By The Business Solutions Network
This point of sale ISV’s exclusive focus on higher education gives it credibility with clients and plays a key role in its continued double-digit growth.
Keeping up with PCI and EMV requirements has been a keydifferentiator for his company, says John Diaz, vice president of business development at Sequoia Retail Systems
Photo By Tim Schermerhorn
The education vertical is a challenging one for resellers but can be quite rewarding. A case in point is Sequoia Retail Systems, a retail point of sale (POS) ISV and VAR headquartered in Mountain View, CA. While much has changed in the world of IT since Sequoia’s inception in 1985, the one thing that hasn’t changed is its exclusive focus on the higher education market.
I recently spoke with John Diaz, vice president of business development at Sequoia. He explained how his company thrives in this market and how it plans to continue its double-digit growth trend.
IT Projections For Higher Education
Before delving into Sequoia’s story, it’s important to first understand the IT spending outlook and trends in higher education. A study released earlier this year by IDC Government Insights predicted that U.S. higher education institutions would spend $6.6 billion on IT this year, mostly due to investments in enterprise networks and higher end notebook computers.
Higher education technology association EDUCAUSE shared additional insights in its State of Higher Ed Tech 2015 report. Among the top IT issues facing higher education IT management were balancing information security and openness and providing user support in mobile, online education, cloud, and BYOD (bring your own device) environments. One of the areas many higher ed institutions are lagging on the most, according to the study, is mobile device management (MDM), with only 10 percent of colleges/ universities citing an MDM policy already in place, followed by 16 percent who indicated that their policy was currently being implemented.
Build Your Higher Ed Value On A Security Foundation
Sequoia’s success in this market fits squarely with one of the major IT issues mentioned earlier — security. In early 2008, the PCI SSC (Payment Card Industry Security Standards Council) released the Payment Application Data Security Standard (PA-DSS). This new sister standard to the PCI DSS was designed to help software vendors and others develop secure payment applications that do not store sensitive credit card information, including full magnetic stripe data, card verification value numbers, and PINs. “A lot of retail VARs initially either disregarded the standards or chose to hold off making any changes to their software or security practices,” says Diaz. “Sequoia took POS and payment processing security seriously right away, ensuring our hardware and software offerings were compliant with industry standards, and that’s been a game changer.” Even though the newspaper headlines following a data breach only cite the retailer, Diaz says the oftentimes untold story is the IT solutions provider and the negative effect on its business following a credit card security breach with one of its customers. “We’ve seen companies go out of business after a data breach due to a combination of the financial costs from legal and labor fees, as well as the blow to their business reputation that follows.”
To avoid the above-mentioned calamities, Sequoia worked closely with PCI auditors, who helped the company architect systems and payment application software in a way that ensured they were properly protected and their scope minimized in terms of PCI compliance. “Not long after becoming knowledgeable about the first wave of PCI security requirements, we learned about P2PE [point-to-point encryption], which helps to secure a merchant’s acceptance environment by removing or devaluing cardholder data,” says Diaz. “Keeping up with this standard kept us at the forefront of POS and payment processing security.” Within the past couple of years, Sequoia has been focused on the EMV payment card standard, which went into effect Oct. 1, 2015 in the U.S. “Everyone in the U.S. market is dealing with this right now, and the certification process has been a huge challenge for payment gateway providers,” he says. “Considering the fact that approximately 60 percent of cardholders still don’t have chip-enabled credit cards, and so many merchants are behind on implementing EMV-enabled payment terminals, it could be several years before we see widespread adoption.”
Due to the time delay associated with waiting for EMV card readers to read and validate chips, Sequoia is already anticipating the next payment trend — contactless payment. “We think quick serve restaurants and campus dining halls are going to prefer NFC [near field communication] payment options, such as Apple Pay, Android Pay, and Google Wallet,” says Diaz. “The majority of students have NFC-enabled smartphones, and they can pay more quickly with their phones as opposed to using a chip card.”
Adapt Your POS Offering To The Consumerization Of IT
Like a lot of POS VARs, Sequoia Retail Systems used to be a hardware-centric reseller that sold and implemented $5,000 to $6,000 POS terminals. As the BYOD and consumerization of IT trends progressed, many merchants — including Sequoia’s customers — started demanding a whole new kind of POS system. “Customers want POS systems that incorporate the latest consumer tablets without giving up the functionality and reliability of a traditional POS system,” says Diaz. “The consensus among many customers is that ‘If our tablet-based POS system breaks, FedEx can overnight us a new one.’”
Sequoia has learned that the challenge described above requires a two-part response, and the first part involves education. “Just because a dining venue manager sees an iPad being used at a boutique shop to cash out patrons doesn’t mean this is the appropriate device to use in the campus dining halls, where they’re doing 3,000 transactions per day,” says Diaz. The ISV also helps customers realize the real cost of downtime when something goes wrong. In the example used earlier of overnighting a new tablet to replace a faulty one, the merchant needs to understand that it takes time to set up and configure the new device.
After reestablishing the value of using purpose-built devices along with the value of working with Sequoia to minimize downtime, the company proposes a happy medium: A device that resembles an Android or iOS tablet, but is actually a purpose-built business class device. (To learn more about which devices Sequoia recommends, check out the sidebar on page 14.) “While approximately twice the cost of popular consumer tablets, these devices are much easier to bundle with peripherals and POS apps, plus they are much easier to support,” says Diaz. “Additionally, because they’re purpose-built with embedded operation systems, they have a much longer life cycle than a consumer device.”
Sequoia maintains backup images of each device it sells and supports, which is something that Diaz says would be nearly impossible to maintain with consumer devices. “Many consumer devices change significantly every 12 to 18 months, which would quickly add up to 100+ different computer system images we would have to manage,” he says. “With a purpose-built device, there are only about a half dozen image configurations, which is much more manageable. Plus, we have the ability to preconfigure purpose-built POS systems at the time of order, so that they’re ready to go out of the box when the customer receives them, which greatly minimizes setup times.”
As a company with roots selling $5,000+ POS terminals, Diaz says bundling software and services has been the key to retaining POS revenue and profit margins. “We bundle payment terminals, bar code scanners, and cash drawers with POS systems. Some VARs will try to develop workarounds that enable iPads and Android-based tablets to work with different peripherals, but this often leads to solutions with limited functionality and cumbersome workflows.”
“Customers want POS systems that incorporate the latest consumer tablets without giving up the functionality and reliability of a traditional POS system.”
John Diaz, vice president of business development, Sequoia Retail Systems
Like many of its peers, Sequoia has traditionally focused on its customers’ business needs, ensuring cashiers and managers, for example, had everything they needed to do their jobs. More recently, however, the company has also started paying closer attention to its customers’ customers — the students — and catering to their needs. “Students want to use their mobile phones to be more engaged in the shopping experience, so we have embraced this idea and are working with college bookstores, dining halls, and arenas to incorporate concepts such as online ordering, self-checkout, loyalty programs, and price-comparison services,” says Diaz. “We incorporate Bluetooth beacons such as iBeacons to enable campuses to promote special offers such as a bookstore offering students a special one-day only textbook buy-back incentive by promoting an additional 5 percent cash back. Or dining halls could use this service to send a message promoting, ‘Pre-order your lunch and skip the line.’”
To date, Sequoia has more than 300 colleges and universities that use its technologies and/or IT services. According to Diaz, that’s less than 10 percent of the total U.S. market. To expand its footprint, the ISV is forming partnerships with food services management companies, including Sodexo, ARAMARK, and Compass Group. “When a food service partner picks up a new college client, they often recommend Sequoia for the campus’ POS needs,” says Diaz. “We’re also seeing a huge opportunity in collegiate concessions, which are still largely behind the times, often using cash boxes and many times not even being able to accept credit cards. As we work to get them up to speed and integrate their POS, inventory management, and accounting systems, we’re going to continue keeping students top of mind, ensuring they can pay for meals and merchandise with their ID cards or phones and creating a good user experience.”