OCTOBER 15, 2021
9 min read
Unless you’re a vendor manager, product owner, or CEO, it’s entirely excusable not to be aware of what vendor lock-in is. To be honest, not all people holding office in one of the aforementioned roles are mindful of this omnipresent yet barely noticeable phenomenon. By definition, vendor lock-in indicates a state wherein a certain individual, organisation, or entity is limited to working with only one vendor without any opportunity to switch to alternative options. Therefore, customer dependence on one vendor, its supply chain, services, and products is rarely a deliberate decision.
Imagine a situation where you need to supply your office with only a specific kind of coffee beans for which the already-purchased coffee machines are suitable. Let’s also suppose your office is located in a place distant from most coffee vendors. Already by default you find yourself in a so-called stalemate since your choice of suppliers is limited, let alone bean varieties that your coffee machines support. However, it’s no good selling them. The crux of the problem with coffee vendors implies that their product’s quality may get severely worse, but you’re already ‘locked in’. The same goes for software. Especially concerning cloud computing.
Just like in the coffee supplier analogy, IT organisations often appear to be locked in to a single cloud vendor. Why so? Because when a company outsources some of its digital infrastructure to one cloud vendor, it becomes extremely challenging to move all the databases to other servers owned by a different hosting provider. This procedure often entails data reformatting, the emergence of unexpected bugs, inaccuracies, and the need to adapt databases to a new environment. Surprisingly, it’s more complex than changing coffee machines. As Statista reveals, more than 13% of the cloud computing market pertains to Amazon Web Services (AWS), proving that many companies worldwide are indeed limited to using only a particular cloud vendor.
What Is Vendor Lock In, After All?
Now that we’ve got the term’s definition in theory, it’s time to handle it more precisely and in light of cloud computing. Probably that’s what the article is about. Definitely not about coffee machines and beans. What is vendor lock in from a software business perspective? Whereas this problem may prove irrelevant for new-fledged companies, vendor lock-in remains notable when it comes to the activity of large-scale organisations with tons of data to be maintained. Whether it’s material procurement or working with freelancers, outsourcing essential processes serves as a lifebuoy for big tech players. But exposing your most vulnerable corporate data to third parties entails risks.
Although the technical and infrastructural lock-in scenarios are also noteworthy, what remains a burning issue today is data lock-in. Astonishingly enough, the international public cloud services market is projected to increase by about 22% in 2022, thereby amounting to more than $480bn. Google Cloud, AWS, Azure, and other giants in the cloud services industry continue to offer top-notch services and at the same time practise slightly monopolistic behaviours that facilitate vendor lock-in. Any troubleshooting tips, you may ask? How about going for diversified vendors? Probably yes. But hold your horses — more on that later.
Cloud Lock-In — How To Not Get Trapped
When does the vendor trap become impending? As soon as you demonstrate a willingness to change the vendor but stumble upon a series of hindering circumstances that require excessive expenses and complexity to overcome. Therein lie both the problem and solution to respond to it. What can be done in a situation when you can’t move your datasets to another environment or your current cloud provider doesn’t meet SLAs, thus increasing the probability of cyberattacks? The recipe implies following these 4 simple rules:
- Begin with developing portable software and applications. Flexibility is everything in fintech product development. In today’s business world, a broad audience has access to multiple platforms. Be it Android, iOS, Windows, PlayStation, Xbox, etc. — try to create quickly adaptable software solutions to be ready for rapid changes. Don’t get stuck with vendors’ built-in solutions like Amazon Lex or Azure’s data lake analytics. Try out cross-platform solutions.
- Don’t write off a coherently stipulated exit strategy. An immediately signed service agreement with a selected cloud service provider may spare you from years of unprofitable cooperation. Ask questions, stipulate all possible conditions, and make sure you can always switch a vendor.
- Focus developers’ attention on your proprietary technology instead of adapting it to the vendor’s digital environment. This aspect is crucial, inasmuch as readapting all your data assets and systems to a recently switched vendor’s platform can quickly turn into a messy time-consuming monster.
- Go for multi-cloud strategies. A curious fact: according to research conducted by IBM in 2018, about 85% already relied on multi-cloud deployments.
A Simple Solution to Avoid a Vendor’s Vice-Like Grip
Excessive dependence, quality deterioration, security issues, offer changes, shortage of control, and migration price constitutes only a bare minimum of what vendor lock-in may bring about for your business. And it’s not a storm in a teacup. As mentioned above, there’s no simple solution to this phenomenon, but it’s far easier to prevent lock-in from occurring rather than dealing with it post factum. Let’s dig deeper into the question! Here’re a few options to consider:
- Stand firm with internal backups:
Unlike its offsite counterpart, on-premises backup is always a solution, no matter how redundant it may seem sometimes when you own third-party cloud storage. Such an approach ensures the safety of your data, facilitates quick access, and merely creates a feeling of knowing where all your data is stored.
- Adjust for a hybrid-cloud architecture:
Given that sticking with a single option, be it local or cloud backup, often results in unwelcome surprises, experts have come up with a mixed solution. It’s most helpful when you’ve got tons of massive datasets and reap the benefits of software-as-a-service (SaaS) applications. By referring to hybrid cloud computing, you can always restore your database if one of your backup locations is compromised, whether it’s cloud or local storage. Interestingly, the hybrid cloud market grew sufficiently to encompass $56bn in 2020, with forecasts indicating that it would hit $145bn in about 2026.
- Follow the 3-2-1 rule:
It’s a golden mean and one of the most widely employed techniques to ensure the security of your data, maximise its restorability, as well as prevent it from being compromised. Just abide by these 3 principles:
- Make 3 copies of all significant files you want to protect so that you’ll have 2 backups and 1 primary file;
- Store these files on 2 different media types in order to have immunity against a broader spectrum of attacks;
- Keep 1 copy outside your office, home, or on-premise storage.
A Few Tips to Break Free from An Insatiable Vendor
Cloud computing has become increasingly common across a broad use case. No one would argue that using cloud services is cost-effective, but not all companies view vendors as a potential threat. It’s about time we listed a couple of tips on how to break loose from a hungry vendor in the cloud computing space if you’ve already been trapped:
- You can consider a problem solved in most critical aspects if you partner with another provider (but this can work only in case the opposite is not stipulated in your agreement with the first vendor).
- There’s no best vendor in the world but there might be one exactly for you. Tradeoffs and switching costs will undoubtedly be your companions while changing a cloud provider. Just be prepared to freeze some of your activities until everything is set up again in a new environment, let alone calculate the switching costs.
- Unlike coffee machines and beans, cloud services are rarely limited to geographical circumstances. There are plenty of vendors in the digital domain, and it’s unlikely that you run into one that doesn’t reckon you may leave someday. Usually, these points are indicated in your service agreement and contract so that you can switch to an alternative option at any time.
Vendor Risk Management
Vendor risk management is what helps businesses ensure data safety while sharing it with third-party vendors, not to mention that this framework presupposes lock-in prevention. Any reputable software development company allocates its corporate resources to employ vendor management opportunities. Your risk management strategy should include how data is shared, accessed, stored, destroyed, and restored. One most valuable vendor management solution involves enabling business owners to retain more control over their data and have more vendors to choose from due to preliminary market research. Still, vendor risk administration shouldn’t be regarded as an ultimate problem solution since it’s only the first step towards independence.
How to Develop A Risk Management Program?
The vendor lock in problem in cloud computing can be partially resolved by outlining a vendor risk management program or plan. Broadly speaking, it should include a variety of offered services, behaviors, and exit conditions. All the essential information about a selected vendor must also be outlined in this document. Conceptually, what vendor lifecycle management encompasses are the following stages of your potential relationship with a third party:
- Coming up with your needs and expectations;
- Letting your risk managers elaborate on a vendor assessment document for you to cherry-pick from (a quick tip — pay attention to vendor license);
- Selecting the most appropriate vendor from the list, researching their offers, and sending out bids;
- Contacting them, stipulating contract terms as well as timeframes;
- Analysing and monitoring activity;
- Closing your relationship with a chosen vendor or renewing it.
While developing a risk management plan, also consider ensuring that:
- Among the vendor list, your preferred choice supports the institution within which you’re operating;
- They work in compliance with all regulations and requirements;
- They agree to initial vendor risk assessment and continual monitoring;
- You can terminate the agreement when something goes wrong from a vendor’s side;
- A preferred vendor has a sufficient number of employees and scale to satisfy your demands;
- Your future vendor isn’t exposed to cybersecurity issues.
Vendor Lock-In Cases Within the Software World
Although vendor lock-in occurs everywhere, you won’t find much information about specific similar cases when it comes to large-scale corporations. However, one can collect a couple of organisations in charge of most cloud computing services.
If you’re an IT player, the odds are you’ve already been locked into the Google ecosystem. Google Cloud, in particular. This digital leviathan has enough power to control pricing and change it depending on its needs. The reality is that it’s not always bad to become locked in to a certain vendor if their services are of high quality. Most often, this type of lock-in simplifies too many processes to refuse from such relationships.
Between 1997 and 2004, the company was blamed for vendor lock-in due to a large scale of the Windows APIs so that any other independent software vendor (ISV) couldn’t but employ and embed them. Therefore, the value offered by Microsoft back then came with the source code itself, meaning that it was more cost-effective to continue using Windows and its services instead of searching for alternatives. In the era of ecosystems, almost any big tech player is willing to monopolise its industry, trying to evade antitrust laws.
Do you remember iTunes? An excellent example of vendor lock-in within the digital realm! The music was sold and could be played only on devices with installed iTunes media player software. Now iTunes is practically dead, but Apple continues to incorporate monopolistic practices into its ecosystem. Today the problem touches upon software and video game developers who intend to sell their products via the App Store. You don’t always need to monopolise the market to solve a problem, don’t you?
How Not To Shun Away from Your Vendors?
Feeling anxious about your vendor after reading this article? Don’t be afraid! As long as you follow the fundamental principles of vendor risk management, remain cautious, and sign contracts exclusively with reliable third parties, you’re safe.
But if you need more in-depth information and are prepared for useful secret tips from a reliable software development company, contact us to get immediate feedback. We’re here to answer all your questions, so don’t hesitate!
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