During a recent procurement project one of the vendors made a provocative statement in a presentation suggesting that it would be risky for our client to move to a Tier 2 or 3 vendor. Needless to say the comment was self-interested but begged the question â€˜how would you classify telecommunicationâ€™s vendors, especially in New Zealand?â€™ And â€˜why wouldnâ€™t you choose to contract to a Tier 2 & 3 vendor?â€™
Based on our research to date any classification system so far defined is an inexact science and subjective. In markets outside of New Zealand, organisations that tend to meet tier 1 status are identified as AT&T, Verizon and one or two others i.e. they offer a global presence versus regional or local presence: tier 1 vendors are more likely to offer support anywhere in the world, while tier 2 vendors are usually present in a limited number of countries or regions and tier 3 vendors are generally local and operate within one country. On that basis Iâ€™ll let you argue who is a Tier 1 vendor in New Zealand. But when considering your choice, bear in mind the ability to support does not necessarily mean directly as some vendors use an international alliance partner to deal with their customerâ€™s offshore offices. And should Tier 1 vendor supply all services (not just mobile) internationally?
So is this tier system a useful measure to adopt?
Certainly. Tiers, real or perceived, provide a useful measure of a vendorâ€™s scale and the capabilities of its services. But theyâ€™re only a starting point in the selection process. By looking closely at potential vendor partners may reveal benefits you didnâ€™t know were there, no matter what tier the vendor is in.
If financial stabilityis important: tier 1 vendors have deep pockets, well-known brand names, and public images, which can be important for satisfying shareholders, or ensuring your customers and vendors understand that you are serious about your own business.
Why would you use Tier 2 & 3 vendors? Some of our clients (including larger government departments) are using so called Tier 2 & 3 vendors for some or all of their telecommunication services. Their reasoning for this selection generally centred on the delivery of flexibility, service and price â€“ risk was not a factor!
Flexibility was a key decision element in most cases with customers citing that the smaller vendor was able to provide customised products or services that the larger vendors could not; therefore there really was no alternative. However it was also clear that nearly all customers we spoke to made the decision to move to the smaller vendor due to poor account management and feeling like they had been cut adrift post contract signing. Lastly from our own experience we have reviewed very competitive pricing from Tier 2 & 3 vendors in procurement projects that have resulted in the larger vendors responding accordingly driving overall market pricing to new lower levels.