Opinion by Thought Leaders
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Avoiding Vendor Cloud Lock-In

 

Cloud lock-in’ is a familiar phrase; but what does it mean? We explore the various outcomes which can lead you to become ‘locked-in’, and how you can avoid it.


ERP vendors are forging ahead to a Cloud-based future, none more so than SAP and Oracle who are both using every tactic at their disposal to push their customers onto their Cloud products.

However, many organizations have been reluctant to move their entire ERP suite onto the Cloud, over concerns like cost, suitability, and complexities in migration. But one factor that many don’t consider is ‘Cloud lock-in’.

In this blog post, we’ll analyze what Cloud lock-in actually is, what can cause it, its effects, and ways of overcoming it.


What is Cloud lock-in?

First, be aware of the difference between Cloud as a platform for your ERP system (e.g. hosting a traditionally on-premise product on an AWS Cloud), and using a vendor’s Cloud-based SaaS product like S/4HANA:

  1. With Cloud as a platform, you are merely using someone else’s hardware to run your software in the Cloud – this potentially provides additional flexibility and cost-effectiveness.
  2. Cloud based SaaS products allow you to use a vendor’s software that is hosted within the vendor’s own Cloud.

It is the second version that we will be talking about in this blog, as it is controlled by the vendor and where you as a customer can experience Cloud lock-in.

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CIO value proposition: Negotiating key IT vendor contracts

 

While it's important for CIOs to provide a strategic advantage and to work on creating a partnership mentality, one area that needs to be smartly managed are those cumbersome and expensive vendor contracts.

We've talked about how CIOs can bring value to the organization through flexibility, business capability, strategic advantage and the development of a partnership mentality. Companies nowadays are measuring the value of their IT departments and their services, comparing their company's technology and capability to others' technology acumen and agility. Are they creating benchmarks as a result of those outcomes? While it's important for CIOs to provide a strategic advantage and to work on creating a partnership mentality, one area that needs to be smartly managed are those cumbersome and expensive vendor contracts.

Before you negotiate a key vendor contract, you need to have developed the right vendor management strategy; failure to do so can result in a dysfunctional relationship that can negatively impact your business, according to The Balance. While you need to be prepared to play hardball, you must also value your vendor and build a strategic partnership that is mutually beneficial for both parties. Although you want to be the hero and negotiate a rate that boosts the company's bottom line, you don't want to go too far and turn your vendor off. And you REALLY don't want to cut corners on service, which can hurt your business and cause an eventual breakdown of the relationship.

So, how can you negotiate key IT vendor agreements so as to benefit your company as well as preserve the vendor relationship?

Recognizing the value

In terms of IT buyers, strategic partners are vendors that have not only provided effective delivery of systems and services, they have gone one step further to become transparent, responsive and trusted collaborators for generating value for the enterprise -- consistently. Vendors who fail to achieve this competitive advantage will only have price to fall back on, bringing them too far down the competitive ladder. The "mutual win" can be put at risk if the most strategic vendor relationships are not pursued strongly.

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