#SFSNYC: The Growing Power of SMB OS

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Until recently, brick-and-mortar shopping relied on the digital world for advertising functions and not much else. But now, local retail has a new digital arena—the full-service operating system.

Nadine Paz, strategic account manager at Cisco, Ilir Sela, CEO of Slice, and Angus Davis, CEO of Upserve, discussed the future of small business operating systems with Street Fight’s Mike Boland at a moderated panel at the Street Fight Summit in New York Wednesday.

With advertising systems as a launch pad, SMBs can expand to integrate supply chain, payroll, customer relationship management, and point of sale systems, Boland said.

All three panelists emphasized the “stickiness” and growth potential of these operating systems. While local advertising is about a $150 billion market, one third of which belongs to small businesses, adding operational support sectors to this market expands small business spending to about one trillion dollars, Boland said.

Slice offers an operating system for local pizza franchises, which outnumber what Sela calls “big pizza” by a ratio of three to one in terms of locations and three to two in terms of revenue. “Big pizza” brings in more revenue because large chains are leveraging digital sales and maximizing sales volume for each location. Slice aims to bring that digital capability to local franchises. “We bring the big pizza playbook to the local segment. Our mission is really uniting local pizza,” Sela said.

Once a local franchise employs Slice and moves to digital, “They don’t want to leave,” Sela said, adding that the increased revenue stream from the digital website decreases churn. “We have to make sure these business are successful, and not cannibalize or commoditize them” in order to ensure high retention rates, he added.

Davis echoed this sentiment, emphasizing the stickiness of full service OS in comparison with advertising-only. Upserve provides point of sale systems, analytics, and payment systems to full-service restaurants, which reduces the chance that an SMB will want to move away from Upserve once the system has been integrated into the restaurant.

In contrast, Cisco largely avoids the retention problem by partnering with service providers similar to Slice and Upserve and offering a contractual relationship, rather than selling directly to the small business. Cisco offers the infrastructure beneath applications like Slice, as well as analytics and quality control. In order to maximize retention, the company does partner with small businesses to leverage analytics and train the sales team. “We have to get to that level of granularity so that we don’t lose the customer when the contract is up for renewal,” Paz said.

All three panelists hope to further expand their OS offerings and see significant growth potential in their market. Slice is working to add operational capacity in supply-side and workflow management, while Davis’ Upserve is beginning a partnership with Rezi to integrate online reservations with its point of sale system (called Breadcrumb).

Paz is most excited about the potential for video surveillance capabilities in Cisco’s IT infrastructure offerings, which will allow the small business user to analyze video for operational management purposes. She detailed an example of a bakery chain, which can use video to examine how long customers stand in line or wander through the store, as well as analyze the flow of the floorplan and the times of day when products sell out.