Texas VAR Sells POS Hardware as a Service and Isn’t Looking Back

Global Business Technologies’ POS Hardware as a Service business has resulted in 30 percent recurring revenue growth for the past three years, and it's projecting the same for 2020.

Global Business Technologies (GBT), headquartered in South Texas, now sells all of its Point of Sale (POS) Hardware as a Service. Value-added reseller Danny Hernandez says transitioning to the new business model has resulted in 30 percent growth in monthly recurring revenue (MRR) for the past three years, and GBT is projecting the same level of double-digit growth this year.

“I feel like it’s the best time to be a VAR, and now that we’ve transitioned to POS as a Service, I’m positive of it,” Hernandez says.

How GBT Evolved from a Break/Fix VAR to a Managed POS as a Service Provider

Hernandez says he was sold on the benefits of recurring revenue about 10 years ago after the Retail Solutions Providers Association (RSPA) encouraged its members to transition to the more sustainable model. GBT, however, ran into a roadblock with how to finance hardware for its initial as a Service installations.

An opportunity a few years later and a little ingenuity helped Hernandez overcome the challenge. GBT seized the opportunity to purchase several hundred POS terminals from a retailer upgrading its systems in stores across the U.S., and refurbished them so they were ready to deploy again. “We knew we were responsible for the warranty and support, so we made sure we dotted all the I’s and crossed all the T’s,” Hernandez says. “We launched our Point of Sale as a Service with those bundles.”

The response from GBT’s customers was so positive that MRR grew to the point where the company could purchase new POS hardware. However, the issue of hardware costs resurfaced.

“I was motivated to look for better pricing,” Hernandez says. “Sourcing hardware on my own was the only way to make this model work.” He contacted vendors from all over the world, had samples shipped to his office, and found the best options for his clients at the best prices.

“There was a learning curve,” he says. “It took some time to understand how long it takes to receive orders and delays that can occur in other countries. You need to take that into account. But it’s like anything else. If there’s a 60-day transit time, you need to have enough hardware on hand for those 60 days. You just need to get into a cycle with orders.”

Other Sources of Revenue During the POS Hardware as a Service Transition

Hernandez points out that it took two years for recurring revenue from POS as a Service to cover GBT’s expenses, so the VAR business sold — and continues to sell — under the break/fix model. Sales of deli scales, security cameras, DVRs, as well as POS systems to legacy clients, Hernandez says, “subsidized our transition until we got to the next level.”

“Incredibly, though, instead of replacing a printer, we’re seeing stores transition over to POS as a Service,” Hernandez says. “We tell them we have a new promotion in which they pay monthly, and we replace their POS system with a brand-new system and it includes lifetime service — and they switch.”

Additionally, Hernandez strongly advises any VAR transitioning to the recurring revenue model to build recurring revenue from payment processing residuals.  “It really increased our RMM and helped the transition go more smoothly,” he says.

He adds that VARs shouldn’t be intimidated by competition for payment processing from ISOs. “As a VAR, you’re much better positioned with industry and tech expertise that ISOs don’t have. You also can provide them with solutions that help them run their businesses better. ISOs can’t do that as well as we can.”

The Vital, Vertical Laser-Focus

Over the past year, Hernandez decided to focus his business on solutions for grocery and convenience stores. This strategy enables GBT to:

  • Improve support because all technicians are trained on and develop a deep understanding of one particular vertical market
  • Focus product development on that specific vertical
  • Develop consistent staging processes, provide standardization across clients, and scale more quickly
  • Make deployment faster and easier for field technicians

“It’s difficult to pool resources to work in multiple verticals,” Hernandez says. “You can serve multiple verticals, but in my opinion, you need staff trained in each vertical to do it.”

“You have greater ROI, efficiency and profitability focusing on one vertical,” he says.

The Hybrid VAR Advantage

Hernandez also positioned GBT for success by developing his own grocery POS software. “This lets us roll out very specific functionality that grocery stores need,” he says. For example, GBT has developed features that can automate the receiving process, saving time and ensuring grocery stores are aware of price changes that that impact margin. “The majority of POS systems that grocery stores use were developed for general retail. It’s not likely that they have that specific functionality,” Hernandez says.

And, as with hardware, Hernandez didn’t want to be locked into specific software or software pricing. “With all the M&A going on, we didn’t want to be forced in a different direction by an ISV that sells or is acquired.”

“We began software development thinking at some point the benefits of buying licenses would outpace development at some point, but that hasn’t been the case,” Hernandez comments. “Even though development costs money, it’s given us great leverage to take opportunities that we didn’t have when we worked with a software partner.”

“The costs of development are like an insurance policy that positions you uniquely among your competition,” he says.

A New Model and a New Perspective

Hernandez concedes that there are some very successful break/fix VARs who don’t need to worry about making payroll every two weeks. But for those that do, especially during slow seasons or even during a recession, transitioning to the recurring revenue model and providing POS Hardware as a Service can give them a new perspective.

“The new model essentially does away with all that worry, and you can focus on other things — like growth,” he says.