In both private and public industries, uncertainty about possible budget cuts or stagnation are becoming part of the new normal. Recently, Gartner stated an 8% deduction in expenditure across the sector for this year and those to come, while recent surveys claim CIO’s do remain confident on budget levels.
In the upcoming articles, we will investigate ways to cope with the possibility of cuts while also looking forward towards the technologies of this decade. Today, we look at vendor lock-ins and the impact on IT-budgets.
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.
Vendor lock-ins in IT have been around for the best part of half a century. As an example of a semi-monopolistic lock-in, IBM mainframe customers wanting to use hardware, OS, software and services have been in these types of lock-ins ever since the 70’s.Getting out of these types of lock-in would demand a huge effort in time and budget, while most of the working staff grew accustomed or was hired specifically to work in these environments. Meanwhile, new opportunities emerge in the shape of modern vendors, platforms and solutions.
In many organizations, maintenance and licensing have been making out more than half of the IT budgets for a long time now, while investment projects sometimes can be put on hold for years in order to free up the right amount of budget. With a possible global recession on the way and the uncertainty of budgets that go with it, freeing up budget currently going towards maintenance and licensing might be a valuable way to take on the opportunities of the next decade.
For decades, numerous private and public organizations have been in both hard and software vendor lock-ins. Normally, this should not be a cause for concern. If using vendor services continues without any problems occurring, then it makes for a standardized, functional way of working. The downside of this appears with the emergence of new challenges. And this year has not come short of challenges. The global pandemic that hit the world has had a substantial impact on how organizations will be looking at arranging both systems and work forces.
This will have (and already has) two major consequences for organizations that have been stuck in vendor lock-ins for decades. On the one hand, it became clear that many organizations were not ready to take on the challenges of such a crisis. In the United States, nationwide troubles with unemployment claims were caused by IT-systems that have been around for the better part of half a century. Working from home proved difficult, resulting in broadband support making up a large part of the financial aid package for local and state governments.
On the other hand, new opportunities arise from trouble, as the pandemic set the stage for even more data-based decision making. Ina year where most decisions (closing or opening schools, tracking testing data…) were based on data gathering, it becomes clear that enterprise analytics will come to the forefront of business even faster than it was already doing. But in times of cloud computing and data analytics, being in a 30-year old vendor lock-in could prove costly.
After years of numerous entrances and exits, three public cloud leaders have emerged winners. AWS, Microsoft Azure and Google will be providing cloud services to most of the B2B market in the upcoming years. So how about locking in with one of these providers? It will still count as a lock-in, right?
Over the years, cloud computing costs have always had a downward trend. Having three large providers ensures a non-monopolistic industry, pushing down prices because of competitive reasons. On top of this, switching between vendors won’t come with the same difficulties as getting out of older hardware lock-ins. Andwhy not make use of the best of both worlds? Both multi and hybrid cloud solutions are becoming more and more popular for enterprises as they give the benefit of picking and choosing cloud vendor add-ons specifically for your organization while not finding yourself locked in with just one provider.
In the end, looking towards a modern, cloud-based solution, whether it be the public, private or even a hybrid cloud version, will make for a future-proof investment decision. With more and more vendors cutting back on support for the older systems themselves and augmenting licensing prices, the future looks set for those that take matters in their own hands.