Dependance Is Not a Strategy. Why is Vendor Choice the Path to Long-Term Freedom?
Both principles apply to supplier selection and relationships, but in most cases only one of them is beneficial in the long term.
The longer cloud services have been on the market, the more the problem of proprietary lock-in with specific suppliers — vendor lock-in — comes to the foreground. It primarily appears in connection with the public cloud of global providers.
However, this situation can affect organizations in such a way that no matter how a company chooses a supplier, it always makes a mistake because it closes itself in its clutches. In this article, however, we will look at both types of IT service supplier selection, the healthy one and the unhealthy one.
The Difference Between Lock-in and Choice
If we look at vendor selection from the perspective of the outcome, the company always ends up with a solution from a specific provider. But that is not the real end. After the solution is delivered, the whole deal only begins.
At this point, it becomes clear whether the selection was strategic or just a process that resulted in a specific vendor.
What do we mean by that? While the vendor choice approach is a conscious selection of a specific solution with the knowledge of what limitations there may be and how to address them, vendor lock-in is the result of a non-strategic decision without a deeper understanding of the future functioning of the given solution within the entire company.
Vendor lock-in ends with dependency and the inability to influence the basic principles of the solution, vendor choice provides the company with the necessary solution including the ability to stay in control.
Vendor Lock-In Under Scrutiny
In one word, we could define vendor lock-in as dependence, specifically on the provider. In the introduction, we described this relationship as unhealthy, and in most cases it is. When is it not?
From a technological point of view, it is sometimes important for companies to choose specific proprietary technologies. The price of dependence is lower compared to the benefit that a specific supplier will bring. That makes sense.
What does not make sense are the contractual terms of vendor lock-in, which are often dismal. Such contracts include high penalties for early departure from the provider. Ok, we can understand that. But some contracts deprive you of ownership of your data that you store and use as part of the solution.
Some proprietary solutions make technological sense for companies — it can be a specific set of applications from one provider, for example, which are tailored to a specific industry.
But if a company is to remain its own master and have its future in its own hands, vendor lock-in is often an insurmountable obstacle. The costs of change are often unbearable, especially if it concerns applications and not just the environment.
Risks
- Finance — if a company decides to switch suppliers, vendor lock-in makes it an unnecessarily expensive process. Consider, for example, changing electricity suppliers and having to pay a year-worth consumption as a penalty for leaving. The conditions for leaving vendor lock-in can be equally absurd, so it is necessary to think carefully before the company falls into this trap.
- Technology — if a company chooses an application that is proprietary, it may encounter that it can only be deployed in a certain environment. The company thus loses control over the technology stack and must adapt to the solution, rather than the solution adapting to it.
- Relationship — providers burdened by vendor lock-in are not partners to the company. Quite often, the supplier and the customer do not have the same strong negotiating power. It may happen that the provider begins to dictate terms that the company does not agree with, but does not have the leverage to oppose.
Balance
Proprietary solutions tend to be fast and convenient, which is a very attractive combination for many companies. They may also provide functionality or a combination of functionalities that are a necessity for a specific company. That is fine.
However, it is still necessary to balance these benefits with the knowledge that vendor lock-in can lead to high costs and loss of control. These negatives are especially evident when something needs to be changed. Or when the provider starts dictating new terms.
Vendor lock-in is quite often an unhealthy approach because it is the result of insufficient research, poor strategy and ill-considered decisions.
Vendor Choice Under Scrutiny
If we want to define vendor choice, then it is the selection of a supplier based on an informed decision. Here too, the result is the delivery of a solution. But it fits right into the operations of the company and its planned future development.
Vendor choice does not necessarily mean the selection of open technologies. However, if it includes non-open technologies, the selection should be even more thought through with regard to exit strategy, data independence and compatibility.
The foundation is usually the interoperability of technologies that form a unified technological ecosystem. Such a stack helps to keep the IT infrastructure functional under all circumstances. Even when the company decides to change.
Risks
- Partner — precisely because this approach focuses on high-quality IT selection in great depth, it is necessary to take the right partner. However, finding one may not be easy.
- Costs — this point is related to the choice of partner. If the company does not choose correctly, it may happen that the costs of operating an inappropriately selected technology stack will be high.
- Complexity — vendor choice can lead a company to the fact that the infrastructure is composed of solutions from several providers. At that point, it may happen that the ecosystem is not built correctly and causes more complications than ease of operation.
Balance
Although it can be scary to look at the beginning of the vendor choice approach, it often pays off for companies. In-depth analysis, choice of the right partner and appropriately configured architecture are activities that are an integral part of the vendor choice approach.
Although they require time and finances, they pay off in the long run. The ecosystem on which the company’s operations depend is then based on a suitably selected combination of solutions. These can often be from the open library, most often companies today reach for Kubernetes or Terraform.
In addition, costs can be a negative for both approaches, but if we look at the positives that balance this, then we look at flexibility, the company’s ability to maintain bargaining power and reduce risks associated with, for example, changing supplier conditions.
Currently, companies are most often heading in the direction of hybrid cloud or multicloud. But as with any technology, it is always most important to look at the needs of a specific company.
Can Vendor Choice Ever Mean Vendor Lock-In?
Yes. For some companies, the technology benefits may outweigh any negatives. This could be a fast time-to-market or the use of multiple solutions from a single vendor that allow for deep integration.
However, the company must carefully weigh the risks and try to mitigate the potential impacts of this “prison.”
The Result Depends on the Approach
Whether a company’s decision falls into the vendor choice or vendor lock-in category depends on the approach it takes. If an organization is well aware of the importance and implications of vendor selection, then it is on the right track to the right outcome.
Questions that can help include:
- Can we exit easily?
- How does migration to and from the environment work?
- Do we have standardized formats for easy migration?
- What is our negotiating position?
The bottom line is that the company should always be the party holding the reins. This will become increasingly important as we live in a rapidly changing world. Companies need to be able to adapt to these changes, so it is necessary to choose a strategy that allows this to happen with as little disruption as possible.
