Software Company Drops Our Company From Service

We have a contact with a software company that is becoming a hot issue -- it's renewal time.

The contract allows the 3rd party to drop us at will after we've paid our licensing fees for 5 years in a row (we're now over this mark). We also have the ability to drop them at will (after current licensing fees are paid in full).

We are contesting a great deal in our contract as some laws have changed regarding taxes and some other stuff. We are fearing that we are becoming too big of a hassle and that they will make a move to drop us. Since our business is heavily vested in this software product to, essentially run and manage our business, loosing it would be detrimental to us and likely cause the business to collapse. This is due to vendor lock-in, proprietary file formats, etc... and that switching to another platform in a short period of time is unfeasible, causing untold revenue loss in that period of time. This would likely collapse the business.

Of course there are a couple things wrong here, we should not be solely dependent on this 3rd party for our very existence, but this is the situation we are in now.

My question is, what recourse do we have if this scenario were to play out? Do we have any legs to fight on? They essentially would be deciding to close our business on us, and they are aware of this (we suspect anyways). Even if it's allowed contractually, this seems horrible and shouldn't be allowed... it should at least have to go through arbitration or the courts before they could just pull the plug on us. Am I viewing this unfairly?

A similar battle played out between Twitter and an App developer recently, and the App developer won since Twitter had pulled the plug on them and essentially destroyed their business.

We are in California, USA if this matters.

The good news is that economists have studied the problem. The bad news is that the pricing power (and thus negotiating strength) is on the other foot.

This can be considered a case of upstream/downstream causality. You are totally dependent on what's happening upstream whereas if the service provider has multiple clients/sites, they can afford to sacrifice a small tributory. Some practical steps

a) if big enough, negotiate an ancillary contract (or side-contract) which includes transition provisions in case of termination. This essentially modifies/ameliorate the at-will clauses without changing their essence.

b) if small fish, try to find other clients/users of the software and band together in a common cause. If it is a tax/regulatory issue, it must be affecting others and negotiating with a sizable fraction of the customer base gains more attention

c) there may be state provisions on fair trading practices. As I'm not licensed to practice in US I can't comment but a risk management/mitigation review should consider the outcome probabilities. IT contracts are treated as any contract.

Remember that vendor lock-in is not new. Unfortunately unless the service provider is big enough to come under anti-trust provisions, not renewing the contract becomes a civil matter and thus only resolvable through arbitration/judicial processes. Under certain circumstances (eg if you are reliant on them for supply essential services like emergency fire response) there may be a case for a pre-emptive injunction to prevent them from turning off the service. Alas, convenience comes at a cost of dependency.