Switching Cost

The total operational, financial, and temporal cost of ending a vendor relationship and transitioning to a replacement. 

Switching costs include not only contractual termination fees but also staff retraining, data migration, integration rebuilding, productivity loss during transition, and the relationship capital invested in the incumbent vendor.

Vendors design their products and contracting structures to maximise switching costs, which is why switching cost assessment must be conducted before contract signature, not at renewal.