Retail Management: Feet On The Ground Or Head In The Clouds?
By Ian Goldman
Cloud computing is everywhere these days. Software companies love it because it reduces piracy, creates recurring revenue, and almost completely eliminates system incompatibility issues; users like it because it lowers capital expenditures, reduces or eliminates the need for IT staff, and ensures the most recent software version is always running. But the cloud has also introduced a slew of concerns, including security, amortization of assets, and flexibility.
You may have read news of the U.S. Department of Defense turning to the cloud for data storage and more doctors offices and hospitals entrusting medical records to the cloud and wondered if the cloud has matured enough to make it worthwhile for retail management. Certainly, there are a few cloud-based options out there. Whether one of them is ideal for your business is individual and depend on a few factors.
Features available in the cloud
One of the most important evaluations necessary in selecting any retail management platform is an assessment of what features are needed, and the cloud is no different. Large retail software vendors have experimented with cloud solutions to varying degrees over the years, but have not found tremendous success. The space is currently dominated by smaller providers offering limited services and functionality.
Although growth is occurring in mid-market providers of cloud retail technology, it is rare to find comparable levels of integration and flexibility to the offered platforms than in traditional licensed software models. Therefore, it is very important to research solutions that are compatible with specific business models out of the box. Cloud solutions are generally more attractive to retailers whose operations are fairly typical and don’t require special customization, regardless of size.
It’s all in the numbers
A fundamental difference between cloud and licensed on-premise software rests in associated costs. In the software as a service (SaaS) model, cloud solutions require very little upfront expenditure, instead relying on subscription fees that continue so long as the service is used. This is a plus for organizations that wish to minimize capital expenditures and those that possess minimal IT expertise as there is very little maintenance with these platforms.
Traditional on-premise retail solutions come with upfront capital expenditures and usually require some level of experience managing IT systems, but the breakeven point is typically reached before a significant upgrade is necessary. Thus, it is more cost-effective for most retailers to purchase licensed software and maintain it than pay subscription fees forever. This is especially true when trained IT professionals and resources are readily available.
Almost all retailers prefer to invest cash into inventory and other investments likely to generate revenue, so understanding which accounting methods are used help govern smart solution decisions. While on-premise solutions ultimately free up more cash over time that can be invested elsewhere, subscription cloud models cost less upfront. A large part of when it’s more important to have cash on hand lies in timing and forecasting.
Where you feel more secure
There are a lot of concerns about security in the cloud, but data centers are some of the most secure places where data can be stored and are almost always more secure than on-site servers. The biggest threat to retailers is credit card transaction information, but point-to-point encryption and EMV security standards have made it such that the point of swipe is by far the largest vulnerability. In most instances, data stored in the cloud is protected by high-end security measures and is at least as secure as local data.
It is worth noting, however, that entrusting customer information to a third party does relinquish control. You are trusting someone else, plus any third party contractor the cloud vendor uses, with your information. Whether data is safer in the cloud or on-premise is largely dependent on local policies and security measures, but in the aggregate, neither avenue provides measurably less vulnerability.
When asking if it is better to turn to the cloud or use an on-premise licensed retail management platform, there truly is no universal answer. There are excellent products in both categories for retailers to choose from depending on business model, culture, and personal preference. The strength of IT expertise and infrastructure, cash flows and investment priorities, and operational complexity are excellent vantage points to stand from when evaluating alternatives.
IanGoldman, President and CEO of Celerant Technology, is an expert software engineer and entrepreneurial enthusiast with an extensive knowledge of Point of Sale systems, CRM, and inventory management.
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