In The Five Competitive Forces That Shape Industry Competition, Porter identifies customer switching costs as one of the barriers to entry into an industry. The specific example that resonated with my work situation was about ERP software:

Enterprise resource planning (ERP) software is an example of a product with very high switching costs. Once a company has installed SAPs ERP system, for example, the costs of moving to a new vendor are astronomical because of embedded data, the fact that internal processes have been adapted to SAP, major retraining needs, and the mission-critical nature of the applications."

As a small business, we do not currently have an ERP system (we have separate programs for separate functions) and the system used by our headquarters is still not all-inclusive. Nevertheless, it has been my experience that every significant software or tool purchased in a small business makes a momentous impact on how business is run for years or even decades. Therefore, even if a vendor would be a perfect fit for our needs, it is difficult to justify the cost and time required to switch vendors and upgrade our process. We see a similar issue with our own products when discussing filtration solutions with smaller shops. They would often like to improve their production site with correct equipment, but cant get the financial approval or have the manpower available to do so.

Thus, it seems that companies whose primary customers are small businesses most likely have a first mover advantage and benefit from long customer retention because of barriers to entry and a low buyer bargaining power. Arguably, this primarily applies to products or services of higher values.

Have you experienced a similar situation and, if so, do you have any suggestions on innovative ways companies can overcome switching cost barriers to entry? Do you think improving any one of the other five forces might help?

need good suggestion.