NoCode in the Enterprise: Vendor Lock-In Risks

NoCode is a fast-growing technology with huge potential for the enterprise, but there are many factors that the enterprise needs to consider before deciding on a vendor. NoCode Vendor Lock-in is one of the most important considerations.

There are many startups developing innovative NoCode platforms and tools. As with any new technology, NoCode will go through several phases. It is currently in an early phase, where startups are still attracting significant private investment. However, the market is already becoming saturated with startups developing NoCode platforms that are essentially doing the same thing. Some of these platforms will grow and become leaders, others will be acquired; some will change their business models, others will pivot to different specialties. Ultimately, most of them will not survive, as is the nature of any new technology.

This is a challenge for the enterprise planning to invest into NoCode platforms, so it is important to understand NoCode vendor lock-in risks and properly mitigate them.


Business Continuity

Continuity and stability of a NoCode vendor is probably the biggest risk for the enterprise. Enterprise technology investments are long term. The possibility of investing in a platform that may not be around in a few years is a big risk that needs to be mitigated.

Direct access to the technology, in case the vendor ceased its operations, or fails to fulfill its support obligations is critical. There are two ways the enterprise can mitigate this risk. The first is to gain access to the code through a source code escrow agreement. While no enterprise would want to maintain the source code of a proprietary NoCode platform, it could provide needed relief if business critical operations are to be deployed on such a platform. The other way the enterprise can mitigate this risk is to deploy the platform on its own infrastructure. This will allow the enterprise to keep the system operational in case the vendor ceases to exist. While this would add more responsibility on the enterprise IT to maintain the platform, other benefits like better security may outweigh the costs.

Another factor to consider is the financial stability of the NoCode Vendor. The vast majority of NoCode vendors have started and grown with private investment. As the NoCode market gets more saturated, some of these platforms will have a hard time raising further capital unless they capture significant market share or become profitable and need no further investment. Naturally, profitability will get harder with more platforms chasing the same customers, even if the market keeps growing. So, evaluating a NoCode vendor’s financial status along with its investment history can help better understand its reliance on external capital.


Experience in Dealing with Enterprise Customers

Let’s be honest: Dealing with enterprise customers is not easy. This is the case even for mature software vendors, let alone vendors in a relatively new technology vastly populated with startups. It typically takes months and an investment of hundreds of hours of key resources to sign an enterprise client. Even then, the likelihood that the deal will not go through after expending all the time and effort is common. Not many startups have the time and resources to go through with this.

It is important for the enterprise to select a vendor that understands the challenges and the rewards of working with an enterprise client. This only comes with experience. For this reason, selecting NoCode vendors with a history of working with enterprises is important. If possible, contacting any existing enterprise clients of the NoCode platform can help with developing an understanding of their experiences. Vendors working with enterprise clients usually have a list of reference customers you can request.


Software Support

Like in any new and fast-growing technology, NoCode platforms go through various iterations and changes. There are frequent software updates with new features and functionalities. Such updates may not always come with detailed documentation and tutorials.  It is important for enterprise users to receive timely and accurate support from the vendor when developing and maintaining applications on their platform.

The best way to mitigate this risk is to sign a detailed Service Level Agreement (SLA) with the vendor. It should include penalties if the vendor fails to fulfill its obligations in supporting the enterprise users.


Software Bugs and Issues

Like in any maturing technology, NoCode platforms suffer from software bugs and issues. Such issues may prevent enterprise users from developing and maintaining applications on these platforms.

Incorporating priority issue resolutions into SLAs is the best approach to mitigate this risk.


Feature Limitations

The main advantage of NoCode is that it allows users to develop applications without code. This comes with the cost of feature limitations. There are certain types of applications or features that you cannot built with a NoCode platform. Each NoCode platform has a specific set of features and capabilities. You may choose one platform for building a specific application, but subsequently find yourself unable to address a different application’s needs in the future.

Naturally, the best approach is to come up with a list of requirements before starting the selection process. However, these needs and requirements can change over time. Incorporating fee-based feature development into contracts may be one way to mitigate this risk. Selecting a platform with some level of extensibility, either through a proprietary scripting language or a configuration module, may also enable the enterprise to implement those features themselves. Alternatively, selecting a platform with Low-Code capabilities will help, so long as the enterprise has the developer resources familiar with the programming language that is supported by the platform.


Ease of Migration

The ability to migrate data away from the platform with minimum friction is another important factor to consider for NoCode vendor lock-in. It is also important to know if the platform includes data export features or if you need to rely on the vendor to export your data. If you need to rely on the vendor, it is important to address this in the contract. The ability to migrate your data with ease is an important criteria before deciding on a NoCode vendor.


Price Adjustments

Most NoCode platforms start and grow with private investment. Like in any new technology, investors want the company to grow fast and acquire market share. This typically means offering free or highly subsidized pricing. However, as the market matures and those external funds are depleted, the pricing will have to adjust to sustain the business, which may lead to significant price hikes. It is important for the enterprise to ensure long term price stability.

The best way for the enterprise to ensure price stability is to have a long-term contract with the vendor that limits the annual price increases. Many enterprises will want to include clauses that will limit annual fee increases to inflation adjustment plus several percentage point. The final number is a matter of negotiation between the vendor and the enterprise. Securing a long-term contract would also be advantageous for the NoCode vendor in order to ensure annual recurring revenues for a long period of time, provided that they can fulfill their obligations and still turn a profit from the engagement.