Vendors

INSIGHTS

How Do You Take Your Lock-In?

If you think long enough about acquiring a CRM system, you will come to vendor lock-in, the idea that you won’t be able to easily change vendors down the road for whatever reason. It’s almost an existential problem, like rent and alimony put together. Every approach to CRM has its benefits and deficits, and ultimately it comes down to what you are comfortable with.

I think of this market as having two major vendor groupings, though it is hard to describe them. Under normal circumstances, every market has one or more high-volume/low-cost producers and a smaller number of producers that charge more and deliver more service.

In CRM it seems everyone is a low-cost producer these days, and everyone has a services strategy, so the old categories don’t mean much. However, if everyone is doing everything, it becomes hard for customers to differentiate. Sometimes you might choose a high-volume provider simply because the product is good enough and it is not a critical factor, but it’s hard to do with CRM.

With CRM, though, the quality of the products has converged in most cases, and so customers look for secondary characteristics. Vendor lock-in or flexibility or easy migration — call it what you want — becomes a big deal. But because you can become locked in regardless of approach, the issue also becomes highly subjective.

One Throat to Choke

So how do you like being locked in? By a vendor that provides a vertically integrated solution or by one that encourages best of breed? We don’t think of best of breed vendors as providing a form of lock-in, but if you think about it, once you are committed to an IT stack, you’re locked in. Moreover, the more components you have to integrate, the more locked in you are simply because changing one component can be like replacing a card in a house of them.

Less than two weeks ago, NetSuite had a partners meeting, and I attended. One evening NetSuite hosted an awards ceremony in which the company gave out its first annual “Hairball” awards in recognition of customers who replaced large numbers of applications with the NetSuite suite. The record winner replaced 20 applications with NetSuite. Think of that: 20 applications that had to be synchronized to work together. That’s lock-in by exercising your freedom to buy best of breed.

Of course best of breed has a place, and there are many successful organizations operating with that model. What many people worry about is becoming so dependent on a vendor that they can’t form any real objection when the vendor raises maintenance fees to 20 percent or more. These companies have settled on one vendor for the majority of their systems, not necessarily because all of the systems led their markets but because they wanted to streamline the ownership process. The result is a highly integrated system with “one throat to choke,” but somehow that gets forgotten when the maintenance bills come in.

Way Down the Road

I’m not sure if there’s a good answer to this. I guess everyone thinks that vendor lock-in won’t happen to them, but eventually it does. Maybe the thing to look for is not low initial cost or many of the usual things we think of when buying systems. Instead, perhaps it would be better if we thought long-term about what to do when the system is fully depreciated and we have the option of buying something else.

Typically, not enough people do this because there are always competing demands for funding and a system designed to last five years ends up lasting longer by being patched and customized beyond recognition. It then becomes increasingly difficult to switch without major surgery. For some reason, when we look at vendor lock-in as a future we get concerned, yet in retrospect we almost act as if it couldn’t be helped.

SaaS and cloud computing were supposed to change this, and they have to a great degree, but the discussion often still comes back to vendor lock-in. Vendors don’t help much because according to them, vendor lock-in is the other guy’s shortcoming.

Maybe we have it backwards. Perhaps understanding the possibility of lock-in in advance might make us better consumers, forcing us to ask up front about the issues so that we don’t have to complain later.


Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at [email protected].

1 Comment

  • What about those who use open source software for their CRM? Then you can go on and modify things, no matter what happens to the supplier. When a public sector organisation wanted to use CRM to keep track of thousands of contacts in a public consultation (separately tracking the pupils, teachers and administrators in 9000 schools), none of the commercial products met their needs. So a programmer customised SugarCRM to meet their needs.

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