Vendor exit strategy: how to think about software dependencies
Why companies need an exit plan for vendor dependencies, and how to start building one before it becomes urgent.
In the spring of 2022 many companies discovered that dependence on foreign software suppliers was not an abstract risk but a concrete operational problem. Some services went dark. Some stopped selling and supporting products. Some simply stopped working because of payment restrictions.
This is not the first time the vendor dependency question has become acute. It arises when suppliers exit a market, when companies are acquired, when prices spike. But spring 2022 made it urgent for a large number of companies simultaneously.
I want to talk not about what to do right now in a crisis, but about how to think about vendor dependency systematically.
What vendor dependency actually is
Vendor dependency is not simply "we use product X". It is the situation where switching suppliers requires significant effort, time, or money. The key dimensions:
- How deeply is the product integrated into your processes and data?
- Do you have your own data in formats compatible with other systems?
- What share of the functionality do you actually use, and are there alternatives for it?
- How critical is the function this vendor performs?
Answers to these questions give you a real dependency map - not a list of products, but an assessment of the cost and feasibility of exit.
Common mistakes in managing dependencies
The first mistake is treating vendor dependency as inevitable. It sometimes is inevitable, but more often it is the result of architectural decisions made without explicit awareness of this risk.
The second mistake is reacting only in a crisis. By that point the exit cost is at its maximum and the choices are at their minimum. Reducing dependency requires time and resources that are not available in a crisis.
The third mistake is thinking only about replacement. Sometimes the right answer is not to replace a system but to reduce integration depth: export data to neutral formats, reduce the number of places where the vendor's data format penetrates business logic.
How to build an exit plan
A vendor exit strategy is not a plan for immediate replacement. It is an understanding of what would need to happen if migration became necessary, and a gradual reduction in the cost of that scenario.
A few concrete steps:
- Map your critical dependencies. Not a list of all software, but a list of systems the business cannot operate without.
- For each critical dependency, assess: are there alternatives, what would migration require, how long would it take.
- Identify where you can reduce integration depth without replacing the system - for example, storing data in open formats in parallel.
- Prioritise by the combination of criticality and feasibility of switching.
- Allocate resources for gradual work - this does not need to happen in one project.
What this does not mean
A vendor exit strategy does not mean rejecting useful tools over hypothetical risks. A good SaaS system may be exactly the right choice, as long as you understand the dependency and consciously accept that risk.
The difference between a conscious dependency and a blind one is that with a conscious dependency you know what to do if something goes wrong. That is the exit strategy: not a plan for immediate flight, but a plan of action in case it becomes necessary.