Vendor lock-in

Sponsorship the way you would do it

In economics, vendor lock-in or proprietary lock-in is a situation in which a customer is dependent on a vendor for products and services and cannot move to another vendor without substantial costs, real or perceived.

Lock-in favors the company at the expense of the consumer. If it results in an effective monopoly, it may result in antitrust actions.

It is often used in the computer industry to describe the effects of a lack of compatibility between different systems. Different companies, or a single company, may create different versions of the same system architecture that cannot interoperate. Manufacturers may design their products so that replacement parts or add-on enhancements must be purchased from the same manufacturer, rather than from a third party (connector conspiracy). The purpose is to make it difficult for users to switch to competing systems. Examples include the various EBCDIC character sets by IBM, the several slightly different implementations of various open standards, the many variations of Unix and Microsoft Office's file formats.

Lock-in may be damaging to the company or industry in question. In the UNIX wars, various Unix vendors battled so hard to lock their customers into their version of Unix that the entire Unix market was seriously affected.

Microsoft software carries a high level of vendor lock-in, based on its extensive set of proprietary APIs.

The European Commission, in its report on Microsoft's business practices, quotes Microsoft general manager for C++ development Aaron Contorer as stating in an internal Microsoft report for senior management:

"The Windows API is so broad, so deep, and so functional that most ISVs would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system instead..."

"It is this switching cost that has given the customers the patience to stick with Windows through all our mistakes, our buggy drivers, our high TCO [total cost of ownership], our lack of a sexy vision at times, and many other difficulties [...] Customers constantly evaluate other desktop platforms, [but] it would be so much work to move over that they hope we just improve Windows rather than force them to move. In short, without this exclusive franchise called the Windows API, we would have been dead a long time ago."

Open standardization processes are meant to provide a way to reduce the risk of vendor lock-in when implementing new technologies. One argument for open source software is that it greatly reduces vendor lock-in.

One way to create artificial lock-in for items without it is to create loyalty schemes. For example, frequent flyer miles that can only be used with one airline create a perceived cost of switching airlines.