POS stands for “point of sale,” which is the place where a transaction takes place between a business and its customers. In the context of most businesses, however, POS usually refers to the point of sale system. And in the world of POS technology, legacy and cloud POS systems are the two most common systems.

Understood in the simplest terms, a POS system is a hardware and software combination that manages transactions, processes payments, gathers business data, and much more. You can find a POS system at any kind of business where a customer buys a product, ticket, or service, such as a restaurant, shop, or movie theater.

While both cloud and legacy POS systems can both carry out the functions listed above, their main differences are in their costs, access, and features. It’s important to choose the best type of system for your specific business’s needs, which is why we’ve created this guide to simplify the decision-making process. 

In this guide comparing cloud and legacy POS systems, you’ll learn:

• The difference between cloud POS systems and legacy POS systems
• Pros and cons of a cloud POS system
• Pros and cons of a legacy POS system

Cloud POS Systems vs Legacy POS Systems: What’s the Difference?

Before you start shopping around for a POS vendor, you need to decide which type of POS system is best for your needs. And the first step in this research process is understanding the primary differences between legacy and cloud POS systems.

Legacy POS systems, also known as traditional POS systems, store your data on-site on local servers and run on a closed internal network. This means that all of the POS hardware has to be set up in one place and can’t be moved. Put simply, a legacy POS works like a closed network on a computer: you can only access files on that computer and can’t open them on another computer or device.

On the other hand, cloud-based POS systems are web-hosted solutions that store your data in the cloud via remote servers. Because these systems are not wired in place, cloud POS systems allow staff to serve customers and process transactions from anywhere in the venue. Similar to the way banking apps allow you to access your accounts online, a cloud-based POS system allows business operators to access transactions and business data off-premises, and update products and pricing from anywhere. 

Pros and Cons of a Cloud POS System

Here’s a closer look at the benefits and downsides of using a cloud-based POS system at your business.

Pros of a Cloud POS System

In recent years, cloud-based systems have become increasingly popular due to their unprecedented data access, flexibility, and affordability. They’re a great option for businesses from restaurants to retail stores.

The biggest benefits of Cloud POS systems include:

• More flexible than a legacy POS because you can move terminals around the business since they rely on a wireless internet connection.
• Most cost-efficient option. The upfront license fee, hardware fees, and monthly maintenance fees of a legacy system typically add up to more than the monthly or annual subscription fee you pay for a cloud-based POS.
• Cloud POS systems scale with your business. You can easily add more devices as your footprint grows or as you open new locations.
• Cloud POS systems are easy to update and bugs are easy to fix. POS providers handle upgrades automatically and remotely for a cloud-based restaurant POS system, which means that no tech professional has to visit your store to update the system manually.
• Since the data is saved on the cloud you can access it whenever you want and from wherever you are. Remote access makes things way easier for management. Managers can check data and reports from home (or on the go!), and after hours so they can keep an eye on their businesses without having to be physically in the venue.
• Because data is stored remotely rather than on one device, there’s no risk of data loss due to physical damage (such as a fire or flood), an accident, or theft.
• Cloud POS systems offer lots of integration capabilities with other valuable software. You can integrate with your ecommerce website, staff scheduling tools, accounting software, and much more.

Cons of a Cloud POS System

As with all tools, it’s important to look for and investigate any shortcomings to understand how they might affect your business. These are some things to look out for when shopping for cloud POS systems:

• Most cloud systems rely on a stable internet connection to operate, which means you might lose functionality if the internet goes down. However, many cloud POS systems are equipped with an offline mode with more limited features so you may still be able to carry out some basic functions without WiFi.
• You have to pay a monthly fee, versus a one-time license fee, which is an added expense to consider. However, it’s worth noting that this monthly payment – both in the short and long term – will generally cost much less than the one-time fee for a legacy system. Plus, hardware costs for cloud systems cost less than for legacy systems.
• If the POS vendor doesn’t have proper systems in place, the risk of a data breach is possible.

Pros and Cons of a Legacy POS System

Before you can determine whether a cloud POS system is the right fit for your business, it’s also important to understand the pros and cons of using a traditional POS system.

Pros of a Legacy POS System

As the original POS system, legacy POSes bring a lot to the table. Legacy POS vendors have pioneered many of the features found in both legacy and cloud-based systems.

Here are some of the benefits of using a legacy POS system at your business:

• Legacy POS systems have been around for a long time, which means the systems may feel more familiar. Veteran staff members may be more comfortable with them if they’ve encountered these systems at past jobs. 
• This type of POS works well in offline mode. Legacy POS systems don’t require a WiFi connection, so they may be good for businesses with no WiFi or a poor connection.
• The data on a legacy POS system is controllable, so if you have good security internally, it could be a good fit for you.
• These systems are very powerful, so they can be a good option for major operations, like a multinational chain restaurant or retailer.

Cons of Legacy POS System

Sometimes, being the first on the market makes change difficult. While legacy POS systems were once cutting-edge, the older technology certainly has its limitations. These are some of the reasons why traditional POS systems may not meet your needs:

• Software is hard to update and bugs are tough to fix on legacy systems. Whenever a software upgrade or service is required for a traditional POS system, tech specialists need to visit the location and program the upgrade procedure (costing you time and money).
• Since the data is stored locally, you must always be physically present in the business and near the computer to access the system. This means you can’t change things remotely, which makes managing the business difficult, especially after hours.
• Legacy systems are expensive. Using one requires installation fees, hardware fees, a license fee, and ongoing costs for maintenance. According to TopPOSSystem.com, POS systems installed onsite can cost upwards of $10,000 for the hardware alone.
• Businesses usually need to pay multi-year contracts to use legacy POS systems, which means you may be locked in with your POS provider for the long term.
• These hardware systems are big, clunky, and hard to move. More importantly, they’re usually fixed, not mobile, so staff members have to constantly walk back and forth to the POS, which can slow down service.
• Data from a legacy POS system can only be accessed locally unless a terminal server is installed. This means the business is the one responsible for data security, and if security isn’t adequate, it might put the data at risk. 
• If there is an outage or damage, like from a flood, data can’t be recovered.
• Integration capabilities are limited on legacy POS systems.
• Legacy systems are built on proprietary software, which can be difficult to learn, and therefore lead to slow setup and onboarding.

Wrapping Up: Cloud POS Systems vs Legacy POS Systems

Based on the above, it might be easy to understand why the industry is largely shifting away from legacy systems to cloud systems. Legacy POS systems’ operating systems are obsolete, their interfaces are out of date, and their software is slow. Legacy systems seriously limit the growth of businesses because they cannot meet their changing needs.

Not to mention, legacy POS systems’ devices and features aren’t compatible with new technology, so it’s difficult to find replacement parts if your system becomes faulty or damaged. These restrictions will hinder your business activities, which just isn’t worth it.

With research showing that 55% of retail businesses plan to replace their existing POS with a cloud-based POS system within three years and 30% plan to do so within the following year, it’s clear that a cloud POS system is likely to be the best option to grow and scale your business.