Over the years, the technology used for point of sale (POS) systems has evolved significantly. Both the POS hardware components and software have undergone substantial transformations. Currently, the most commonly used POS software systems are either local or cloud-based. Each type has its own benefits and drawbacks, and based on your business requirements and preferences, one mode may be more suitable for you than the other.
Regardless of the software type, the basic functionalities are primarily the same. They support POS activities, identify products, generate bills, accept payments and record transactions. Many providers will have both types of POS software available, while others may specialise in one format.
The selection of a POS system software is a major one, and will influence its performance, need for updates and costs. Since implementing a new POS software is a significant investment and also takes time, choosing carefully is important. By learning of local and cloud-based software, you can choose the one that is best for you.
Evolution of POS Systems
Historically, sales have been recorded manually for accounting purposes. In the 1870s a mechanical method of tracking sales transactions was developed by saloon owner James Ritty in Ohio. His initial goal was to prevent employees from stealing from the cash register. Inspired by the machine that counted revolutions of a ships propellor, this initial mechanism was adapted to record each time a sale was completed.
The patent was sold twice, and in 1884 was renamed as the National Cash Register, with additional features of a cash drawer, and receipt printing. In the 1900s, electric versions of the cash register were developed and in 1973 IBM launched the first ever point of sale system. In 1986, touch screen displays were incorporated and throughout the 1990s rapid technological progress took place alongside the development of personal computers.
In the 2000s, mobile and cloud-based POS systems were developed. Multiple features have been added on, and POS systems have become more accessible than ever before. While initially POS systems were used primarily by grocery stores and supermarkets, now, nearly all businesses dealing directly with customers have started using POS setups, including retail shops, restaurants, healthcare, and hospitality.
Local POS Systems
A local point of sale system, also known as traditional, legacy or on-premise POS, stores all the software and data on a local server. The system runs on a closed internal network and is not accessible by devices outside the network.
- Can be used offline
- Can download data
Cloud POS Systems
A cloud-based POS software is where the POS system, all the data and information, are web-hosted on the cloud on a remote server. Deployed as a type of Software as a Service (SaaS), a cloud-based POS system is accessed through the internet and all backups are available online.
- More features
- Can be accessed remotely
- Regular updates
Local Vs Cloud POS Systems
The primary difference between local and cloud-based POS systems is the hosting of the software. While in a traditional POS system, the hosting is local and offline, in a cloud POS system, the hosting is web-based on a remote server. When it comes to application of these systems, there are a few other aspects to consider.
A POS system requires a significant investment, and so the costs should be considered at the time of purchase. The costs include initial setup expenses as well as running costs.
Local: A traditional POS system will typically have a high upfront cost for the installation. Apart from installation charges, there would be maintenance fees for periodic updates that would take place on-site. If the system crashes, you would have to spend money on re-installation which can be expensive. Other than maintenance costs, there are no monthly recurring charges.
Cloud: A cloud-based POS system is generally cheaper than a local version, and involves either a monthly or annual subscription fee. The installation process is simple with minimal upfront costs. Also, the cost of updates is already included in the subscription fees so there are no additional charges. However, the subscription amount typically depends on the size of the business and volume of transactions, so for larger businesses, it can be expensive in the long run. There are a few ‘free’ cloud-based POS systems, but they often have hidden costs.
Any POS software will require hardware to function on. The can influence the mobility and costs of the POS setup.
Local: As the hardware for a local POS system will have to serve as a server to store the data, the size of the device is typically large and bulky. The large size is difficult to move around and can be expensive, but it also discourages theft.
Cloud: Any device with an adequate operating system and internet connection can be used for a cloud-based POS system. This includes laptops, computers, tablets, smartphones and specialised devices. Mobile devices would require regular battery charges and can be vulnerable to theft.
The accessibility refers to how easily you can access the data of your POS system. In some cases, you may want instant access, while in other situations a bit of delay won’t make a difference.
Local: In a local POS system, all the data is stored in the local server. As a result, the data can only be accessed from the specific office or location where the server or POS system is located. Any changes to be made to the POS, inventory or other details can only be made with a physical presence at the server location.
Cloud: As a cloud setup is completely online, all the data is stored online as well. The data can be accessed remotely, whenever required. Changes to the POS system can also be made remotely, only an internet connection is required. The POS system can also be monitored remotely from any location with an internet connection.
Updates are important for POS software as they make sure the software runs smoothly and is secure. Also, updates can add extra features to the POS capabilities.
Local: A traditional POS system would need to be updated manually and on-site by qualified technical support staff. During the update process, the POS system cannot be used, resulting in added downtime for the business. Due to the disruptions caused, local POS systems are updated around once a year or after hours.
Cloud: A cloud-based POS system automatically installs updates periodically. There is no need for an on-site visit or downtime. Also, the updates take place frequently and in-real time, so you are always using the latest version of the software.
Data Loss Risks
Every point of sale system records a substantial amount of data, pertaining to the transactions conducted, inventory, employees, sales, customers and more. In any situation, the data garnered from a POS system is valuable, and loss of it is undesirable.
Local: A traditional POS system has a comparatively higher risk of losing data. As local servers and a closed internal network are used for data storage, there is a risk of losing all of the data in case of an emergency. This can be the system crashing, a software bug, or a physical disaster such as a flood or a fire. Although data can be downloaded and backed up for safety, it is a time-consuming process and would need to be done regularly.
Cloud: A cloud-based POS system has a minimal risk of data loss. As all of the data and information is stored on remote servers online, it remains safe even if there is an issue with local POS devices. Also, backups are conducted automatically and regularly on the cloud, so if the system crashes, the data can easily be restored.
Internet access is often a significant factor influencing the choice of POS software. Consider the internet availability in your place of business, and how steady the connection is.
Local: A major benefit of local POS systems is that they are not dependent on the internet. Even if there is no internet connection, the system can run efficiently and without interruption.
Cloud: In contrast to local systems, a cloud-based POS system is heavily internet dependent. In many cases, if the internet quality drops or is lost, the service will be affected. A few cloud-based POS systems do have support for offline service, in which case you can run basic services and sync data once internet is available.
Integration Support and Customisation
A POS system offers a vast range of features, which for many businesses can be more than enough. However, if you plan to supplement with additional functionalities, then it is useful to consider the integration capabilities of the POS system.
Local: For a local POS system, integrating extra features, systems, tools or updates after the initial installation can be a challenge. Most often, either businesses would need to use it as-is, or call in extra technical support for further integration, at an additional cost.
Cloud: There is a great deal of flexibility with cloud-based POS systems. Additional features, modules, tools, updates, and connections with third-party software providers can also be incorporated with an existing POS setup. There is a notable amount of flexibility for customisation as per the needs of the business.
Installing and setting up point of sale software takes time, money, and efforts, and so it is important to choose the right software for your business needs. For businesses that require a great deal of mobility and have a constant internet connection, a cloud-based POS system is a suitable option. If there is a need for extended offline operations, then a local POS system may be appropriate.
Although cloud-based POS systems are gaining considerable popularity, it is important to keep in mind your situation and take guidance from experts. Technology evolves at a rapid pace, making it vital to choose a sustainable POS system.