Can Vendor Lock-in Have a Happy Ending?

When a company is overly dependent on a single provider, it can become vulnerable to unexpected complications. At TITANS, we explain what to watch out for in relation to vendor lock-in, under what circumstances it can be helpful, and how successful brands approach it.

If you think about it, you will probably remember at least one company that has been very dissatisfied with its software supplier for a long time but has not terminated its cooperation with them. This is due to a phenomenon that worries many brands operating in various industries. Vendor lock-in, which prevents them from easily switching to a competing supplier of products or services, is caused by several factors.

For a company using software that depends on technologies incompatible with its competitors’ IT tools, changing providers would be very costly. Besides, some contracts have clauses that make the customer pay a fee if they switch to another supplier before the contract ends.

Why vendor lock-in resembles a trap

When a company is too dependent on one provider, it can become vulnerable to sudden complications. If it chooses the wrong partner, it may have to deal with service outages, regulatory compliance violations, or price increases. Given this risk, it is worth mentioning the 100 different business applications that Capiche examined between 2009 and 2019. As many as 67 of them increased their prices by an average of 98%.

As dependence on suppliers increases, a company’s competitiveness may decrease proportionally. Outdated, deeply integrated proprietary systems hinder attempts at upgrades and prevent the implementation of the latest features. Endless repairs also drain company budgets.

Although approximately two-thirds of CIOs surveyed would prefer public cloud services from multiple vendors, in 2020, up to 71% of companies used the public cloud from only one provider. This was revealed in a study by Bain.

Understandably, in such cases, companies feel trapped. Even if they decide to bear the financial losses and invest capital in a new service, they often experience weeks of disruptions during the transition, which can reduce their revenue and damage their reputation. Vendor lock-in is likely to happen again later with a new supplier.

Advantages of vendor lock-in

It may surprise you, but vendor lock-in has always existed and is virtually impossible to avoid completely. Even if you hire an engineer to create a specific solution for your company, you will still be tied to the data centre operator, hardware supplier, and ultimately the engineer who operates and maintains the solution.

However, even with vendor lock-in, things are not black and white. The key factor is the degree of its severity, i.e., the time, costs, and risks associated with replacing a component or service. If you plan to change your hardware, data centre operator, or employee, the costs are usually low. But if you want to replace highly differentiated proprietary solutions that are not easy to duplicate, you will have a harder time.

The good news is that vendor lock-in can also have advantages – if you choose a single supplier, it can simplify your situation. Such solutions are often better integrated, which translates into higher quality and agility. If you have a reliable provider and pay a price that you consider fair in relation to the value you receive, vendor lock-in won’t hurt you.

Oliver Presland from Ensono also emphasises that if vendor lock-in provides a unique opportunity to differentiate yourself from the competition, it is not a negative thing. But again, we emphasise that choosing the right partner is key.

Ace up your sleeve

As already mentioned, vendor lock-in does not have to be a concern when the solution is developed by your internal employees. The same applies when you hire one of the more than 30,000 freelancers we bring together at TITANS. During their time at your company, they will adopt a culture similar to that of your team, while also bringing a wealth of experience to the table. Asentrepreneurs who have worked on multiple projects for various clients, they are better able to compare potential solutions.

On the other hand, if you rely solely on internal staff, it is worth considering the following data: according to the Gallup World Poll from 2022 to 2024, up to 68.47% of employees in Slovakia are not motivated at work, and 17.62% are even actively demotivated.

However, freelancers tend to have higher levels of stability and motivation and lower turnover rates. This is also demonstrated by the fact that the total average allocation time for projects has been increasing over the years. IT specialists do not want to disappoint us, so they wouldn’t damage their reputation in the market, where we are actively engaged as a respected brand. In Slovakia, we have long been the leader in IT specialists outsourcing (see Chart 1).

The best of both worlds

Besides building systems, our clients also use IT freelancers for other purposes. For example, if they are working on a project with a strong software provider in a field where they lack know-how, they need expert support. Along with this, experienced freelancers also provide preventive oversight of the provider, thereby preventing potential risks (such as a serious degree of vendor lock-in). This approach is also appreciated by the supplier, as they gain a partner who is knowledgeable about the issue.

For other clients, we provide freelancers with relevant specialisations who offer a solution to existing vendor lock-in because they have valuable experience with similar scenarios. Another group of companies is interested in specialists who can advise them on whether to choose a build-to-suit solution or to build software on their own.

When searching for a candidate for a project, we make sure to find the perfect match, thereby eliminating many of the risks that a company would face when outsourcing on its own. Every one of TITANS’ more than 700 clients knows that our freelancers will never be assigned a project more important than the one they were hired for. This means they can sleep soundly.

We also specialise in mediating relationships, which allows us to ensure favourable conditions for both parties. However, if necessary, within 10 days, we will find a candidate who could replace the hired freelancer.

We strive to be a partner that supports brand autonomy, with a mutual agreement that is felt only when our help is needed. In essence, a freelancer from TITANS combines all the positives of an internal employee with the advantages of an external provider.