By Gurdeep Singh, Product Manager, Artificial Intelligence & Robotics at Tryg
Gurdeep Singh has worked with automation, including RPA for almost a decade and is currently Product Manager, Artificial Intelligence & Robotics at Tryg in Copenhagen.
The exponential rate at which the robotics process automation technology is evolving, with new features and components being developed and released daily, it’s very import that we have an open, scalable and agile architecture.
However this is an ideal state and to tarnish the ideal state one of the biggest challenges today is vendor lock-in.
With software vendors increasing their prices, organisations don’t even realise that they are locked in until the time they try and innovate with new components and try to open the existing architecture on a system, platform, tool or service.
In this post, I’ll summarise what we covered in a recent member’s call, share advice on how to avoid vendor lock-in, but let’s take a step back first to understand what vendor lock-in is all about.
Understanding vendor lock-in and how it happens
To quote from the Wikipedia definition of vendor lock-in:
“Vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products, unable to use another vendor without substantial switching costs.”
This means that you are contractually bound to vision, strategy, tools and components provided by the vendor. If it doesn’t stops you from a change, it does create challenges and that usually entails extra investment in time and money.
Vendors have been doing it for a while in many software categories by locking contracts for five to ten years with customers, binding them with systems which eventually turn out to be legacy systems. This in turn pulls down the innovative spirit and flexibility of the organisation.
Today as technology evolves at a speed that we have never witnessed before, there is a change in the paradigm shifts in expectations from our customers, the way we develop solutions, the way we service our customers and to meet this expectation our agility to adopt is the key differentiator.
To adopt to the ever changing and evolving ecosystem, we need to be able to collaborate with not one but multiple vendors and get the best out of it all, however vendor lock-in can really become a big roadblock.
Impacts of vendor lock-in
Let me share seven ways vendor lock-in can impact you:
Vendor lock-in limits our flexibility, which at its core puts you, the customer, at the mercy of the vendor. That’s a bad place to be.
Usually vendors lure their prospective and existing customers with short term benefits from the core system, service or hardware. This then has a negative long term impact, when you plan to expand the software or service by leveraging other services or vendors.
It limits innovation as your innovation playground is now tied to your current vendor and how they executve their strategy and have their vision aligned. If it’s misaligned with yours, then the lock-in will make it difficult.
As you have surrendered to the vendor’s strategy, rather than your own strategy, when priorities and plans change, the bonds to the vendor will be expensive to break.
It leaves you vulnerable and dependent on the vendor, which down the road is likely to lead to frustration, challenges in the relationship and a sour partnership.
There’s the fear of missing out (FOMO) for most organisations resulting in making bad hasty decisions resulting in further long term negative impacts on your initiatives
Actually, the worst is the double lock-in where you are not only locked in to the software vendors, but also locked to the service provider or implementation provider. Now, you are in a quite bad and risky place, in particular if RPA is powering strategic initiatives.
Now, onto the important question: How do vendors do it and lure us into their trap?
How are we lured to vendor lock-in?
Historically these lock-ins have been mainly driven because of the effectiveness of the pre-sales and account executives, complemented by the brand names, pseudo-monopolies and previous engagement goodwill. However today with cloud and open source solutions as alternatives, new and multiple options, alongside clever sharing by customers in peer groups (like our business automation community), the software vendors have added six more weapons to their arsenal:
Super saver initial deals are a big one, where vendors offer short term lucrative benefits with long term commitments
Discourage movement outside the vendors ecosystem, which means it comes with a financial penalty to use a 3rd party, open source vendor or even competitor. Consequently the ROI eventually turns into negative and hence the initiative dies down it’s own death
Data lock-in, today in the age of data, where data is the next stage fuel in driving innovation and transformation in an organisation, many endors lock-in data resulting in difficulty in moving out or collaborating outside the vendor ecosystem. This results in non-availability of the data outside the ecosystem or transfer limitations resulting in additional cost
In the world of open architecture, most if not all, vendors advocate open architecture or open connectors resulting in creating a mirage of open architecture or connectors showcasing major brands and building a reputation of open architecture software or service, which can be really convincing. However in reality they have open architecture for subcontractors, acquired firms, major vendors, tools, hardware, software or applications only and a close architecture to everything beyond it
Linking their offering to a unique proprietary service or product, which is where the vendors have a monopoly. Despite what you might think, often vendors don’t face direct competition, which means as a customer you need to decide between the tradeoff between the perceived safety of an established player against the perceived uncertainty of working with multiple offerings.
Generating a bogus fear of security threat or a governance issue, if another tool is leveraged or allowed in your digital ecosystem. Often liabilities around SLAs, KPIs, data breach, governance issues are mentioned. Vendors can be quite vocal about stating no-liability post integration, which generates a fear in the business and then consequently a reprioritisation of the engagement with another vendor.
Now that we understand that vendors have tricks and tactics of ensuring vendor lock-in, it becomes important to get out of it and ideally avoid it entirely in the first place.
Don’t get into a vendor relation that you can’t get out of
Today, I sense a shift in the teutonic plates between vendors and customers, so that we are moving towards a paradigm shift in the market where th vendor and customer relationship has changed from a vendor lock-in relationship to a more healthy merit based partnership.
We are not entirely there yet, but there’s a few things you can do as a customer to avoid vendor lock-in:
It starts with due diligence, including:
Don’t simply reuse the same age-old RFP templates that doesn’t factor in agility and open architectures
Involve enterprise architecture from the very beginning ensuring that they take the ownership of the solution to make it more future proof
Validate the fine prints in the contracts with the lens of open architecture and engagement agility
Prepare for open collaboration and an exit plan in the vendor selection stage itself and be vocal about it
Documentation and reading the fine prints on the contracts helps make it open for discussion
Being cognizant of the unrevealed potential lock-in by implementation partners due to vested interest and partnership with technology, software or service provider. Make sure to evaluate the recommendations internally prior to commitments to implementation partners
Then consider your cloud, on-premise or hybrid strategy:
Have a clear strategy defined on cloud
Assess the upstream and downstream value chain
Make sure to have your own strategy and vision for what you are doing. Don’t rely on the vendor strategy
Leverage GIT, containers and dockers for effective CICD and storage
Leverage chef and cookbooks to ensure re-initiations automatically
Moving onto what I would call “Open Architecture Strategy”:
Keep evaluating open source solution and leverage open communities
Have an open architecture and open ecosystem strategy defining the key success criteria for selection of a software or service vendor
Consider a API / microservices-—first strategy and have a clear discussion with the potential vendor on these strategies and openness requirements from your side
Then consider your data or what we can call “Data management strategy”:
Have a strategy which defines your data management strategy around data generated from the software, or services with vendor highlighting, data storage, retrieval, transfer and ownership in case of additional vendors
Understand the data generated and define a strategy for defining right data, storage and backup
Evaluate the loss impact in case of contract breach and bake it into exit strategy impact
Regular governance and audits to ensure initial assessment at RFP stage still hold true
Then, I would also recommend a coping strategy:
In case breaking out of the vendor lock-in is not possible, how can you cope with the vendor and benefit from it
Create a modular build strategy to limit the impact
Consider managed services since at times, managed services vendors have higher flexibility or you are have the ability to transfer the risk of vendor lock-in
If you don’t have enough skills to assess the vendor lock-in in due diligence stage leverage 3rd parties for assessments
Work closely to aligning the vendor strategy and organization strategy to define a win – win for the organization
Being vocal about the vendor lock-in challenges with market analysts like Gartner, HFS or IDC highlighting the challenges it possesses towards innovation and collaboration
Finally, let’s look at what vendors can do to make things better.
What can vendors do to avoid vendor lock-in
While in some stages it’s good for vendors to have vendor lock-in, with a merit driven partnership it is important to understand that we succeed when our customers succeed.
My four recommendations for vendors is to consider:
Open agility: Vendors can acknowledge the requirement of open architecture and ecosystems and hence embrace the same and offer as a value add to the customers
Align strategy: It is important to ask these questions beforehand and align the product and service accordingly so that customers can assess it at their convenience
Offer a partnership: If you find your customer is indeed locked-in and this is impacting our customer and our relations with them, then offer a partnership in finding alternatives and have an open dialog to identify how to reach the end goal and how can both partners can prioritise their vision and strategies for a win win for both
Actively avoid lock-in strategy: What might have been a good business strategy in the past, the need of the hour is to have an open merit driven partnership and you should help your customers in the journey. Embrace this in your culture as well.
Learn more about vendor lock-in, business automation and what’s happening at the moment
In this time, where artificial intelligence is changing the game, another way of looking at what’s happening is to consider the term “software moat”. Moat is another term for a sustainable competitive advantage. It is a software firms ability to maintain a competitive advantage for protecting its market share and long-term profits from its competitors.
In the beginning of May, a leaked internal Google document claimed Open Source AI will outcompete Google and OpenAI. The memo is one of the most important documents to come out of Silicon Valley in the recent months and worth a careful read: Google "We Have No Moat, And Neither Does OpenAI".
Let’s just quote a bit from it:
“Plainly put, [the open source community is] lapping us,” the Google memo stated. “Things we consider ‘major open problems’ are solved and in people’s hands today. … While our models still hold a slight edge in terms of quality, the gap is closing astonishingly quickly. Open-source models are faster, more customizable, more private, and pound-for-pound more capable.”
Pause here for a moment and let me quote from Scott Brinker’s analysis of the memo:
Consider: a trillion-dollar company with many of the world’s most talented AI developers — this current wave of generative AI is based on their invention — and billions of dollars to spend can’t keep up with the speed of innovation of an uncoordinated mass of hobbyists, students, and tinkerers.
You can also read more in some of my previous posts on this topic:
Hyperautomation: More hype than hyper (March 2023)
Selecting the right process mining vendor (February 2023)
Lean RPA the what, why and how (December 2022)
Finally, do consider stepping out from behind the screen and joining us in the peer groups. You can also meet me in person in Aarhus in November for the Boye Aarhus 23 conference.