LOCK-IN

Over time, companies invest a great deal of effort and money in the computer systems they rely on to manage their many business functions. Not only do the systems themselves cost money (in terms of hardware, software, and other network infrastructure), they also require a substantial investment of human capital. Employees, customers, and business partners spend many hours learning to use such systems. Additionally, there are costs associated with maintaining these systems from day to day and performing various infrastructure and system upgrades. Considering all this, it's easy to see why giving up one system for something newer or better is difficult at best, and often represents significant cost and frustration. The term lock-in is used to describe this very real business challenge, which many companies face as they attempt to adapt different systems, some of which are very old (sometimes referred to as legacy systems), to the cutting-edge world of e-commerce.

Lock-in can have very negative effects. Not only does this phenomenon make it difficult for companies to switch over to newer systems, it also can stifle competition and hinder progress. When large companies, entire industries, or even the public at large become dependent on technologies or platforms from a mere handful of companies, it can be extremely difficult for new competitors and more innovative products and services to enter the marketplace. This is sometimes referred to as the network effect, whereby a company's sheer size and dominance keeps the competition at bay, and keeps the majority hooked on one system for the sake of compatibility.

Software manufacturer Microsoft Corp. was one company that received a great deal of negative press in the late 1990s and early 2000s for just this reason, culminating in a lawsuit raised by U.S. anti-trust regulators. This stemmed from the monolithic firm's practice of packaging its Web browser with its pervasive Windows operating system, causing rival Netscape to lose market share. Many industry professionals have expressed frustration concerning Microsoft's lock-in practices. In Linux Today, Brian Pfaffenberger argued: "Virtually all of the firm's products contain features designed so that customers cannot enjoy the product's full feature set unless they purchase additional products made by the same company." While such practices increase profits for software vendors, they generally tend to cost companies more money in the long run and increase their dependence on one vendor's technology.

FURTHER READING:

Enos, Lori. "FTC: Antitrust Enforcement Critical to High-Tech Growth." E-Commerce Times, June 16, 2000. Available from www.ecommercetimes.com.

Pfaffenberger, Bryan. "Linux Journal—The Linux Advantage: Locking Out the Lock-in Artists." Linux Today, July 8, 2000. Available from www.linuxtoday.com.

Saliba, Clare. "EU Signs Off on E-Signature Initiative." E-Commerce Times, August 1, 2001. Available from www.ecommercetimes.com.