Restaurant Platform-as-a-Service (PaaS)

A trend we have been following in the restaurant technology space is a gradual move by the top vendors to a Platform-as-a-Service (PaaS) model.

Current State of Restaurant Technology

Over the past few years, the slow transition of the traditional restaurant application vendors to a cloud-based architecture has opened the door for well-funded startups to seize the opportunity and build innovative cloud-based restaurant applications.

This has led operators to embrace a best-of-breed model with a cast of vendors providing the applications they need to run their businesses. The result is that operators are now struggling to manage a complex vendor ecosystem of integrated applications and get them all to play well together.

Cloud-based architectures have increased the rate of application innovation, allowing upcoming vendors to check more boxes by providing more of the applications restaurant operators need to run their businesses. As a result, the big traditional restaurant application vendors are racing to do the same through both acquisition and in-house development.

This increase in the number of applications provided by restaurant technology vendors will likely inspire vendors to shift from a Software-as-a-Service (SaaS) model to a Platform-as-a-Service (PaaS) model.

Restaurant Platform-as-a-Service

First, what is Platform-as-a-Service (PaaS)? Wikipedia defines it as “a category of cloud computing services that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an app”.

A key component of the definition is that applications is plural. To embrace the PaaS model, vendors shift their focus from providing an application to providing a platform of applications. Another key component is providing customers the option to develop, run, and manage custom applications on the platform. This allows customers the potential to group all their business applications (or at least for a specific business function) on one platform.

Now that we have an understanding of what the PaaS model is, what are some indicators that restaurant technology vendors are moving toward PaaS?

Vendors are expanding their capabilities to enable operators to meet most or all of their application needs via one vendor. We see this in our Grid Decision leaderboards as vendors expand to participate in more technology leaderboards each quarter.
Payment companies are expanding their capabilities by entering the software business. Some examples include Global Payments acquiring several POS (SICOM, Nextep, Xpient, and several others) and launching a new POS (Xenial), First Data launching their Clover POS, Square launching their own POS, and Shift4 acquiring Restaurant Manager, POSitouch, and Future POS.
Software companies are expanding their payment capabilities. Some examples are NCR and Toast providing payment gateway capabilities.
POS vendors continue to build out their digital order engine and loyalty capabilities while at the same time several of the digital-focused vendors are being acquired by the order aggregators (ex: UberEATS acquiring OrderTalk and GrubHub acquiring TakeoutTech and LevelUP). This opens the door for customers needing to make a change due to those acquisitions to reconsider using their POS vendor’s digital ordering and loyalty applications.

These are just a few indicators of vendors expanding the number of applications they provide in the restaurant space, prompting the potential shift in vendor strategies from applications to platforms. Now let’s discuss some of the enablers for this shift to take place.

Enablers of the shift to Platforms

The first and most obvious enabler is cloud computing. By moving applications to the cloud, vendors are able to expand existing applications and launch new applications more rapidly. It also creates the opportunity for vendors to allow customers to build and host custom applications within their infrastructure, enabling easier application and data integration.

Similar to the above enabler, the increase in speed and reduced cost of innovation has forced application vendors to expand their capabilities or lose business to the growing list of well-funded startups driving new innovation. This has forced the established vendors to grow their capabilities through a combination of acquisition and a shift to a platform model to enable more rapid growth of applications/capabilities.

Now that we have an understanding of the shift from applications to platforms in the restaurant technology space, what are the benefits and drawbacks?

Benefits of a shift to Restaurant PaaS

Reduced complexity by removing the challenge of integrating best-of-breed applications. While there will always be some integrations, operators have learned over the years that each additional integration adds complexity. Additionally, our clients often struggle to get their vendors to play well together. This isn’t always a technology issue but is often vendors not wanting to integrate with competitors.
Having all/most applications on one platform enables a simplified data model with single points of truth for data. Many operators today struggle with having to enter the same data (ex: menus, pricing) in multiple systems manually. This creates the opportunity for conflicting data between systems. Hosting all applications on a single platform enables one point of truth for data.
Allows an operator’s IT team to focus on building expertise around one platform instead of having to become experts in multiple vendor applications and in managing a significant number of vendors and integrations.
PaaS vendors typically allow customers to build and host their own custom applications on the platform. This can enable rapid application development since the platform is already in place and all the other applications and data on the platform are more easily leveraged.
Improves the ability to implement and leverage shared services across multiple applications.

Drawbacks of a shift to Restaurant PaaS

Growing dependency on one vendor’s ability to keep up with innovation and best practices. You’re putting all your eggs in one basket so that increases risk and increases the importance of selecting the right basket.
Reduced control of your destiny. As platform vendors grow their customer base, operators may struggle with aligning the vendor’s priorities with their own priorities on the vendor’s application roadmaps.
Complexity of changing platform vendors due to the number of applications involved will make it more difficult, risky, and costly to change. This is a good reason for vendors to move to a platform model as it
By selecting the best PaaS vendor, operators may end up with a collection of good applications but few best-of-breed applications.

Keys to Restaurant PaaS Success for Operators

I have two recommendations for operators embracing the shift to PaaS:

Select the right Restaurant PaaS vendor. This sounds simple but it’s not. One thing I find myself regularly saying to clients in the restaurant technology space is that there is no perfect vendor. They all have their pros and cons. And now you have to expand your decision to consider pros and cons of all their applications individually AND collectively (Note: see below for more on how we can help).
Become their best customer. What do I mean by become their best customer? I mean lean into the relationship and fully engage your team in making the most of the platform. This means investing in educating your team on all aspects of the platform, participating in customer advisory groups, engaging their customer community, and advocating new innovations. It means viewing them as a partner, not a vendor but an extension of your organization. It means setting up executive-level relationships and QBRs to monitor the relationship and set it up for success. You get the picture. The more successful they are, the more benefits you will receive from selecting their platform.

Keys to Restaurant PaaS Success for Vendors

As far as my recommendations to the restaurant technology vendors moving to a PaaS model:

Build your platform for enterprise-level and scale. This seems obvious but a platform focus means you build for scale before you need it. Best to hire people from other industries that already have enterprise-level PaaS providers to learn from their experience.
Build a custom applications capability. This will increase the value of your platform to your customers and ultimately make them more invested in your platform.
Consider acquisitions to acquire the talent, knowledge, and experience required to rapidly grow your applications/capabilities to become a one-stop-shop for your customers.
Embrace open integration, especially where you have gaps. While operators will settle for some applications that aren’t best of breed in order to reduce the number of vendors and integrations, where the gap is too great they will need to integrate. Trust that in the long run they will move to your applications as they become more viable options so that they can reduce complexity in managing multiple vendors and integrations.

Alternative Vendor Ecosystem Strategy

While the vendors appear to be moving toward a one-stop-shop PaaS model, operators may not want to put all their eggs in one basket. Next week, we will be sharing an alternative strategy to make the best-of-breed vendor model work as you scale your chain to an enterprise-level.