Microsoft Retail Systems

Introduction

Based on the increased demand for information technology (IT) in the retail industry, Microsoft offers two retail packages: Microsoft Retail Management System (RMS) and Microsoft Point of Sale (POS). Microsoft Retail Management System provides small and midsize business retailers with an integrated point of sale solution to manage operations within one store or across a chain of stores. Microsoft Point of Sale provides single-store retailers with an application that helps with daily business tasks. To promote its offerings, in March 2006 Microsoft expanded its business relationship with Best Buy for Business, whereby Best Buy became the only official retail sales channel for the Microsoft POS solution (Microsoft RMS is available through Microsoft's certified sales partners).

The following article will highlight the main difference between Microsoft POS and Microsoft RMS, and examine the strengths and challenges of the products, as well as competitors. The article will then provide user recommendations.

Retail Management System versus Point of Sale

Although Microsoft POS is targeted to one-store retailers, it includes the main core functionalities and some of the non-core functionalities of a POS system (for more information about POS core and non-core functionalities please see Point of Sale: To Stand Alone or Not?). Microsoft POS includes transaction management, price management, register management, inventory management, customer relationship management (CRM), and report and inquiries modules. Non-core functionalities include modules for price changes and purchase orders.

Despite Microsoft's late entry into the mature retail software market, it will likely compete against known, established, and leading retail software vendors such as Intuit, Raymark, Synchronics (a division of Radiant Systems), Fujitsu, and Retail Anywhere. By offering a stand-alone POS system and using Best Buy for Business as its only retail sales channel to date, Microsoft becomes a possible direct competitor of Intuit's QuickBooks Point of Sale. More retail sales channels will be announced in the fourth quarter of 2006. Intuit and Microsoft both offer point-for-point functionalities, and one-store retailers can obtain the products off the shelf. Hence, an owner of a store can procure either solution within the same point of purchase.

In addition, the Counterpoint SQL Express solution from Synchronics is another main competitor of Microsoft. Similarly, Synchronics offers a one-store POS solution for retailers, and targets the same market. Having similar functionalities and price points, one-store retailers can consider evaluating Synchronics and Microsoft. Nevertheless, Synchronics does not have the same sales channel as Microsoft, since Counterpoint SQL Express is only available from value-added service partners. A small retailer thus has better accessibility to Microsoft POS, as it can buy it off the shelf, whereas to acquire Counterpoint SQL Express, retailers must go through a long sales process with vendor briefings and demos.

Microsoft RMS includes functionalities from Microsoft POS and more (please refer to table 1 for a comparison of Microsoft POS and Microsoft RMS). The prominent feature of Microsoft RMS is the ability to obtain inventory and customer information across multiple stores. Having the ability to support multiple stores and increased visibility on inventory allows Microsoft to target a larger market. Microsoft also delivers additional management and tracking tools for small and medium retailers. These added features allow Microsoft to compete with vendors such as Raymark, Fujitsu, and Retail Anywhere. These vendors have the same sales process, and retailers need to set up vendor briefings and demos before purchasing one of these solutions. Since the core functionalities are similar from solution to solution, retailers need to evaluate the additional value for each provider's offerings. Each of these vendors has different pricing structures, upgrade paths, maintenance plans, and company recognition. The retailer needs not only to evaluate the solution according to its unique business needs, but also to evaluate the software vendor's reputation. Retailers that spend a considerable investment on a new POS system need the security of a support and upgrade path for the future.

Table 1. Comparison: Microsoft Point of Sale and Microsoft Retail Management

Source: http://www.microsoft.com/businesssolutions/retailmanagementsystem/product/product_comparison.mspx

Product Strengths

Microsoft's retail solutions gains competitive advantage due to its ease of use, integration capabilities, and vendor partners, which allows Microsoft to serve many retail verticals.

Microsoft RMS includes the main core functions and features of a POS system. Moreover, it has the look, feel, and ease of use that is common to Microsoft products. The graphical user interfaces (GUIs) of RMS and POS have the same look and feel as Microsoft Outlook. A user who is not technically savvy but who uses Outlook can easily enter a sales transaction without any training. Moreover, Microsoft POS has a very descriptive nomenclature that follows user functionalities. For instance, within the application, visual icons such as sales or transfers are clearly marked. Furthermore, if a question arises regarding certain features or functions, the help module integrated into the POS solution is user-friendly and complete, thus reducing training time.

In addition to easy navigation throughout the system, and a well-organized help module, Microsoft POS installation is relatively easy. The software offers step-by-step instructions during the installation process. Similar to the Microsoft Office Suite, the installation of POS can be done by non-technical users. This is an advantage for Microsoft, compared to Synchronic's Counterpoint SQL Express solution. The Synchronics solution is available through its resellers, which will only provide the solution as a package with its implementation services.

Due to the full integration of all of Microsoft's products, its retail solution implementation and configuration is relatively effortless. There are two approaches to setting up data within an enterprise solution: importing the data, or manually entering data into the application. Microsoft POS allows an import of data just by having inventory, customer, and supply information available on an Excel spreadsheet. Thus, instead of keying in all the information manually, or going through a lengthy process for data conversion, retailers can import the information and be ready to enter transactions within a few hours.

In contrast to Microsoft POS, Intuit's POS and accounting solutions for small retailers (QuickBooks Point of Sale and QuickBooks Financials) do not integrate with one another. Depending on the country where QuickBooks Financials was purchased, the POS solution from Intuit may not integrate, due to the different financial structure of each country. Other strengths of Microsoft integration capabilities include the remote access features; with the help of Windows XP Remote Access, owners can easily connect to the stores remotely, unlike products from certain vendors such as Fujitsu that need a third party solution.

Many verticals exist within the retail industry. Microsoft has many partners such as Elypsis (the wine and liquor vertical), RubinBrown IT Group (the hospitality vertical), Computeration Inc. (the entertainment vertical), or retail automation systems (the convenience store and gas pumps verticals). Not only are these partners trained on Microsoft retail products, they are usually experts within the verticals. They understand the unique business needs of the retailers and can suggest best-practice approaches.

Product Challenges

The pricing structure for support of both Microsoft products is very complicated. Moreover, the upgrade from Microsoft POS to Microsoft RMS is tedious compared to its competitors. Also, there are a few compatibility issues with POS hardware, along with functionalities that certain competitors offer, and that Microsoft does not.

There are many plans available for support on Microsoft POS and RMS. Therefore, before comparing the pricing structure between QuickBooks Point of Sale and Microsoft POS, it is useful to look at an explanation of the different support and maintenance plans for Microsoft POS and Microsoft RMS, as provided in table 2 (please note that all prices are in US dollars).

Table 2. Microsoft maintenance and support fees (as of August 2006)

The Microsoft annual maintenance plan comprises only the software upgrades and service pack; it does not include any technical support. The other packages (Flex 5-pack Support and Flex per Incident Support) include support from a Microsoft technician.

Microsoft POS and Intuit's QuickBooks Point of Sale have the same initial purchase price of $799 (USD). As for the QuickBooks Point of Sale support plan, the first thirty days of support are free, and then there is a monthly fee of $49 (USD). The comparative total costs of ownership (TCOs) for one year are compared in table 3 (all prices are in US dollars).

Table 3. Microsoft versus QuickBooks TCO (as of August 2006)

Assuming that on average, five support interventions are needed in a year, the TCO for Microsoft is $443.82 (USD) while QuickBooks' TCO is $539.00 (USD) for an unlimited number of support calls. Based on the scenario mentioned above, Microsoft POS is approximately 55.5 percent of the list price and QuickBooks Point of Sale is 67.4 percent. In this scenario, Microsoft is less expensive. However, if a retailer needs more than six support calls, it becomes more expensive than its competitor. This is where retailers need to anticipate the number of calls they might require. With all the decisions that retailers already have to make when implementing a business solution, it might be more advantageous for Microsoft to offer an all-inclusive support plan, as with the QuickBooks strategy.

Not only are the support and maintenance plans complicated, but upgrading the Microsoft POS system to RMS is difficult and complex compared to QuickBooks Point of Sale. QuickBooks Point of Sale offers three versions to its customers: Basic, Pro, and Pro Multi-store. Thus, when a retailer purchases QuickBooks Point of Sale Basic, it can easily upgrade, since it's only a matter of calling a sales representative, entering the provided code, and unlocking the features. Moreover, retailers are not monetarily penalized, since Intuit only charges the difference of price between the Basic, Pro, and Pro Multi-store versions. As for Microsoft, the upgrade is not as simple: retailers need to contact a Microsoft partner and go through the whole software implementation project to have Microsoft RMS installed. Thus, retailers need to prepare data, schedule a project plan, and check for infrastructure capabilities for the upgrade.

Microsoft POS is only at its first release. Although the software includes the main core functionalities of a POS system, its late arrival into the retail industry has many consequences. For example, Microsoft is competing in a mature market space, and other vendors already have a head start. Unlike Synchronics, it does not offer the ability to integrate automatically with e-commerce capabilities. Due to the increased demand for an online presence, it would be to Microsoft's advantage to offer e-commerce features in future releases within its base product. Moreover, since Microsoft's product is at its earliest version, the compatibility of its retail solution with third party software is not mature. For example, Microsoft Point of Sale can communicate with Excel to a certain extent only: the import or export of important data such as the supplier information is not available. In addition, the integration of Microsoft Point of Sale with popular accounting software such as Peachtree Complete Accounting or MYOB Business Essentials Pro is not possible. Another consequence of its late arrival, there is no method for data validation within many modules of the application. Therefore, users can enter erroneous and duplicated data.

User Recommendations

Although Microsoft has introduced its retail solutions late into the market, it has provided the principal necessary functions and features for retailers. With its partners, Microsoft has the ability to target a larger market and to satisfy many retail verticals such as the hospitality, wine and liquor, and entertainment industries. Retailers may feel more secure about investing in a Microsoft product, due to its good reputation and brand recognition. However, since the retail industry has many verticals, the likelihood of customization of the solution is high. Therefore, implementation and support of the Microsoft Retail Management Solution requires engaging its sales partners, as Microsoft does not directly offer customization. Since engaging a reseller requires a long business process analysis, other vendors such as Fujitsu or Retail Anywhere with similar sales strategies should not be overlooked.

As for Microsoft POS, Microsoft expanded its relationship with Best Buy for Business to promote its offerings to small retailers. For single-location retailers that are not technically savvy, Microsoft POS delivers what it promises. By having a solution that is easy to purchase, to install, to use, and to learn, Microsoft kept its business strategy simple for its POS product. However, there are some inconsistencies within its strategy, as once the software is purchased, the support pricing plan is relatively unclear Moreover, upgrading from POS to RMS is also complex.

Microsoft Point of Sale is likely a good avenue for retailers which are convinced that business will remain a single location. For retailers that might eventually expand business to between two and ten locations, other vendors such as Synchronics or Intuit should be evaluated. Finally, for retailers needing a solution for over ten locations, Microsoft RMS, Fujitsu, Retail Anywhere, or any other retail system vendors, should be evaluated according the retailer's business needs.