Cloud computing: Helping restaurants keep their costs under control with on-demand IT
Pizza Express, Jamie's Italian, Cafe Rouge and many more as well as hotels from Hilton to Hyatt and Travelodge, all rely on Fourth Software's back-office systems to keep the business running efficiently and cost effectively.
When a pub or hotel is cashing up at the end of the day, it's Fourth applications that tells the manager how many customers have walked through the door, how much they've spent, how much food and drink they've consumed, and what needs to be re-ordered, how many staff will be needed tomorrow and, crucially, whether or not the house has hit target for the day.
We talked to Fourth's CTO, Christian Berthelsen, to get an insight into how all this is done.
ZDNet: I believe the company started off in the restaurant business?
Berthelsen: Yes, here in the UK. We are based in London and we have 120 people working on technology in Sofia. We have 100 people in Macclesfield where we process payroll for most of the hospitality industry -- about 500,000 employees' payroll gets processed each year.
We've got 30 people in America and four people in Dubai, but our main business is here in the UK and the US. We started as a business about 20 years ago. The original founders were restaurateurs as were the early investors. We've got customers in about 60 countries.
So you've grown as the hospitality industry has grown?
Absolutely. This industry has become more professional and professionalised, and hopefully we've played our part in that. We think we have played a significant part here in the UK in helping people afford systems. Before nobody could really afford to invest in technology. That was because hospitality was about kitchens, and cooking food and making cocktails, and they gave the managers a pen and a paper -- and perhaps an Excel sheet -- and then they told them, "off you go and manage the business".
But in those days, you did compete with companies like IBM?
Only in the tills and IBM software. No-one really invested in the operational side of things; cost control, managing staff, in payroll and purchasing and invoicing, that whole back-of-house, managing process.
We don't do, what we call, front-of-house. We don't do tills, or reservation systems. We don't do your table ordering, payment systems or anything at all like that. We're purely, behind the scenes, operational cost control, forecasting, demand planning and the like.
So you hand over the other stuff and leave it to other companies?
Absolutely. There's a huge range of point of sale (POS) and till companies and there's an ever-growing number of online table ordering, online maps and so on.
Why not go at that area?
Our expertise is in managing costs, and operational systems and helping to automate the operational side of things. It's an area where we can demonstrate a clear return on investment.
All that we do so we can say, "If you do this you can shave half a percent off your costs or you can increase your margin by one or two percent," and that will equate to two hundred thousand pounds, a million or whatever depending on the size of the company.
How have you undertaken that transformation?
Hard graft. We've made technology available to anybody, whether you are an independent or Greene King with 1,900 pubs.
And it's the same technology, the same platform, the same tools and we've made it cheap enough for a sufficient part of the industry to adopt it.
We've lowered the barrier of entry. There's no up-front costs. You don't buy the software. It's what everybody does today. Everybody uses software-as-a-service (SaaS) -- you rent software. We just started doing that in 2000 when nobody else was doing it.
See: Special report: The future of Everything as a Service (free PDF)
And we've never changed that. That business model runs everywhere today, in cloud and SaaS. It's what everybody tries to do today. We just did it from Day One.
And we knew that restaurants and hotels wouldn't pay a lot of money up front. They're a cash-flow business. Money comes in every day, money goes out every day. They just pay a fixed fee to us and then all their operational systems are put in place. There's no hidden fees, there's no hardware. Nothing locally installed. None of those sorts of things.
We focused on that and we focused on the manager. We've not built head office tools, we've built tools for the restaurant manager. Tools the manager can use at 3am in the morning, when he or she wants to go home but still needs to do their job and finish off a few things and wants to do it fast.
They just see it as being useful to them, rather than being a hindrance. That's why most of our business comes from referrals. Someone's worked with it and moves somewhere else. They don't have it and the first thing that happens is that we get a phone call.
You help them get the balance?
Everything and all of the day, you track it. Give them the visibility on how well they are doing, so that they can start making adjustments. Because its incremental improvements. They just start to make a change that just means they shave off a couple of pounds in one shift, or half a shift. Or perhaps reduce their wastage from 5% to 3%. If you do that and you're Pizza Express with 400 restaurants and just apply that little gain by 400 times -- it becomes quite serious money.
Could you sum up what you do? Perhaps not in one sentence but simply?
The strapline is, "We help you achieve more."
The fundamental thing we do is help you get the control and visibility of your business that helps you to confidently scale. That's fundamentally what we do.
We allow you to control your costs and give you visibility of those costs and that gives you the confidence to scale up your business.
A lot of companies say that they do that but don't.
Berthelsen: We start the business with forecasting
We focus on your two main costs: your staff and your cost of goods. Those are the two variables in the hospitality business. Because you pay your staff hourly and you, more or less, have food and drink delivered every day. Those costs vary, and we help you to maintain and manage those two costs.
We start the business with forecasting. That's probably the big difference between us and everybody else. That's because we focus on getting a really good forecast of what's going to happen next week and the week after.
That way, you can make much more informed decisions about when to deploy your staff and what to buy in. All that stuff.
Now stepping back to when you were starting off, where did that idea come from?
It probably came out of two things. One was that the original founders where restauranteurs themselves. They had had 40 or 50 restaurants and had seen the chaos and the inefficiencies, and no one was doing anything significant to try and change that.
The only money that people were willing to invest was in POS. And that was hardware and printers and service contracts and engineers driving vans and fixing printers.
There was a desire to fundamentally change that. To change the role of the manager from someone who was pushing paper around to someone who could spend more time on the floor with their manager, staff and customers.
That's where the idea came from.
How big a part does your US arm play now?
It's probably about 15 percent of the business right now but it's growing at 100 percent a year.
It's exactly the same as here in the UK. The same challenge, the same process. It's a more fragmented market. There are more players but none of them have got any really significant size. And it's a very similar message.
See: Special report: The art of the hybrid cloud (free PDF)
We've invested a lot of money in making sure that everything is American and complying with all the American rules and regulations and handling the various states -- which are all very different -- properly.
We're backed by a big American fund and most of the people who work over there are American. We've got nearly 100 customers in the US so it's not really a question of credibility anymore.
Where's the R&D done?
Half here and half in Sofia. We have 110 people here on the ground floor and 120 in Sofia and Bulgaria.
Why Sofia?
We needed to expand. We needed to be able to recruit in more than one place. And the establishment costs and the costs of attracting talent in London is getting pretty limiting. We simply couldn't find the right people quickly enough.
With our investment we simply needed to have more capability, so we decided to have two technology hubs. So, depending on which one was under pressure we could invest in the other one.
We looked around at different places but decided that we needed somewhere in the European Union that we could get to within three hours without having a lot of backwards and forwards stuff because of a need for visas.
Do you think the UK is losing out?
I don't think so. But it's a whole different matter when Brexit happens.
How will Brexit affect you?
It will affect the hospitality industry badly. The hospitality industry will have a serious problem because they simply will not have enough staff. We have already seen that staff are not coming to the UK from the rest of Europe in the numbers that they used to. And that means that there are simply not enough staff for the hospitality industry.
There aren't enough people in the UK who want to work in the hospitality industry. They are now switching to attracting and retaining staff like they never have before. That's why the costs for attracting staff are simply going through the roof. The pool of talent is simply dwindling.
That, for us, is not as bad because we are not just a UK business anymore. We've got revenue coming from the US and the Middle East. We've got people working here, in Sofia and so on.
We've always looked to be able to balance things.
More case studies
Big data case study: How UPS is using analytics to improve performance
Find out how logistics company UPS is using data and analytics in a number of key projects.
The idea is to use technology not just to replicate an existing service in a digital form, but to use technology to transform that service into something significantly better.
New Zealand examining AI ethical framework and action plan
The New Zealand government has called for swift action to create an ethical framework and plan for how the country will deal with the impacts of artificial intelligence.
Digital transformation: Closing the gap between innovation and execution
Coming up with the ideas is easy, but turning those bright sparks into successful businesses is a lot harder.