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Switching costs: why TurboTax users and Rockwell's plants rarely leave

The fourth of Hamilton Helmer's 7 Powers, the one most industrial companies actually have, and why it pays only on customers you already serve.

By Dan Lee · November 2026

Siemens or Schneider can build a controller as good as Rockwell Automation's. What they can't do is move the years of control code, technician training and spare parts a plant has built around its Allen-Bradley controllers. Replacing the box means rewriting and re-testing the logic on a running line. Most plants pay Rockwell's price instead.

TurboTax users face a smaller version of the same thing. Last year's return is already there. Leaving means retyping it somewhere else.

That is switching costs, the fourth of Hamilton Helmer's 7 Powers, and the one most industrial companies really have.

What the Power is

Helmer defines switching costs as the value a customer expects to lose by moving to another supplier for its next purchase. He sorts them into three kinds:

• Financial: new equipment, tooling or integration.
• Procedural: retraining, re-validation and the risk of disruption.
• Relational: the working relationships between your people and theirs.

The benefit is that you can charge existing customers more than an equivalent competitor could. The limit is in the definition: it pays only on follow-on sales to customers you already have. It does nothing for a new customer, and once a market matures, competitors bid the lifetime value of a new customer away up front.

The consumer case: Intuit's TurboTax

TurboTax carries last year's return forward for anyone who signs in again (TurboTax support). Leaving means uploading the old return somewhere else or typing it in again, and taking the risk of a mistake on your taxes. The barrier is procedural and it is real: when H&R Block launched a tool in 2024 to import TurboTax returns, its own executive said consumers find "switching is daunting" (H&R Block).

The benefit shows as price. In fiscal 2026 TurboTax revenue rose 7% to $5.3 billion while the number of U.S. returns it filed fell 2% to 39.0 million (Intuit results). More revenue from fewer customers is what switching costs look like. Intuit reports a 73% operating margin for its consumer segment, by its own segment measure. Free alternatives haven't broken it: the IRS's own free filing service drew about 751,000 registrations in 2025 against more than 32 million eligible taxpayers (TIGTA), and was suspended for 2026.

It also shows where switching costs stop. After its August 2026 results, Intuit's management reportedly said price had become the top reason customers leave TurboTax, and guided TurboTax growth to just 2% to 3% (Benzinga summary). Switching costs let you charge more. They don't let you charge anything.

The B2B case: Rockwell Automation

Rockwell's 10-K calls its control architecture, "with Logix at its core," an important differentiator, and lists its installed base as a competitive factor. Its Software & Control segment, where the Logix controllers and their programming software sit, shows the benefit. In fiscal 2025 it earned a 29.7% margin, against 18.0% and 14.5% for Rockwell's other two segments. It produced about 42% of segment profit on about 29% of sales (10-K). In the first nine months of fiscal 2026 the margin was 33.7% (10-Q). The gap isn't new: the predecessor segment earned 28% to 29% in fiscal 2018 to 2020.

The cash signature of switching costs is price taken in a bad year. In fiscal 2024, Rockwell's volume fell about 12 points, and price still added about 2 points to sales (fiscal 2024 10-K).

Rockwell also owns the upgrade path. When it retires a controller, the migration route leads to its next one. The PLC-5 was discontinued in 2017, and its programming software stopped being sold at the end of 2025, with the recommended path into Logix (distributor notice). So the moment a customer is forced to change doesn't become an open bid. When Nippon Gases modernized its European plants in 2025, it replaced old Rockwell controllers with new Rockwell controllers, to standardize on a single platform (Hydrocarbon Engineering).

Where it breaks

Switching costs protect margin, not volume. In fiscal 2024, Software & Control sales fell 24% when customers cut capital spending. They stayed, but they bought less. The lock-in is strongest in North America, where the Allen-Bradley base and distributors are densest. In Europe, Siemens holds the same advantage over Rockwell. A new plant is an open bid, where every vendor competes. And large buyers are organizing against lock-in: ExxonMobil is running an open-standard control system on low-cost industrial computers (Control Global), and Siemens has released a controller that runs as software (Drives & Controls). Adoption is early, but the direction is clear.

What it looks like in your business

In a consumer business, switching costs are your photos in one cloud, your playlists, your loyalty points, a bank account with every bill and paycheck attached. They are often built from data and habit, and they are why consumer companies work so hard to get you to store things with them.

In a B2B or industrial business, they are requalification, validation runs, tooling, code, training, and engineering built into the customer's design. A component designed into a customer's product, a controls platform, software that holds the customer's data, or consumables tied to installed equipment can all carry real switching costs. A build-to-print job rebid every two years usually carries none.

A useful test from Helmer: high retention with high satisfaction may just be good service, which a competitor can copy. High retention despite complaints is the sign of real switching costs.

Questions to ask

• What would a customer have to redo, retrain or re-validate to replace us?
• Did we take price last year, even if volume was down? If we couldn't, how real are our switching costs?
• What share of revenue is follow-on business from existing customers, and is our new-business pricing lower than our legacy pricing?
• When our product is retired, do customers migrate to our next one or put it out to bid?

What to do on Monday

Split last year's revenue into follow-on business from existing customers and new wins. Compare the pricing and the win rate on each. Then list what your top ten customers would have to redo to leave you. That list is your barrier, and it's where to invest: tools, training and design-in work that make staying easier than leaving.

TurboTax's and Rockwell's full cases are in our free download, 7 Powers in practice. Previous: counter-positioning. Next: branding.

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