Software

Beware of vendor lock-in upfront, or be prepared to pay later

Vendors don't love you. They love your money and your business. They'll be nice if that's what it takes to get your money at first, but after that, if they can lock you into their solution and keep draining your wallet, they will. Would a vendor really treat a customer that way? Read on.

We're basically all capitalists here, so we know how the system is supposed to work. As a vendor, you want to find a customer to buy your products. As a customer, you want to find a vendor who will fill your needs. Ideally, vendors and customers come together, money changes hands and everyone goes away happy.

Everyone except the vendor of course.

The vendor's only temporarily happy because he's made a sale, but now needs to go find the next one, not unlike a wolf needing to find the next sheep to prey on. Because the best prospect for future business is someone who has already bought from you, the vendor will try to resell to previous customers. Ordinarily they'll do that by doing such things as introducing new innovative products, add-ons to existing products, or by selling and/or providing superior support for their current products.

The drawback to all of that from a vendor perspective is all of that is expensive. The entire reason a vendor is in business is to make as much money as possible, so that means that it's important to expend the least amount of energy to make a given dollar. So, how do you keep the maximum amount of money flowing in while expending the minimum effort? That's easy - all you have to do is lock the customer in to your product.

A customer can be locked in several ways. You can sell so much of a product to them that it would be to economically painful to make a change. You can use proprietary features that no competitor has. You can use contractual obligations and tie them down legally. The main goal is to make sure that the customer has little choice but to keep sending you checks. After that, as a vendor, you can essentially do whatever you want.

Enough guilt to go around

No one particular vendor is guilty of this behavior. It's just the way things work. But, let's look at a couple of real world examples. One of the most successful vendors in the IT arena who has made an entire business model around locking in customers and soaking them dry is Apple. Here are a few of the Apple's less than friendly customer tactics:

Microsoft does it too. Users complain endlessly about things like Windows Genuine Advantage and how does it respond? They create a new feature called Office Genuine Advantage which does the exact same thing, but now does it to those people who decide to use Office 2007. If you check Microsoft's Web site, the only real 'advantage' that WGA or OGA provide is to Microsoft. Customers are left being felt like dupes or pirates.

Even beyond Apple and Microsoft, you can pick on pretty much anyone you want - IBM, Novell, the programmer with his own shop that charges a leg and an arm for customizing software. Everyone does it. But, as the customer, you have to decide upfront how you want to react to such abuse.

Have both an entrance and an exit strategy

It's easier going into a vendor relationship to set the ground rules. Be aware of the implications of your decision in advance. If you can negotiate your way out of the lock-in opportunities you should. Otherwise, avoid the transaction or figure out how to mitigate the damage of the lock-in.

For example, if you want to deploy Microsoft Office 2007, you can't really complain later when users come to you constantly saying that they're getting OGA pop-ups. Remember Microsoft loves to lock people into Office via proprietary file formats. You can configure Office to use more standard formats and thereby make it easier to switch to another office suite later because your data can go with you with less effort.

Once you start noticing pain points due to vendor abuse, you should start trying to figure out how to break the contract, migrate to a new platform, or do something to terminate the relationship. This may take some doing, but over the long term it could save you a lot of headaches as well as reduce the overall cost of support. Complaining to the vendor occasionally works, but that usually works best when you have some leverage over them as well, such as a big fat support contract.

The bottom line for IT leaders

Remember a lock-in is only as good as the power you give it. A vendor may try to do things to keep tapping your wallet, but you can decide upfront either not to participate, or to do things to at least mitigate the damage it you decide to terminate the relationship. Don't stand up to vendor abuse. Once a vendor no longer remembers their place, they'll try as quickly as possible to turn the relationship their financial advantage. Be aware of the implications of lock-in upfront and have an exit strategy when the abuse becomes unbearable or be prepared to pay more money over the long term.

3 comments
yuhong2
yuhong2

You are right about vendor lock-in but you cited bad examples. For example, for MS vendor lock-in, there are better examples than WGA and OGA. Also, for Apple: "Taking a cross platform OS like BSD Unix and modifying it so that won???t run on other platforms" Not a very good one, because Mac OS X isn't just BSD Unix. Yes, it includes BSD, but... Better: "Tying Mac OS X to Apple hardware" "Shipping telephone devices that are locked into specific vendors" That is standard cell phone practice. What Apple did not do is offer an unlocked version. "Sneaking new software on customers??? machines in the form of security updates" Both MS does it as well. For MS, WGA Notifications is a good example of this. But that itself is vendor lock-in? BTW, DRM can lock you in as well and that is true of both Apple and MS, but that is just because there is no standard for DRM. For example, if you buy DRMed music from iTunes Music Store, you can only play it on an iPod.

BALTHOR
BALTHOR

There are International standards for digital files.

John Sheesley - TechRepublic Pro
John Sheesley - TechRepublic Pro

The best way to keep a revenue stream going if you're a vendor is to lock the customer into your solution and then just start cashing the checks as I mentioned in Decision Central: http://blogs.techrepublic.com.com/decisioncentral/?p=104 Microsoft. Apple. IBM. All the vendors do it. Customers whine and complain and then buy the next version, or sign the support contract extension. Wash, Rinse, Repeat. What's the best strategy to end the cycle of abuse? Or at least get vendors to start treating us like customers again?