One of our partners approached us recently about re-creating a client's site in Joomla. The original site was working fine, but they wanted to make it responsive. The problem was that the marketing agency who originally created the site wanted an arm and leg to make it responsive. On top of this, they were busy for several months and it could be a year before the work was completed. Unfortunately, there wasn't a lot the client could do. They had already paid an arm and leg to have the site developed and the platform that it was developed on was proprietary to the marketing agency. This is a form of vendor lock-in. In this post, we'll discuss why lock-in is terrible for your business and 3 common techniques that I've seen used to create it in web development.
The Virtual Monopoly
First, a definition:
"In economics, vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs. Lock-in costs which create barriers to market entry may result in antitrust action against a monopoly." - Wikipedia
I like this definition quite a bit. A key point I want to highlight is the monopoly aspect. It no longer matters that there are 50,000 other providers who could work on your site, once you're locked in, that becomes 1. The monopoly has no competition and little incentive to provide reasonable prices, good service, or quality work.
The 3 Jailers of Lock-in
- Legal: Legal lock-in is where a development company utilizes a contract that hinders or removes your options to make changes, update, or move the finished work. In web design, I've seen design firms with clauses that give them ownership of the finished design and do not allow other professionals to change or alter it. For development, I've seen the same, but sometimes, there is a legitimate reason. For example, we often retain ownership of code we've written. This is because we want the option to reuse code for various projects, benefiting us and future clients. In this situation, we give our clients lifetime license to reuse and modify the code as they see fit, providing options and preventing lock-in. It would be a major red-flag if we maintained ownership but did not provide this flexibility.
- Control: Another form of lock-in is where control of the site resources is retained and managed by the vendor. This can make it awkward and even impossible for other solution providers to work on your site. A simple example of this is when a development company registers the ownership of a domain name their client intends to use. If the development company owns the domain and simply allows their client to use it, the client has very little option to work with anyone else, especially when their domain is strongly tied to their brand. If the client decides, "We are working with someone else now, so ourcompany.com should now go to our new site," the vendor can reply, "Umm...No... that's not going to work for us. We want to keep ourcompany.com pointing towards our servers. Let us know if you need anything else."
- Application: Finally, we have application lock-in. This is where the vendor's solution is proprietary and under the control of the vendor. For example, if a site has been built on a proprietary CMS, then choosing to work with another vendor may mean having to abandon all previous work done on that CMS. If it's a hosted application, like Squarespace, you can't move the application to someone else's control. Even if it's self-hosted, the source code can be compiled or encrypted, effectively blocking anyone else from working on it. In this type of situation, all you can really get out are images and copy (if you have a legal right to do so!)
Don't Plan on Things Working Out
I think that businesses enter into these types of situations thinking that they're looking for a longterm partner, not minding that they're giving up options in the meantime. Often, the rationale behind this decision is based upon some sort of trust signal like size or reputation. Developing a rapport with a salesperson is not going to guarantee that their firm will deliver results for you, even from an established company. I've seen several large companies with solid reputations do horrible work and bend their clients over the legal barrel when they sought recompense (e.g. Oracle.) Trust signals are great, but as a friend once told me, "A plan is only as good as its options."
The lesson: retain control of what you pay for and keep your options open.