"Once you have tied yourself thoroughly to one service, it is extremely difficult to get out. We think we live in a free world and do free business, but in reality that does not hold," says Martin Rungi, sales manager at Greenergy Data Centers.
Captive relationships reduce your options. Photo: Tõnu Tunnel.
The fact is that Estonia has plenty of companies whose digital development has stalled. Not because it has reached the highest level, but because they are locked into a partner who does not allow them to develop outside its ecosystem.
All too often it is precisely connectivity and cloud services that become the big bottleneck in the growth of new businesses. To secure control and commercial independence, you would need to use several different providers, or at least keep the door open to do so. A lack of freedom to decide becomes a serious headache sooner or later.
Martin Rungi, sales manager of the Baltics' largest data center, believes that sober consideration and a plan for how to get out of the situation, or, as a start-up, how to avoid the pitfalls, help more than complaining. First, though, we have to go back to the very beginning.
How do captive relationships arise?
There are several reasons captive relationships arise:
- Preferring the easiest way out. Someone offers a solution that suits you right now, and in a narrow context it is a perfectly logical choice. The future-proofness of the decision is not tested.
- Preferring convenience. Someone offers what you need plus convenience services on top. Life gets easier in the short term, but you also hand a larger slice of your business over to someone else's control.
- Preferring a low price. Later, when taking the next steps, it turns out the so-called platform was indeed cheap, but every subsequent move is considerably more expensive. Good examples are the large cloud providers who generously hand out free credit to new sign-ups.
- Getting stuck in the initial choice. Because one partner was preferred at some point, the relationship is continued in other projects too, without weighing alternatives.
- Ignorance of alternatives. The market overview is out of date. People simply do not know about alternative solutions.
As a result of captive relationships, a company has lost part of its sovereignty and control over its business (no matter whether we are talking about connectivity or the cloud). Captive relationships affect cost-effectiveness, future development, the quality of the service received, the ability to choose partners and so on.
If, for example, you have moved your office to a place served by only one provider's cable, you accept that provider's terms. Seemingly there is nothing left but to pay, because you still need connectivity.
How to take your business back under your own control?
It always pays to keep alternatives in your back pocket. "We are the foundation for all of that," says Rungi. Today the bulk of business has become digital in one way or another. "If you have an online shop, everything, where the site is hosted, how you handle orders and payments, runs on machines that are ultimately in some data center," explains the sales manager of the GDC data center in Hüüru on the edge of Tallinn. That data center, however, was built with neutrality and freedom of choice in mind.
"For every cloud or connectivity service there is an alternative provider. With us you cannot paint yourself into a corner," he says. In GDC's case carrier neutrality means that different operators offer their service in the data center and the customer chooses the one that suits them best. The same applies to cloud services.
Often, however, data centers are not neutral, or the freedom of choice is only apparent. That is, they are tied to a specific operator or provider. "But once you have tied yourself to one partner and expanded only within that ecosystem, it can be extremely hard to get out later," he says.
Why is it important for a data center to be neutral?
When a data center is neutral through and through, towards both cloud and connectivity services, it gives businesses back their sovereignty. That means they can decide for themselves who to do business with and what kind, who supplies their equipment and connectivity, who supplies software solutions and so on. "You get the whole chain under your control," Rungi explains.
Rungi recommends starting from the most logical end: from the beginning of any serious partnership, keep an "exit plan" in reserve for how to change partner if needed. That should be in place whenever any business-critical service is procured. With such a plan you can always adapt to changing circumstances. If there is none, you first have to get past the emotion that nothing can be done anyway. Something always can. In more complicated cases, though, you have to start with small steps: set up a new line of business or a backup in an alternative location, for example, which secures freedom of choice. Over time other parts of the business can be relocated too, or growth can happen in the alternative location.
"In that case you certainly have to allow for the possibility that the old partner makes life difficult, because an arrangement that benefits them is starting to crumble," Rungi advises keeping your resolve.
To illustrate all this, imagine you have built your office or production facility in a place reached by only one provider's cable. Finding an alternative and the construction work obviously take time, but in the longer term it pays off. Once a second cable has been brought into the building, you can ask for competing offers or use both for higher reliability.
"If until now you have kept all your eggs in one basket, you can still lift them out one at a time," Rungi explains.
It all starts with mapping what can be done differently or rearranged. The alternative you find may not only suit you but also be technically far more modern, and more cost-effective at that.
Talk to people
The next point sounds so simple that it is almost odd to recommend it, but there is truth in it. If you dig around a little online or talk to your network, you will certainly find someone who has had a similar problem or who can relate and offer solutions from their own experience. You are probably not the first to have painted yourself into a corner. Listen to others' experiences and learn from them. It is a matter of making the effort.
What could a start-up learn from "other people's mistakes"?
For younger companies the most common example is the cloud (we have written earlier on the blog about the pros and cons of cloud services and data centers). Because using cloud services is often a sensible choice for a start-up, that is where they start. If all development is then done with only one provider's ecosystem in mind, the options can end up rather narrow. And that is harder to sort out after the fact.
In summary, remember that when choosing any business-critical partner you should weigh the alternatives and think about the future. Like a secret agent, you need an exit plan from every room in case things heat up. That is partly why the neutral data center of Greenergy Data Centers was born: to ease the constraints of captive relationships and give companies back their control and freedom.