IBM announced plans in April tosell its $1.5 billion Retail Store Solutions (RSS) and POS division toToshiba in a deal worth a reported $850 million. The news was certainlyno shocker, since IBM has been trying to offload many of its hardwareheavy divisions for a long time, said Greg Buzek, president of IHL, aresearch and consulting firm focused on retail and hospitality sectortechnologies based in Franklin, Tennessee.
“This (POS) division particularly has primary revenue stream comingthrough hardware. Although there’s a software piece of it, it’s lowmargin,” Buzek said. “They’ve been coming to this (sale) for years.”
Canadian analyst James Alexander agrees.
A win for Toshiba channel partners
“For IBM resellers, many of them don’tcare to sell hardware at verylow margins rather than (focusing on) the integration of services andgetting folks into higher end applications,” said Alexander,vice-president at Info-Tech Research Group in Toronto.
Since IBM was the top POS vendor in the world andToshiba was “probably number seven or eight,” the transaction is a hugewin for Toshiba, Alexander said.
“Resellers are not one-size-fits-all. The traditional Toshiba resellersfor POS are the people who sold cash registers. Now they get access toa better system,” Alexander said.
The POS market has been shifting further away from traditional hardwareand software towards app-based mobile technology in recent years. Oneof the hottest companies capitalizing on that trend is Canadian startupLightSpeed. The Montreal firmnabbed a $30-million venture capital deal from Silicon Valley’s AccelPartners in June. Later that month, it unveiled a new app that allowsretail store staff to use iPads as mobile sales and transaction deviceswhile interacting with customers.
Retail staff can use the LightSpeed For iPad app to browse for productscarried in the store. The app also brings up related items on-screen sosales people can cross-promote them to upsell customers buying otherproducts in the store. The app creates a sales invoice with one tap onthe iPad and also processes credit card payments, accepts signatureson-screen, and emails and prints receipts wirelessly from anywhere.
Although the app is available as a free download from the iTunes AppStores, retailers must purchase a LightSpeed server with one userlicense required per iPad client.
The growing popularity of these mobile app-based POS systems has taken POS opportunities away from the traditional channel stream, Buzek said.
“There have been some monumental changes for the channel. Half theretailers in North America are small mom-and-pop shops, one-storechains. (A mobile) POS app may be good enough for a lot of those guys.But that (eats) into the dealer base where the dealers and VARs used toplay,” Buzek said.
The IBM deal could also open up new opportunities for POS vendors –like HP – which compete against IBM in other parts of the IT channel,he added.
“The second piece of the picture is the programs to the dealers in thechannel. IBM has traditionally had strong dealer programs and rewards(in the POS channel) but now that’s in doubt. It opens up anopportunity for competitors like HP and ScanSource to forge new tieswith those dealers.”
Due to IBM’s recent move, ScanSource is now a Toshiba POS partner rather than anIBM partner. ScanSource is also a POS channel partner of Motorola,Microsoft and NCR. Info-Tech’s Alexander concurs that HP willreap big channel benefits from IBM bowing out of the POS market.
…and a win for HP
“If I’m selling HP POS sytems, this is a win for me. If you can’t buythem from IBM anymore, where are you gonna go? Any time you take outthe market share holder in any solution area, it’s always going to openup opportunities,” Alexander said.
In a blog posting following the announcement of the IBM/Toshiba deal,Forrester Research analyst Brian Walker warned that while thetransaction won’t have a noticeable impact on IBM’s RSS and POScustomers right away, the bigger issue of POS sales moving away fromthe traditional channel context will linger.
“The near-term implications for IBM Retail Store Solutions customersare minimal,” wrote Walker, vice-president and principal analyst fore-business and channel strategy at Forrester.
“However, in the long term, clients of the new Toshiba (POS) unit willface the same challenges determining the long-term road map for theirchannel-centric systems, and whether a move to a channel agnostictechnology architecture is in their long-term best interests. Toshibawill be a Smarter Commerce partner, but the questions go much deeperthan integration of these systems.”