Many organizations enter into contracts for the monthly delivery of services or products. And you prefer to conclude such a contract for a longer period, so you don't constantly have to conclude new contracts. But the danger exists that you then end up in a vendor lock-in.
What is Vendor Lock-In
But what exactly is a vendor lock-in? We'll explain with an example. Suppose you need new phone devices for your organization. Of course, you also want to immediately enable VOIP via a cloud PBX, because it's late 2019 and that works perfectly. You conclude a contract with provider X, and buy or rent your digital devices there. But then you suddenly find a cheaper solution at provider Z. And what turns out? The devices you just purchased only work with the cloud PBX of your current provider X. In other words: you're stuck with provider X, unless you're going to invest heavily again.
When you conclude such a contract, it may seem like a good idea. But before you know it, you're bound hand and foot to a supplier and it becomes particularly difficult or very expensive to change. So watch out before you sign such contracts.
Exit Strategy
Start your collaboration with a supplier with the end already in mind. Maybe that sounds a bit strange, but it works. There are a number of situations in which you will need the help of your old supplier to make the switch. By taking that into account in your negotiations, you ensure a smoother transition. Include in the exit provisions what support you expect, what the agreements are regarding prices and any knowledge transfer, and what timings should be used.
Contract Renewal
Watch out with the renewal of your contract. Often that happens automatically and before you know it you're stuck again for a certain period with the same contract. Make sure someone in your organization keeps a good eye on the expiry dates of such contracts so you can take action in time.
Ensure a Backup
For certain types of suppliers, such as IT, it can be useful to provide a backup. That way you're not exclusively tied to one and the same supplier and you already have your backup ready when you want to change. This avoids a vendor lock-in locking your organization in and you can't go anywhere.
End of the Contract
It's often the overlapping of contract periods that makes it so difficult to get out of a vendor lock-in. Make sure those contract ends coincide as much as possible, so you can immediately coordinate your investments well and thus avoid a vendor lock-in.
So watch out when you conclude such contracts and avoid ending up in a vendor lock-in. Because however advantageous that initial contract may seem, the snakes in the grass will cost you quite a bit at the end of the ride. Want to know more about vendor lock-in and how you can save? Contact us.