POS Pointers

For 20 years or more, one of the most profitable segments of the channel has been point-of-sale systems sold and configured by solution providers. But as time marches on, there appears to be some significant changes underway in the technology landscape that could significantly alter the traditional POS business model.

Microsoft, in conjunction with a startup company called IP Commerce, is working with a variety of electronic funds transfer services to create a SAAS (software as a service) delivery model for POS. In this model, retailers would deploy IP Commerce's POS software as a service running on top of Vista. That service would then be connected to a variety of back-end electronic funds transfer agents, which today include BankServ, Chase Paymentech Solutions, CIT Group, Internet Commerce, PayPal and Pay by Touch.

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These organizations have bandied together to create a PASS (Payments as a Secure Service) offering that seeks to eliminate the need to create and deploy dedicated POS systems. Instead, any PC running Vista will be able to invoke PASS to securely transfer funds from any retail location by leveraging new sets of security protocols that are layered into the Vista operating system.

The advent of this service poses both a threat and an opportunity for solution providers. The obvious threat is that it has the potential to eliminate the need for specialized POS systems and the solution providers that build them. The opportunity is that it may open the whole POS ecosystem to a broader number of solution providers because they won't have to invest as much capital in setting up a POS system.

Not only does the IP Commerce system manage the transfer of funds, it also provides an accounts payable and receivable management system for the individual retailer as a service. And down the road you can envision how the service might be used to give retailers more visibility into the back-end supply chains of manufacturers.

Given the fact that PASS is dependent on Vista adoption, it will probably be a while before IP Commerce becomes the equivalent of a Salesforce.com in the POS space. But at the same time, the presence of a PASS consortium made up of financial services companies that will be pushing retailers to adopt IP Commerce because it lowers their costs by streamlining their back-end processes makes PASS an impending threat to every solution provider and distributor in the POS space.

And as the saying goes, to be forewarned is to be forearmed. In this case, that will probably result in a pressing need for existing POS providers to start moving upstream to higher-level consulting and management services before what they do today becomes a low-margin service tomorrow.

Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.