DaveO Posted June 24, 2014 Posted June 24, 2014 Its a hot time for bigger businesses buying smaller food related technical businesses. Priceline just purchased OpenTable for $2.6 billion, and as of yesterday Oracle announced they are purchasing long time Columbia Maryland Hospitality POS manufacturer, Micros for $5.3 billion. Micros, a local company, has been around since the late 1970's and has been the leader with regard to POS systems for the hospitality industry, particularly focused on restaurants and hotels and more recently expanded to a wide variety of retail. I found the above reference to the sale interesting as it breaks down sources of income for micros with the largest element being "service", the consistent volume of changes requisite from customers to upgrade and adjust their systems. Hmmm. Every time a restaurant adds new items or changes its menu it needs to pay the POS operator something to change the system. I never thought about that.
DonRocks Posted June 24, 2014 Posted June 24, 2014 Hmmm. Every time a restaurant adds new items or changes its menu it needs to pay the POS operator something to change the system. I never thought about that. If that's the case, you can bet the restaurants resent it, and I suspect this one thing kills brand loyalty - in other words, they'd haul ass first chance they got.
DaveO Posted June 24, 2014 Author Posted June 24, 2014 If that's the case, you can bet the restaurants resent it, and I suspect this one thing kills brand loyalty - in other words, they'd haul ass first chance they got. I think you would have to question the operators about that. As I was reading the news about this transaction I saw the article referencing the "mini me" and the fact that both Oracle and Micros both earn the substantial volume of revenues by servicing their clients on an on going basis. Back in the '90's I sold a building and worked on behalf of the largest, or only micros dealer in the region (DC/Baltimore). Ultimately micros merged all the dealers across the country into their own business. The local dealer was the 2nd generation of a local business that started out selling cash registers and had morphed into POS systems. Really liked that client. He was sharp. I still recall how he described the evolution of his business and industry and how it evolved by selling "services" on an ongoing basis. So in the early '90's he was doing what Micros is doing to this day... Our different businesses subscribe to some of this. Its costly but its also on the minor scale of all costs. Its the kind of situation wherein you'd have to poll to the operators to see how they feel and react. Also if newer operators evolve and they are able to deliver systems that don't involve ongoing management costs...I'm sure they are attracting customers. meanwhile I followed micros stock and never purchased a share. It was sooooo cheap for so long ....I think into the early 2000's. Stocks at 68 now. So long term holders and some fairly recent buyers are making out on that.
TedE Posted June 24, 2014 Posted June 24, 2014 Hmmm. Every time a restaurant adds new items or changes its menu it needs to pay the POS operator something to change the system. I never thought about that. "Services" does not include such low level tasks. There is no way the software doesn't handle that as delivered (you would need a Micros person on staff just to handle daily specials!). "Services" in this regard refers to everything short of the actual sale of hardware: initial installation/setup, software updates, POS screen customization, adding/configuring ticket printers. Hell, they probably sell services that will do financial analysis and tax reporting for you. It's how large IT industries make money these days; you can't stay afloat by selling silicon, it's a commodity. This is especially true with the shift to cloud-based solutions (sale-as-a-service) where the only thing you are selling is the service, the client is basically paying you to run their system within defined performance specs, up to the company to make that happen with whatever hardware is required. If that is where Micros was going then this sale makes complete sense.
DaveO Posted June 24, 2014 Author Posted June 24, 2014 "Services" does not include such low level tasks. There is no way the software doesn't handle that as delivered (you would need a Micros person on staff just to handle daily specials!). "Services" in this regard refers to everything short of the actual sale of hardware: initial installation/setup, software updates, POS screen customization, adding/configuring ticket printers. Hell, they probably sell services that will do financial analysis and tax reporting for you. It's how large IT industries make money these days; you can't stay afloat by selling silicon, it's a commodity. This is especially true with the shift to cloud-based solutions (sale-as-a-service) where the only thing you are selling is the service, the client is basically paying you to run their system within defined performance specs, up to the company to make that happen with whatever hardware is required. If that is where Micros was going then this sale makes complete sense. Good points. I'm not on the restaurant side and wouldn't know what constitutes "services" and not. Astute comment. Menu changes could be daily...not something conducive to charging and using outside people all the time. Meanwhile per the article above "service" revenues were 40% of total or in excess of $400 million. That is a lot of service!!!--(whatever it is). In any case Micros is one little home grown business that really took off over the years. Good for them.
Mark Slater Posted June 24, 2014 Posted June 24, 2014 "Services" does not include such low level tasks. There is no way the software doesn't handle that as delivered (you would need a Micros person on staff just to handle daily specials!). "Services" in this regard refers to everything short of the actual sale of hardware: initial installation/setup, software updates, POS screen customization, adding/configuring ticket printers. Hell, they probably sell services that will do financial analysis and tax reporting for you. It's how large IT industries make money these days; you can't stay afloat by selling silicon, it's a commodity. This is especially true with the shift to cloud-based solutions (sale-as-a-service) where the only thing you are selling is the service, the client is basically paying you to run their system within defined performance specs, up to the company to make that happen with whatever hardware is required. If that is where Micros was going then this sale makes complete sense. Installation is particularly lucrative for Micros. It involves sending wires throughout the restaurant and to the office where the main PC is located. Running and testing the wires usually takes a few days. The system itself is not inexpensive. A large restaurant with the need for 5 or more waiter touchscreens and multiple kitchen and bar printers could easily add up to more than $40,000. Once the system is setup, Micros provides manager and staff training. Changing menus, touchscreen configurations and such can be done by the operator. Murphy's Restaurant Law dictates that Micros systems only crash on weekends and holidays when the service department is usually unreachable and technicians can charge double. 1
B.A.R. Posted June 24, 2014 Posted June 24, 2014 "Services" does not include such low level tasks. There is no way the software doesn't handle that as delivered (you would need a Micros person on staff just to handle daily specials!). "Services" in this regard refers to everything short of the actual sale of hardware: initial installation/setup, software updates, POS screen customization, adding/configuring ticket printers. Hell, they probably sell services that will do financial analysis and tax reporting for you. It's how large IT industries make money these days; you can't stay afloat by selling silicon, it's a commodity. This is especially true with the shift to cloud-based solutions (sale-as-a-service) where the only thing you are selling is the service, the client is basically paying you to run their system within defined performance specs, up to the company to make that happen with whatever hardware is required. If that is where Micros was going then this sale makes complete sense. I imagine the service referred to above is service contracts, specifically on hardware, as well as travel time. The last service contract sent to me from Micros had the annual fees 35-40% of the original cost the hardware. Yet that same hardware costs have plummeted over time. For example, the service coverage charge an Epson TM-88 printer was $221 per printer, annually. Current online price of the printer ranges from $255-$284. Don't get me started about travel charges.
Al Dente Posted June 25, 2014 Posted June 25, 2014 They also make a nice little chunk of change on credit card transaction fees.
DaveO Posted June 26, 2014 Author Posted June 26, 2014 Jeepers. I wonder if they build these things with "planned obsolescence" just so they can rack up the service fees.? these "maintenance contracts do "add up". Our smb's have some tech support labor contracts. Service and labor charges are a lot. I found some little doo dad connected to one of our systems that I didn't like for the company. I tried my best to remove it. confounding. Had to contact the tech support company that had added it to our "package" (What the hell did we know about the whole package). Its a complicated little tech doodad. A tech had to "undo it". Wasn't that complicated if I knew just a bit more about the whole thing...but I didn't. So they add a bunch of "cr@p" and they disable a bunch of "cr@p" and we frankly don't know what the heck is going on...except that we pay for it....coming and going. Complicated little world we live in.
ol_ironstomach Posted June 28, 2014 Posted June 28, 2014 A relative bargain for Oracle, considering the modest premium, and how long Micros has built their business by plodding the slow and steady path. We shared a building with those guys 20 years ago, in what was a nondescript class C office park in Laurel at the time. It'll be interesting to see what Oracle brings to POS land...after using a Ziosk tablet last winter, I think we'll be seeing generic chains jump all over tabletop customer gizmos.
DaveO Posted June 29, 2014 Author Posted June 29, 2014 A relative bargain for Oracle, considering the modest premium, and how long Micros has built their business by plodding the slow and steady path. We shared a building with those guys 20 years ago, in what was a nondescript class C office park in Laurel at the time. It'll be interesting to see what Oracle brings to POS land...after using a Ziosk tablet last winter, I think we'll be seeing generic chains jump all over tabletop customer gizmos. You shared a building with the DC/Baltimore sales/service side of Micros. The principles of a local POS distributor had purchased the building in the early 90's and moved the business there. I was part of the RE brokerage group that partook in that deal. Shortly afterwards Micros bought up all its national distributors and became a more full service company, including all the service revenues. It made sense as per the opening thread and the news article service revenues make up over 40% of their total Micros revenues of over $1billion/year. I recall that transaction pretty well. The entire thing was very complex with many moving parts but the main principle was a bright guy who was the chief reason everything worked. He had told me he converted the old line business into a service business and really made it work. I thought he was a genius. Now it looks to me like just being in the tech world and servicing these contraptions was a natural function of the tech world. Per Mark's statement above these products are not inexpensive to purchase and install and then service is the ugly and expensive issue that hits you when you least expect it or need it. As customers we have little idea of all the expenses and issues the restaurant business has. Its tough to put out a great product and make a buck. 1
SeanMike Posted June 30, 2014 Posted June 30, 2014 I spent a while talking to some friends in the restaurant industry because I was (and still am) convinced that my company could build a better system, especially in terms of reliability - especially given the costs for POS systems. The biggest problem I was hitting on the business case side to do a prototype was the UI development time, especially as our programming team got steadily more overwhelmed. However, I did run into a POS salesman at Hogo one night and chatted with him quite a while about the business which also made me hesitant. What he pointed out was how so many of the restaurants he sold to didn't want to pay the maintenance, or for support, and often just *didn't* pay, then went nuts when the system broke. (Having been at a BW-3 when their system went down and they literally had to give everything away for free, I can't imagine how much the downtime cost them. I felt glad that I had cash so I could at least tip out my bartender that night.)
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