Until a few years ago, most face-to-face businesses would store all their point of sale (POS) data locally, including prices of items and records of transactions. This data would usually be held on an on-site PC or server, or perhaps a server on a private company network in the case of large retail chains.
But as the internet has become ubiquitous and most business tools are now based online, there’s been a natural progression towards cloud-based POS systems. Let’s look at what cloud-based point of sale systems are and how it differs from locally hosted POS systems.
How it works
Cloud-based point of sale systems process and store sales data online as opposed to locally on your own computer or on-premise server.
The frontend POS interface is made for use on internet-enabled devices including tablets, smartphones and touchscreen monitors, while the backend can be accessed through any web browser. Cloud-based POS systems is sometimes referred to as POS applications (apps) instead of software, since they are used on mobile devices.
About the cloud
- “Cloud” is really just a metaphor for the internet.
- “Cloud-based” refers to online storage and processing of data as an alternative to using your computer hard drive.
- Information stored in the cloud is stored on servers provided by a cloud computing provider.
- Cloud POS providers handle the cloud hosting for you.
Cloud-based point of sales can be truly portable (if using mobile devices) while the business manager can check and use sales data from anywhere as they are being updated in real time in the cloud. It also means lower equipment costs, since your existing iPad or mobile phone can be used as the POS interface.
Because the data are stored on the POS provider’s internet servers, a cloud-based POS system can usually only function when there’s an internet connection, although providers may offer some offline functionality to minimise potential disruption to your customer service.
Cloud-based vs. locally hosted POS systems
Let’s look at how a cloud-based POS system compares to a locally hosted POS system.
Cloud-based: Requires signing up online or over the phone (the provider may perform a background check), then downloading the POS application that is ready to use straight away. Many POS providers offer a free trial you can use for testing, before you are required to subscribe to a plan.
On-site: Typically costs a setup fee and requires a trained engineer to set up equipment, customise the software to your needs and install it on your local computer network. On-site POS systems can’t be used before both the hardware and software setup have been done.
Cloud-based: Subscription-based, usually without a long-term contract, which covers everything including licences, customer support, data hosting and software updates. You usually pay per touchscreen device using the POS application. Plans are flexible so you can switch to more or fewer devices or cancel any time. If using many POS touchscreens as in the case of large retailers with multiple stores, the costs can add up to be as expensive as on-site systems.
On-site: Usually requires a long-term contract. Costs can be high because locally hosted software requires a more specialised hardware setup, dedicated support from the POS provider and periodical maintenance of both software and hardware. This may, however, suit and be more cost-effective for larger businesses with particular needs.
Cloud-based: Limited customisation options of core app features, although there are POS applications created for specific sectors such as restaurants (Lightspeed Restaurant POS is an example). Furthermore, many cloud-based POS apps can integrate with various compatible partner platforms like Xero and WooCommerce, creating much room for growth and flexibility.
On-site: Providers can customise the POS software to your unique exact business needs, for instance the POS interface can show only what’s needed in that company. Not made for integration with internet-based software platforms, so integrating in-store sales with, say, e-commerce sales may not be possible. Any customisation should be done at setup, as it costs to adapt and change the system later.
Cloud-based: Requires an ongoing internet connection to function, so it’s vital the POS device has a decent WiFi or mobile network data connection. Some applications has the capacity to work offline, then sync the new data to the cloud when back online. Certain POS applications only function on iPads, but many offer Android compatibility too. Software updates are done automatically by the provider – just make sure you’re using the latest version of the app.
On-site: Functions without an internet connection. Requires own physical server (for instance, a computer hard drive) set up on your business premises. Periodical software updates need to be done either manually by yourself or professionally by an IT engineer on your premises.
With cloud-based point of sale systems, you can use a card machine anywhere as long as it is connected with a mobile device with a POS app and functioning 3G, 4G or WiFi.
Cloud-based: Works on tablets and smartphones so you can accept payments from anywhere you bring your mobile device, provided you have a 3G, 4G or WiFi connection. Chip, contactless/NFC or swipe card payments should of course be processed through a card reader, but there are many compact and wireless card machines that can be used with cloud-based POS systems. Management functions can be accessed through any web browser anywhere.
On-site: Can’t be used outside the business premises where the software is installed. Wireless card terminals connected to the on-site POS will only work within the connectivity range of the system. Management functions can only be accessed on the POS premises.
Cloud-based: All data is stored in the cloud, which is highly secure. None of your data is stored on your point of sale devices, so if you lose all your hardware, you still have instant access to all your sales data and POS system when logging into a new computer or mobile device. The POS provider automatically performs any security updates needed in the software.
On-site: All data is stored on your own physical server, usually a computer hard drive. This means that if something happens to your computer, your data is at risk. It is therefore required you keep your operating system up to date with the latest security updates and take good care of your equipment.