Eating Crow: How Heartland’s New POS, Xenial, Could Prove Us Wrong

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Last year we published a story on Heartland’s (now Global Payment’s) consolidated cloud POS effort under their Commerce umbrella. Our concerns fell into a few categories:

  1. Building the new POS seemed really expensive (though not nearly as expensive as Revel, Toast and some other cloud companies have been)
  2. The POS appeared to want control over all bolt-on products (loyalty, reporting, etc.)
  3. While dealer economics for the new POS were unpublished, unfavorable terms for existing dealers really had us questioning Heartland’s modus operandi
  4. Payments companies are not product companies and mingling the two could be dangerous

After sitting down with Christopher Sebes, President of Heartland Commerce, for an update on Xenial POS, it looks like we might be helping ourselves to a serving of crow! Christopher and his team seem to be doing everything right, starting with the application itself.

Many POS softwares are only compatible with one computer operating system: think Aloha and Micros on Windows, or Revel on Apple’s iOS. Xenial will run on Windows 7+, iOS and Android operating systems. Christopher’s team was able to accomplish that using Electron for Windows and Cordova for iOS and Android. This gives maximal coverage on potential operating systems.

Additionally, Xenial was built with multi-locations in mind. Many single store operators are eager to use cloud, but regret the lack of redundancy in a local server. By that we mean that if internet goes down, the cloud POS just became an expensive paperweight. You can’t close out at the end of the day, send tickets to a kitchen, or even talk to peripherals. Multi-store owners know to avoid these rookie mistakes and instead look for cloud systems that are hybrid, allowing some level of local redundancy in the event of internet outages.

To that effect Xenial has local redundancy and offline capabilities for up to 30 days without internet connectivity. The offline mode still connects with peripherals, has cash drawer functionality, and allows for interaction with timekeeping and other mission critical features. Xenial also shares orders between terminals, pushing tickets around in a P2P distributed architecture, just like other top hybrid cloud POS companies do.

Surprisingly, Xenial is payment processing agnostic. “While we would certainly prefer customers to choose Heartland’s processing services, we need to earn that business. We don’t want to force customers to use our processing solutions if they’re not the best fit. POS and processing should be free markets,” explains Christopher.

We remain convinced that POS and processing industries will naturally merge over time, but it’s splendid to see a payments company that’s not forcing its own payments, even though it certainly could. Xenial has this flexibility because they’re separate from Heartland, assuaging another of our initial concerns on product creep. “Xenial operates as separate business unit and it’s not part of any of Heartland’s payment businesses,” Christopher notes. This is critical for delivery of a quality POS with no underlying motives.

Xenial also has a revolutionary business model that we hope other POS companies aspire to. Christopher explains, “We want to bring the benefits of enterprise functionality to your main street SMB merchant. You can’t do that by charging enterprise prices for a mom-and-pop.” So Xenial engineered a fixed price for their platform with an unlimited number of devices. What is that fixed price?

Using sales volume over a 90-day window, Xenial will categorize your business into a revenue group. That group is then associated with a flat monthly rate. Xenial will publish these pricing bands at a later date, but they want it to be transparent and Christopher ensures us it will be very competitive. Here’s why.

Xenial offers a number of additional features (i.e bolt-ons) in their platform that would normally come at extra costs, for free! One could argue that nothing is free, but given Xenial’s cost structure thus far they might be swallowing the expense as a cost of doing business. These features are:

  • Online ordering (irrespective of channel)
  • Time and attendance
  • Reporting (built on Pentaho)
  • Cash management

The most impressive bolt-on to make that list of freebies is online ordering. “Online ordering is becoming a necessity for today’s merchants and we felt it irresponsible to deliver a POS solution that didn’t have these capabilities built in,” Christopher attests.

Xenial also offers a set of additional bolt-ons with associated costs. Like Xenial’s tiered pricing based upon volume, these bolt-on upgrades are tiered so smaller merchants doing less volume aren’t paying the higher fees a larger enterprise might expect. Here are some of the bolt-ons Xenial will offer for purchase in addition to those that come with their POS:

  • Scheduling
  • Inventory
  • Customer engagement/loyalty
  • Gift or stored value

If merchants don’t want to use some of these features – let’s say they want another third party to do their online ordering – Xenial has an open API interface that anyone can integrate to for free.

But don’t confuse that for an app store. “App stores usually end in finger pointing… If something fails, whose fault is it?” asks Christopher. To prove the viability of their APIs, all of Xenial’s bolt-on products are consuming their own APIs; Xenial is in effect eating their own dog food.

There are undoubtedly a large number of Heartland dealers who sell existing Heartland POS systems and wonder what the release of Xenial means. Here’s what Christopher shared.

Xenial is a brand new cloud solution built on decades of POS experience. Many of the products our channel sells were used to make Xenial as robust as possible. But just because we’re releasing Xenial doesn’t mean that we’re stopping support on any of our existing POS product lines.

We’re not going to abandon our customers but we also believe Xenial will prove itself to be an enhanced solution that will be far more relevant over time. We will provide a path for both our channel and their customers should they want to upgrade to Xenial.

Xenial will be giving their channel a perpetual revenue share of both the POS software subscription and any bolt-on, irrespective of who sells it. Resellers will be given first priority for merchant accounts in the 1-50 location range, while Xenial sees itself selling directly to merchants with over 50 locations.

However, Xenial won’t preclude resellers from selling larger accounts if they already have those relationships, or if a merchant started in the 1-50 location range and grew beyond 50 locations under the reseller’s watch. If a merchant wants to deal directly with Xenial, Xenial will work with them BUT Xenial will still share relevant revenues with the dealer. If a dealer leaves the Heartland community they will still collect their ongoing revenues so long as the accounts are still active. And unlike many other POS systems, Xenial is hardware agnostic, letting dealers choose what’s best for the customer. And yes, Xenial also keeps to Heartland’s equity incentive program

Xenial’s first release will target QSR and fast casual restaurants with customer-facing products (online ordering, etc.) launching this fall. In Q4 of this year Xenial will release a larger set of features applicable to table service restaurants with liquor store and retail versions coming in 2018. Xenial’s features and pricing will make it relevant from, “Taco Bell to taco trucks,” says Christopher.

It seems like Xenial is doing all the right things. And since we use data to form our opinions, we’re happy to change them when new data is available.

If only brick and mortar merchants would learn to use any data at all…

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