular software updates (you don’t have to buy a new boxed software every 3-5 years), these costs can add up.
- Data Security Concerns – The best POS vendors provide advanced security settings. However, there’s always a risk to having data stored in the cloud.
Who Uses Cloud POS?
Let’s say your business was growing and have recently added three locations (and may open more). You need a system that will allow you to monitor and sync changes across the entire operation. Plus, you need a unified inventory system that will sync data in real-time.
Another scenario: You’re new retail business and you’re want to keep start-up costs down. You want a POS that won’t break the bank. A cloud system will offer you helpful business tools, while reducing upfront costs. A cloud-based system would make the most sense in these situations.
Legacy POS: What Is It?
An on-premise system, which is also known as a traditional or legacy point of sale, requires you to install a server on-site. These systems were traditionally hardwired, requiring extensive set-ups. However, there are now wireless on-premise systems available.
Therefore, your POS system would be connected to a hard drive with software installed to store and process data.
Some unique advantages of on-premise POS software include:
- Offline Mode – Online connectivity isn’t necessary for on-site systems. Without the internet, you can still use the installed device to access the system and your data. However, you would still need access to accept credit card payments.
- One-Time Cost – With a legacy system, you pay a one-time licensing fee upfront. This then becomes an asset for your business. However, if the software becomes outdated or is no longer supported, you will have to buy an updated version.
- Customizations – With a legacy system, you can build custom features and functions into the software (if you have a developer on staff). Therefore, you can tailor the software for your needs.
On-premise POS has a lot of drawbacks as well:
- High Upfront Costs – Legacy POS systems often require a significant initial investment in hardware and software. This includes purchasing servers, terminals, and other necessary equipment.
- Limited Scalability – As a business grows, it might need to add more terminals or features. With legacy systems, this often means purchasing additional hardware or software licenses, which can be costly.
- Maintenance and Updates – On-premise systems require regular maintenance, which can be both time-consuming and expensive. Software updates might not be as frequent, and when they are available, they often require manual installation.
- Lack of Mobility: Traditional POS systems are typically stationary, meaning sales transactions can only occur at the physical location of the terminal. This limits the flexibility for businesses that might benefit from mobile transactions, such as restaurants or businesses that attend trade shows.
- Integration Challenges: Legacy systems might not easily integrate with newer technologies or third-party applications. This can be a hindrance for businesses looking to sync their POS data with other systems like e-commerce platforms or accounting software.
Who Uses Cloud POS?
Let’s say you own a single-location gift shop. You have 1 POS terminal, and your shop is located in an area with spotty mobile coverage. In this case, a legacy POS might make more sense.
Making the Right Choice: Factors to Consider
Ultimately, there’s a lot to consider when buying a POS. But if you follow these tips, you’ll land on the best choice for your business:
- Assess Your Business Needs: Understand what your business truly needs. Do you require real-time access to data from multiple locations? Are you looking for a system that integrates seamlessly with other software? Answering these questions will help narrow down your options.
- Consider the Total Cost of Ownership (TCO): While on-premise systems might have higher upfront costs due to hardware and software purchases, cloud-based solutions often come with recurring subscription fees. Evaluate the long-term costs of both options, factoring in maintenance, updates, and potential scalability needs.
- Think About Scalability: If you plan to expand your business, a cloud-based POS might be more suitable. These systems allow for easy addition of new terminals or locations without significant infrastructure changes. On the other hand, scaling up an on-premise system might require additional hardware and software licenses.
- Evaluate Data Accessibility: Cloud POS systems offer the advantage of accessing your business data from anywhere with an internet connection. This is especially beneficial for business owners who manage multiple locations or travel frequently.
- Security Concerns: Both systems have their security challenges. While on-premise solutions might be vulnerable to physical breaches (like theft), cloud systems depend on internet security. Ensure that whichever option you choose has robust security measures in place, including encryption, regular updates, and compliance with industry standards.
- Integration Capabilities: Modern businesses often rely on multiple software solutions, from e-commerce platforms to accounting tools. Cloud-based POS systems typically offer better integration capabilities with third-party applications, making data synchronization more seamless.
- Downtime and Reliability: Consider the potential downtime associated with both systems. While on-premise systems might suffer from hardware malfunctions, cloud systems could be affected by internet outages. Choose a solution that offers reliable uptime and has contingencies in place for unexpected disruptions.
Both on-premise and cloud POS typically have benefits and drawbacks. On-premise POS also has its own characteristics that are suited for some business types who need their own customized POS system, despite cloud POS being more remarkable and well-known. Depending on the type of business, expectations, and scale, retailers should carefully consider whether to employ cloud-based POS software or traditional POS software.
By switching to a cloud POS, you receive a strong and cutting-edge system to support the growth of your business. Here are the primary benefits that FTx POS provides:
- You can access the new Control Center from anywhere at any time
- Centralized database with 24/7 security backup of all your data
- Get rid of your server and the need to manage it
- Use offline mode to continue selling even when your WiFi is down
Ready to take your business to new heights with the cloud? Get in touch with us now to schedule a consultation and see the power of a demo for yourself!