Vendor lock-in, kidnapping by a technology vendor

Vendor lock-in or vendor kidnapping is no new phenomenon that continues to jeopardise businesses, commerce and, of course, technology sectors. The perilous reliance on a supplier, which can feel like a never-ending captivity, can result in significant tension, loss of power and financial damage to companies.

What is the vendor kidnapping phenomenon? 

Vendor lock-in occurs when a customer is “trapped” using a specific service provider, technology solution or product due to of the challenge or even impossibility of switching to another provider. Some vendors intentionally engage in vendor kidnapping as a means of limiting the customers’ ability to migrate to alternative platforms. This is achieved by offering closed or proprietary solutions, initially low prices, or by withholding or controlling customer data or information to impede migration. This issue is particularly prevalent in the case of e-signature transactions. 

Who does it affect? 

For companies that rely on technology or software suppliers to conduct their operations, vendor lock-in can have significant ramifications. This is especially true for businesses operating in highly regulated industries or those heavily dependent on specific technologies to maintain a competitive edge. Additionally, the situation could have implications for the end-users of the company’s products or services, who may be constrained by their quality or lack of innovation. 

Vendor kidnapping can manifest in several apparent ways. For instance, a company may become trapped in the use of particular software or operating systems, such as Windows or Mac OS. Additionally, reliance on closed SaaS applications with configuration challenges or hardware vendors, such as cloud storage systems, can also lead to vendor kidnapping. 

Vendor lock-in is a pervasive issue in several sectors, particularly in the SaaS industry. For instance, telecommunications businesses can become heavily reliant on cloud communication tools like Zoom or VoIP services like RingCentral, making it difficult to switch to another provider. Similarly, e-commerce businesses can be locked into a particular payment gateway service like Stripe or a logistics management tool like ShipStation, hindering their ability to pivot to other service providers. 

Other examples include companies that use Salesforce as their customer relationship management (CRM) system, which may find it challenging to switch to a different CRM solution due to the complexity of integration and the risk of data loss. Similarly, businesses that rely on Adobe Creative Cloud for their design needs may find it difficult to switch to a different software suite due to the proprietary file formats used by Adobe. 

In all these cases, vendor lock-in can have significant implications for the company’s operations and competitiveness. Therefore, it is crucial for businesses to carefully evaluate the long-term effects of their software and service provider choices to avoid being trapped in a vendor lock-in situation. 

What are the reasons that prevent a customer from changing suppliers? 

Customers can become tied to a single supplier due to various factors, ranging from economic considerations to abusive clauses in contracts, as well as a lack of sufficient knowledge. 

Other reasons include:  

• Lack of interoperability between the supplier’s systems and those of third parties. This means that customers may find it challenging to integrate products or services from other suppliers with those already obtained from the original supplier.
• Technology dependence occurs when a customer has invested significant time and resources utilizing a particular technology or platform and cannot switch to another without incurring substantial migration costs, such as purchasing new equipment, providing employee training, transferring data, and experiencing downtime that can impact productivity. 
• Supplier monopoly occurs when the original supplier monopolises the market, which can limit competition and reduce the customer’s ability to find alternative solutions in the marketplace.  
• Customizing a service or tool to the point that it is totally dependent on that platform can be quite expensive and difficult to implement another one and make it 100% compatible with the company’s needs. On the flip side, if a technology does not meet the customization objectives, but is deeply embedded in the core of the business, it can be tough to migrate to better options. 

What are the consequences of this phenomenon? 

When a customer is trapped in a vendor lock-in, it can lead to several issues that can significantly impact the company’s capabilities. These include limited freedom of choice and innovation, hindering the ability to leverage new technologies and adapt to market changes. Additionally, migrating to new suppliers can come with heavy investment costs. 

Extreme dependency on the original supplier for technical support, upgrades, maintenance, and other issues can also limit the company’s control over its own business, resulting in negative consequences for both the company’s competitiveness and market positioning. 

Vendor lock-in can restrict the company’s ability to negotiate better prices or terms with its current supplier, as the supplier knows the customer has few alternatives. Furthermore, if response times are extended, even minor or one-time problems can have magnified consequences. 

How can it be avoided or corrected? 

Transactional choreography is a powerful and reliable technology that can effectively manage diverse solutions and has the ability to position themselves as the ultimate solution to vendor kidnapping. By providing an open and decentralized architecture, they enable companies to manage diverse solutions and move away from closed systems. 

The choreographer is built on a decentralized and agnostic architecture, enabling it to seamlessly integrate with various providers to execute specific transactions or use cases without limitations. For instance, if a company needs to carry out an electronic signature, the choreographer can enable the service to be performed through signature providers A, B, or C, or even all of them at once depending on the circumstances. This flexibility allows for a more customized and efficient approach to managing transactions. 

This architecture provides companies with the flexibility to quickly switch between choreographed suppliers based on their business needs. With the choreographer in place, the company can easily choose to sign electronically with suppliers A, B, or C, and even replace supplier A with D if needed, all within a span of just 2 weeks. 

What’s more, the choreographer is a plug-and-play solution that requires no manual configuration or adjustment. It comes with a pre-configured output methodology (unplug-and-no-more-play) and established interoperability, making it possible for a company to seamlessly switch to a new choreographer in just 4 weeks if desired. 

What steps should I take to move from a vendor kidnapping situation to a choreographer who will free my company?  

Implementation projects for a choreographer are typically launched four months before their SaaS provider contract is set to expire. The first step involves integrating the choreographer and activating digital transactions that were previously handled by the captive provider. 

Next, an A/B test is conducted to determine how to split transactions between the hijacker and the choreographer. The quality of the choreographer’s transactions is carefully evaluated to ensure that they meet the same high standards as those of the captive provider. Based on this evaluation, the decision is made to either definitively disable the previous provider’s transactions or negotiate with them to include their services as a choreographed alternative. 

In the latter case, the company starts from a position of strength, as the adoption of the choreographer has provided them with more bargaining power. This comprehensive approach ensures a smooth transition to the new provider and helps companies avoid disruptions to their digital transactions.