{"id":5304,"date":"2019-10-01T06:17:35","date_gmt":"2019-10-01T11:17:35","guid":{"rendered":"https:\/\/reformingretail.com\/?p=5304"},"modified":"2019-10-01T06:17:44","modified_gmt":"2019-10-01T11:17:44","slug":"danger-of-converting-a-perpetual-license-merchant-to-saas","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2019\/10\/01\/danger-of-converting-a-perpetual-license-merchant-to-saas\/","title":{"rendered":"Danger of Converting A Perpetual License Merchant to SaaS"},"content":{"rendered":"\n

Recurring revenue businesses garner great premiums over businesses with perpetual licenses, or one-time software revenues. It’s the reason why we expect NCR has been so keen to convince their merchants and resellers <\/a>to transition to a recurring license for the software: grab a premium share price from the market so their management can make out like bandits <\/a>without fixing any of the underlying, systemic issues.<\/p>\n\n\n\n

Financial engineering at its finest.<\/p>\n\n\n\n

But NCR’s new management appears ignorant to the reason why many of their customers are still<\/em> using their POS systems to begin with (hint: it’s because they own<\/strong> the system). Ten years ago SaaS pricing for POS didn’t exist. And since merchants held (and still hold) their POS systems for ridiculous stretches of time<\/a>, they bought the line that if you buy it, you own it forever.<\/p>\n\n\n\n

Many of the legacy POS companies were copacetic with this deal too, as it allowed them to skimp on R&D investments and pad their financials. Remember that these were the days of locked-in POS (although these days might be returning thanks to greedy cloud POS providers<\/a>) and the legacy POS companies knew they would extract revenue in other ways. For proof of this modus operandi<\/em> you can look to NCR’s Aloha POS, which still can’t produce a third party API worth discussing (according to every third party we’ve ever spoken with), whose own bolt-ons can’t even talk with newer versions of their own<\/em> POS software (research Aloha version 15 and NCR Loyalty), and who still has a host of EMV issues nearly four years after the liability shift<\/strong> (ask NCR’s own customer advisory board members).<\/p>\n\n\n\n

Simply amazing.<\/p>\n\n\n\n

So what happens when you force these merchants, who were sold to the idea that they owned their POS, to start paying monthly for your underwhelming POS software?<\/p>\n\n\n\n

They leave.<\/strong><\/p>\n\n\n\n

Think about it: if you’re going to ask a merchant to reach back into their pockets after 20 years of living “off your books”, they’re going to shop. And what do you think happens when they compare your underinvested product to competitors that have<\/em> invested significant capital in R&D to keep their products modern, relevant, and sexy?<\/p>\n\n\n\n

Ruh roh.<\/p>\n\n\n\n

Why don’t we abstract this to a really, really simple argument from the merchant’s perspective, paraphrased from many Aloha customer conversations:<\/p>\n\n\n\n

For years you’ve been providing my POS system. I paid for it once, and I haven’t seen any improvements from your company in the years since. Hell, even if I find a third party solution to fix your product you pretty much make it impossible to use. If I start handing you money monthly, what the hell are you going to do with it? My frame of reference for NCR is a company that has not only refused to fix my current problems, but hasn’t created anything useful in my history of staring at your green logo.<\/p>

Fool me once, shame on you; fool me twice, shame on me.<\/p>Pretty much your average Aloha customer<\/cite><\/blockquote>\n\n\n\n

The danger in foolishly rushing into a SaaS model when you’ve been a perpetual license provider is that you’re giving your merchants a reason to shop. And if you’ve neglected R&D investments, your products will not show well in a beauty pageant. We feel sorry for resellers of these types of POS systems, who live in market reality yet are being asked the impossible by corporate.<\/p>\n\n\n\n

SaaS multiples are appetizing but you don’t simply stumble into them by accident. If you want them, you need to earn them. We pray NCR doesn’t get their payouts without adding value to their customers first.\n<\/p>\n