Designing Client Systems for Total Cost

Evaluating a multitude of factors will guarantee long-term success

By Brad Tracy

Interactive client systems, such as point of sale terminals and the components and peripherals that support them, must be cost-effective for the retail customer. To meet that need, designers must look beyond the product cost to address the customer’s total cost of ownership. Factors that affect the deployment and life cycle of client system element outweigh the initial cost over time.

The retail industry has undergone significant change in recent years with increasing competition from both specialized-traditional and Internet-based vendors. This has resulted in pressure within retailer information technology departments to cut costs; the significant investments retailers make in point of sale (POS) terminals is increasingly under scrutiny. The PC on a Cash Drawer (PCoCD) has gained the reputation of being an inexpensive alternative to the traditional POS interactive client, forcing client designers to consider product costs carefully in order to remain competitive with the PCoCD.

Product cost is not the only factor that designers should be considering, however. The end customers need to minimize the total cost of ownership (TCO) for systems they purchase, and so should the designers of these systems and components. The key to understanding TCO is the knowledge that generally more than 80 percent of the overall customer investment occurs after the initial procurement.

First, there are several fundamental criteria that interactive clients must satisfy to be practical in a retail market. For one, they must be stable platforms-capable of reliably and consistently processing customer transactions 24 hours a day, 7 days a week. To that end, selection and integration of highest quality components for the design is paramount. High quality components are only one part of delivering a reliable solution, however. Performing rigorous testing, including shock, vibration, heat and humidity, are all central to ensuring how a POS solution will function over its lifetime as well. (see Figure 1)

Figure 1: Many more factors than the system purchase price must go into an analysis of an interactive client’s Total Cost of Ownership.

Stability is Essential

Stability means that the system’s production and support lifetime must be considerably longer than the typical PC, where the same base units are rarely manufactured for more than 9 months. A significant investment in both time and capital funding is involved in replacing store automation solutions; retailers are not typically in a hurry to replace their systems. Instead, it is commonplace for a retailer to use a POS terminal for 7 to 10 years, with many retailers preserving their investment for upwards of 12 years or more.

To achieve such an extended useful life, the retail industry expects client systems to demonstrate consistency during rollout and subsequent years. System hardware and software changes drive increased training requirements and generate support and management headaches for the retailer. Furthermore, each component change requires customer re-certification of the product. This re-certification effort can be considerable and directly translates into the customer’s cost and risk.

However, “upgradeability” cannot be compromised in achieving a stable design. When purchasing a POS solution the first question a customer asks often concerns the solution’s upgradeability. Because so many retailers keep their POS solutions for such a long period of time, the ease of upgradeability and the expected costs over the lifetime of the system are essential considerations in a procurement decision. A typical retailer will only undertake one or two upgrades during the life of the solution.

Legacy support is always critical. Operating on thin margins, retailers constantly look for ways to stretch their store automation investments. One strategy many employ is to selectively replace components when the business case justifies a replacement. To facilitate this strategy, designers should ensure that their systems have ample connectivity, for not only new devices but also for legacy peripherals. Allowing retailers to protect their existing investments in peripherals such as scanners, printers, keyboards and displays can reduce a new POS investment by as much as 60 percent.

In addition to protecting peripheral investment, retailers often require support for legacy operating systems and applications. This legacy requirement is especially critical when the retailer wants to continue utilizing the existing POS application.

Additionally, the system design must have the right look and feel. Retailers spend a significant amount of money on store aesthetics, paying careful attention to ensure the retail environment is appealing. While the primary function of a POS terminal-recording purchases-must not be compromised, POS systems must also be designed to complement aesthetics, adding rather than detracting from the overall store appearance.

Finally, the system needs to provide security for the transaction data the system collects. With every dollar of business and all customer transaction data passing through the POS system, retailers are intensely focused on ensuring maximum system security. Allowing unrestricted access to media such as flex drives and CD ROM drives can increase the risk of introducing devastating computer viruses, as well as the potential for fraud and theft. Worse yet, valuable customer and financial data can be compromised or erased leading to improper use and outright fraud. To protect data, POS solutions must provide key lock security for access to power switch and media components.

Total cost of ownership

The features discussed above are only some of the considerations that retailers must take into account in evaluating the purchase of an interactive client system. The total cost of ownership (TCO) is another consideration. TCO is an approach that recognizes that costs are incurred throughout the life of the investment. The key phases of the POS life cycle include:

• Acquisition-The initial cost of the system including all hardware and software necessary for proper functioning.
• Deployment-The costs associated with delivering the system to the store location including activities such as equipment staging, site preparation, de-installation of existing equipment, and integration and installation of the new systems.
• Life Cycle Management-The cost of maintaining, operating and supporting the systems during their useful life.
• Disposition-The cost of removing and disposing of the components when their useful life has been exhausted.

Designers sensitive to the cost elements at each stage can make design decisions that will limit those costs. For instance, the hardware acquisition cost for a retailer includes all terminal hardware (including internal components), peripheral hardware, integration components, communication cables, power cables and mounting components necessary to deploy the system. Shipping costs from the manufacturer to the staging facility should also be considered.

The software acquisition cost includes all of the operating system, platform software (including drivers and diagnostic software), terminal management software and POS application software necessary to deploy the POS system. In addition, any initial application customization necessary to interface to corporate systems such as financial and product maintenance systems should be considered as part of the customer’s model.

Factoring in deployment costs

Deployment costs also include the site preparation requirements of the system. Consider electrical wiring, for instance. POS workstations and peripherals require power to operate. PCoCD configurations typically require a separate power receptacle for each peripheral. Designs in which the workstation provides the power for most of the peripherals prevents the retailer from having to either add a receptacle or employ power strips or UPS equipment.

To properly deploy POS systems in a consistent manner over time the retailer needs also to develop, and subsequently maintain, thorough documentation. There needs to be enough documentation detail to ensure successful deployment given typical employee turnover during the course of deployment. Each document typically takes between 4 to 8 resource weeks to complete. That effort includes the initial development of the documentation, technical writing, engineering review and updates, validation, and management review and approvals.

To support deployment, design teams should provide initial documentation that typically includes, but is not limited to, documents for:

• Staging-The document details the process for receiving equipment, consolidation, loading, re-boxing, and shipment preparation. It may include special shipment instructions to ensure equipment arrives and is handled at the store in a specific manner.
• Site Preparation-This document provides the detail on site requirements including power, communications cabling, and checkstand/wrapstand modifications.
• Installation-Ensuring consistency and timeliness of installation, the installation guide documents all requirements including physical installation, setup procedures, and schedules.

Design teams can affect system life cycle costs by carefully considering the frequency of hardware design updates for installed systems. Each time hardware changes, the customer’s associates who interact or support the new hardware need to be trained on the new equipment. Further, the customer’s support documentation will need updating. Document updates typically require 20 to 40 resource hours to complete, including understanding and documenting the changes, management review and approval, document tracking, and document distribution. Thus, the fewer hardware updates the system receives, the lower the life cycle cost.

Final considerations

To keep costs down over the lifetime of the system, design teams should always consider serviceability. Once a system is installed at the customer’s site, service personnel must be able to perform repairs in a timely manner to avoid additional equipment downtime in the store. One way to support that effort is to design the system for in-lane serviceability, allowing equipment to be repaired without being moved from its installed location. This technique speeds repair time and minimizes the retailer’s lost productivity, which is a factor in TCO measurement.

To service the retail market, POS solutions must deliver maximum investment protection over the long haul. These systems should be designed for upgradeability and legacy support with an eye towards TCO over the product lifetime. Designs that simply focus on the customer’s acquisition yield shortsighted solutions that the customer will ultimately pay for in the long run. A thorough evaluation of the system requirements-from inception through to implementation and maintenance-involves a methodology that takes into account the many factors that influence both cost of ownership and long-term performance in a point of sale system.

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Brad Tracy is director of global product marketing at NCR Corp. (Deluth, Georgia). In his 14 years in the retail industry with NCR, Tracy has held positions in sales, product management, and product marketing. His current responsibilities include NCR’s RealPOS workstations, store automation applications software, and the RealScan and RealPrice product lines.