Overcoming Vendor Lock-In Challenges for Digital Transformation

In today’s fast-moving landscape, payments companies must keep up with the latest technology innovations and meet new consumer demands. Although this can require significant investments of time and money, the right technology partner can help reap great rewards. Yet for many businesses, forming those partnerships is the hardest step in their digital transformation — all because of vendor lock-in.

Vendor lock-in refers to any system that has become dependent on a single provider, making it unnecessarily difficult to migrate to a new service or incorporate new solutions. In cloud computing, this is increasingly common due to the amount of software that is built on top of a single cloud infrastructure; in which case — shifting to a new provider would require a total overhaul, often at great expense. As per a survey by Bain & Company, close to 65% of CIOs plan to use cloud services from multiple vendors to avoid lock-in. In some cases, payments platforms may not discover this dependency until they want to use a new technology service.

Even if the existing structure works well right now, vendor lock-in can create long-term disadvantages. With so many third-party applications now available, companies must have the infrastructure to support new solutions. This means, having a set-up that is compatible with multiple vendors so that different kinds of programs can easily be integrated into the platform as needed. 

When this can’t be done due to restrictions by the cloud provider, payments companies may quickly find that they are less competitive in the market. Protecting against vendor lock-in should therefore be a top priority for any payments platform today.

The Key Challenges of Vendor Lock-In

Vendor lock-in can occur in any system that hasn’t actively strategized away from it. Technology is evolving at such a fast rate, that today’s tech staples may be obsolete tomorrow, so if a company can’t adapt then they risk falling behind. There are a few critical scenarios that payments companies should be aware of so that they can be well prepared:

Quality of service declines: Whether due to limited resources, poor management, or any number of external factors, a cloud provider may provide a worse service over time. In an ideal situation, the customer would be able to leverage the value of their business to correct this issue or receive a discount, but vendor lock-in removes this agency. If the provider knows they can’t migrate to another service, there is less incentive to provide high-quality service long-term.

Prices increase unsustainably: It is common for costs to rise as a company grows and needs more bandwidth from their provider, but this should be at a sustainable rate. If a payments company is experiencing vendor lock-in, this creates an opportunity for the provider to crank up their prices as they know it may still be cheaper than moving to a new provider entirely. This will greatly eat into bottom lines and hinder growth.

The provider shuts down: Any dependency on an external tool puts a company in a vulnerable position, as they risk losing important services or even total functionality should that tool be terminated. Whether the business pivots to a new offering or closes its doors, payments companies that are locked into this provider may find that their entire platform implodes without that underlying infrastructure — unless they can migrate to an alternative service. 

Overcoming Vendor Lock-In for Cloud Success

Despite these dangers, cloud technology is still one of the smartest investments that a payments company can make right now. With the right provider, the cloud can enable data sharing and storage at more efficient, cost-effective rates than ever before. It can eliminate the need for on-premise servers and make the deployment of new applications easy and accessible. To seek those rewards while avoiding vendor lock-in, it’s critical to make strategic choices throughout the cloud journey.

First, when assessing a new cloud partner, payments companies should be on the lookout for any potential dependencies. Do they only support a particular version of a program or require the use of in-house solutions? While it is impossible to safeguard against all future restrictions, a provider that supports a range of different applications will be a more strategic choice than one that already imposes strict limits.

Within existing partnerships, it is critical to keep backups of all data stored in the cloud, should the provider terminate service. Not only will this ensure that data is protected, but this will also make migration to a new provider more efficient by having everything ready to go. This data and its corresponding apps should also be portable so that payments platforms can ensure their material can be moved if necessary. If something is dependent on that particular system, it may be easier to begin by migrating that single application — rather than the entire infrastructure.

Some companies may decide to deploy a hybrid or multi-cloud solution, where multiple infrastructures are used to support operations. This allows the platform to support a greater variety of tools and solutions, while also removing dependency — if one provider is no longer the right fit, it won’t undermine every area of the business and resolutions can target just one issue. This approach can present its own challenges, as the structures all need to successfully integrate with each other, but it does eliminate the issue of vendor lock-in.

Building a Successful Cloud Future

Cloud infrastructure can help companies set themselves up for success, by creating an adaptive framework that can grow alongside the company. In order to maximize the value of their cloud network, payments companies must be aware of any restrictions on that growth — particularly in regard to vendor lock-in. Protecting the right to utilize whichever third-party tools and applications work best, will be a substantial investment in a businesses’ future. This will further ensure that payments companies can remain a step ahead of their competition.