08 Apr Dependency on a Single IT Vendor – A Mistake That Could Cost a Fortune
Business people like us all face an enormous challenge today. Sharp stock market declines, uncertainty in currency markets, unclear political movements, the threat of recession in the US, and the war raging beyond Europe’s border mean we should analyze our strategic decisions even more carefully.
In the face of growing tensions and changing regulations (such as those regarding tariffs, personal data protection, or migration policy), it’s worth considering whether complete dependence on a single global technology provider is really the best option…
In today’s article, I take a close look at the dangers of vendor lock-in. If you’ve been using a single IT provider for years, now might be the right time to change your approach.
Table of Contents
- Business “Antifragility”
- Vendor Lock-in: The Single IT Provider Trap
- The End of the Public Cloud and SaaS Trend?
- A New/Old Way to Full Business Flexibility
- Summary
Business “Antifragility”
The COVID pandemic already showed us that excessive dependence on a single contractor can lead to serious operational and financial problems. A similar situation applies to IT today. Relying on a single technology provider, especially from a region exposed to drastic transformations, can prove to be a costly mistake.
Nassim Taleb in his book “Antifragile: Things That Gain from Disorder” clearly emphasized that only entities that dare to draw from the volatility of contemporary realities can be resistant to crises.
This is mainly about business courage, challenging the established status quo, and agilely responding to so-called black swans, or unpredictable situations in our environment.
Translating this to IT, the recommended path is: avoiding excessive dependence on a single provider (vendor lock-in) and investing in flexible technology that can change along with the organization.
Vendor Lock-in: The Single IT Provider Trap
One of the riskier situations for an entrepreneur is becoming a hostage to their previous choices.
As we’ve already had the opportunity to learn, there are no certainties in business, public health, or politics. Therefore, when investing in technology, one should avoid situations that will be difficult to exit.
Companies that choose a single IT provider for all their processes (HCM, ERP, BI, communication, analytics) are in reality putting their own future in someone else’s hands.
Vendor lock-in refers to a situation where an organization is so strongly tied to one technology manufacturer that changing the system to another becomes practically impossible or involves enormous costs and risks. This can result from getting accustomed to specific standards, data formats, technologies, or licenses.
The cost of such attachment is usually overwhelming:
- Lack of flexibility – migration to another solution becomes difficult and costly, and the tool itself (if its code is closed) very often cannot be adapted to changed market situations.
- Cost unpredictability – IT providers can change the prices of their services. If you tie yourself to one entity, you’ll feel each price increase with even greater force. The problem of cost unpredictability also increases when the license fee is charged in a currency other than the one of your country. With an unfavorable exchange rate, you’ll pay more even if the price list hasn’t changed.
- Political and legal risk – depending on the country, regulations in force there may affect the availability and functionality of certain services. Recently in the United States, for example, the availability of Chinese TikTok was restricted with no warning.
The End of the Public Cloud and SaaS Trend?
I get the impression that the trend of migrating to the public cloud and SaaS models, which dominated large companies and organizations for years, is beginning to slow down.
It had its justification, of course. Scalability, convenience, and no need to manage infrastructure tempted corporate decision-makers. Times have changed, however, and today data and infrastructure security has become more valuable than user convenience.
Investors increasingly notice that cloud and SaaS are not risk-free:
- Their costs increase over time – in the longer term, subscription-based SaaS models can be more expensive than owning infrastructure.
- Lack of full control over data – the provider can change the conditions of data storage and access.
- Dependence on a single decision-making center – an open question about what will happen if the provider stops providing the service or changes the rules?
An alternative to the described state of affairs may be a combination of different models, such as private cloud, on-premise, and Open Source.
I always recommend to my clients not to rely on a single provider, but to build a flexible technological structure that can be adapted to individual needs, legal regulations, and market changes.
In practice, this means:
- Diversification of IT providers – using multiple technology providers for different purposes, especially since such systems can be integrated anyway.
- Avoiding closed ecosystems – openness to Open Source solutions, Low-Code/No-Code, and private cloud.
- Readiness for changes – the ability to quickly adapt to new conditions without high migration costs.
A New/Old Way to Full Business Flexibility
Since dependence on a single provider creates danger, and there’s no escape from digitizing business processes, there can only be one answer to these difficult times: diversity.
My proposed recipe for maintaining full business flexibility in unpredictable times is:
- Choosing Open Source or Low-Code/No-Code solutions – no dependence on a closed ecosystem and greater control over technology.
- Local implementation service provider – the ability to adapt the system to specific needs and minimize political risk.
- Diversification of suppliers – using solutions from different regions of the world (USA, European Union countries, China, etc.).
Summary
As Nassim Taleb noted in his book “Antifragility,” organizations that can adapt to new conditions are more resistant to unpredictable events. In the IT context, this means avoiding excessive dependence on a single provider and investing in technologies that can be freely modified.
At the same time, flexibility is not just resistance to chaos, but something more. It allows us to respond agilely and take advantage of emerging opportunities, or positive “black swans.” For example, quickly entering a niche that emerged after an unexpected change in regulations or the market’s reaction to a turbulent economic situation.
Good examples of such solutions are Open Source and Low-Code/No-Code systems. Currently, I would also prefer hybrid or private rather than public IT infrastructure models.
Remember: the difference between costly dependence and long-term resilience to market changes lies in the flexibility of the software you choose. Diversification of suppliers and technologies today is not just a matter of strategy, but rather a necessity to avoid the vendor lock-in trap and gain real influence over the future of your business.
Martin Rozanski
MintHCM founder