Do terminals need to own their TOS systems?

As terminal operations evolve, efficiency has become more critical than ever. Terminals are continuously exploring ways to streamline processes, cut costs, and maintain a competitive edge. One key component driving these improvements is the Terminal Operating System (TOS).

As terminals strive for operational excellence, a key question arises: Should you own and manage your Terminal Operating System (TOS), or would it be smarter to outsource this critical system? With technology rapidly advancing, terminals are rethinking traditional methods and considering cloud-based TOS systems as a viable alternative. So, is owning an on-premise TOS still necessary, or could outsourcing free terminals to focus on their core business?

A global shift

The trend toward cloud-based solutions is widespread. We’re not just seeing it in our own industry. It’s a global phenomenon. For example, instead of buying software licenses, businesses now subscribe to tools like Microsoft Office or Adobe Suite. Companies like Uber and Airbnb thrive by offering access without owning cars or hotels. This new model helps businesses stay flexible and adapt to rapid changes.

According to Eurostat, 42.5% of EU enterprises purchased cloud computing services in 2023. This reflects a growing recognition that outsourcing IT services—including TOS—can provide operational efficiencies, reduce costs, and enable businesses to scale more effectively.

Additionally, according to KcKinsey cloud-based solutions can reduce IT infrastructure costs by up to 30%. This can be a game-changer for terminals looking to optimize their budgets without sacrificing innovation.

Keeping focus on terminal operations

Terminal operations are the core of a terminal’s business. This means that maximizing efficiency, security, and flexibility in terminal operations is essential. However, software development and server infrastructure management are not typically part of a terminal’s core expertise.

That’s where the idea of outsourcing the Terminal Operating System (TOS) comes into play. Rather than owning and maintaining a TOS in-house, many terminals are turning to cloud-based options, allowing them to focus on what they do best—running the terminal efficiently.

Advantages and disadvantages

Overall, both owning and outsourcing your TOS will have advantages and disadvantages. Here’s a quick overview of the pros and cons:

Aspect

Owning

Outsourcing

Fixed costs

High, given you invest in the acquisition

Low, given you pay-per-use

Flexibility

Low, you can’t move away from what you own easily

High, you can change quickly and faster

Stability & predictability

Fixed cost after initial purchase (e.g., license purchases)

Easy to adjust to changing needs; scalable subscription models

Responsibility

Ongoing maintenance and update responsibilities (e.g., server upgrade)

Limited control over customization; need to accept the providers’ approach

Obsolescence

Risk of becoming outdated without costly upgrades (e.g., unsupported software)

Provider takes care of improvement and adaptations to remain relevant.

On-premise TOS: control comes at a cost

For years, on-premise TOS systems have been the industry standard. Having your TOS infrastructure in-house can provide terminals with full control over data, software customization, and security. However, with technology advancing at breakneck speeds, is this traditional method still the best choice?

Advantages of on-premise TOS:

  1. Data sovereignty and control: When you run your TOS on-premise, your data stays within your walls. For terminals handling sensitive data or operating in regions with strict data privacy laws, this control can be a big advantage.

  2. No ongoing subscription fees: Once the system is installed, there are no recurring subscription costs – only occasional maintenance expenses.

Disadvantages of on-premise TOS:

  1. High initial cost and maintenance: Owning a TOS requires substantial up-front costs for hardware, IT infrastructure, and purchase of a TOS. Additionally, the terminal must hire IT staff to handle ongoing maintenance, updates, and security.

  2. Complexity in scaling: As your terminal grows or adds new locations, scaling your on-premise TOS becomes a complex and expensive endeavor. Every expansion means new hardware, more servers, and reconfiguring the system—costs that can quickly add up.

  3. Not a core activity: With full control comes full responsibility. Terminals need to manage software updates, cybersecurity, and server maintenance—none of which are their core expertise. Maintaining servers is resource-intensive; in fact, reports show that on-premise server maintenance requires dedicated staff, can lead to outages, and often makes scalability difficult.

Cloud-based TOS: flexibility for the future

As the industry shifts toward digital transformation, cloud-based TOS systems are gaining traction. Delivered via Software-as-a-Service (SaaS), this option allows terminals to subscribe to a service hosted off-site, accessing the TOS through the internet. But is this the right fit for your terminal?

Advantages of cloud-based TOS:

  1. Lower upfront costs: No need to invest in expensive servers or IT infrastructure. Instead, terminals pay for the service as they use it, making it easier to predict and manage costs over time.

  2. Scalability and flexibility: A cloud-based TOS can scale with your terminal. Whether you’re adding more users or expanding to new locations, cloud systems are designed to grow without the need for additional hardware. This adaptability ensures that your TOS can keep up with your business needs.

  3. Automatic updates and maintenance: Cloud providers handle everything—from system updates to security patches. This means your terminal always has access to the latest technology without dedicating resources to maintaining or upgrading your system.

  4. Improved data security: With dedicated cybersecurity and advanced encryption methods, cloud providers often offer better protection than an in-house IT team could. The infrastructure is built to handle threats and keep your data secure.

Disadvantages of cloud-based TOS:

  1. Dependence on internet connectivity: The cloud relies on a stable internet connection. If there’s an outage or connectivity issue, it could disrupt your operations. Although cloud providers typically have redundancy systems in place, there’s a risk of downtime.

  2. Recurring subscription costs: While the upfront costs are lower, terminals must budget for ongoing subscription fees.

Why outsourcing can be the right choice

Terminal operations are complex, but software development and server management are not typically part of a terminal’s core expertise. Maintaining an on-premise TOS requires IT skills and resources, diverting attention away from core operations. In contrast, outsourcing the TOS to a cloud provider allows terminals to leverage advanced technology without the burden of managing IT infrastructure.

Cloud-based TOS systems reduce the need for in-house IT teams and the responsibility of server management, helping terminals optimize their resources. Moreover, terminals can easily scale up or down, making cloud-based solutions more flexible.

The bottom line: own or outsource your TOS?

Terminals should ask themselves: is it worth dedicating time and resources to owning and maintaining a TOS system, or should they focus on their core business—terminal operations—and leave the software management to a specialized cloud provider? For many, the answer lies in embracing cloud-based TOS. The flexibility, scalability, and reduced burden of infrastructure management make it a compelling choice for modern terminal operations.