Tier 1 isn’t always “better”

25 July 2014

Over the course of my career I have had the pleasure of working for some of the biggest, and not so big, Managed Service Providers and Outsourcers in the market place and one question has troubled me throughout. Why do Clients elect to pay a such a premium for a big brand when they could potentially get better service from a smaller provider?

I know this seems a bit self explanatory. No-one ever got fired for buying [insert generic big brand in here]. But at the end of the day, just because it’s a big brand, doesn’t necessarily make it better, more scalable or even more secure.

Fundamentally Clients are looking for a number of things. Risk reduction for their specific project is probably the biggest thing. And where risk of going out of business is considered, there can be no doubt that the bigger brands have more financial security than a number of the smaller players. In todays MSP market, there are more mergers and acquisitions going on than you can keep track of, and some of the debt structures are eye-watering.

However very few people consider Risk in the round. Realistically, Tier 2/3 providers have flexibility and agility over the Tier 1’s, and if the project has the potential to change shape, this flexibility could provide a lower risk solution over the traditional Tier 1 provider. Poor engagement should also be considered a risk of its own, and a substantial one. “My provider doesn’t understand me” is an awful position to be in, Tier 2/3 providers are more likely to invest in a relationship if you are a large fish in their pond, and combined with the flexibility point from earlier, they can adapt to best suit your needs.

When all the pro’s and con’s are weighed up, a lot of choice comes down to “if it all goes wrong, how much money can I sue the provider for”, and Tier 1’s have deeper pockets. Lets face it. If you think its going to go wrong, you probably shouldn’t be doing the project in the first place. And of course a company is more open to being sued if it charges an enormous premium for its services!

I accept that Tier 1 providers have a number of excellent benefits over smaller providers. One throat to choke, breadth of resource and skill, global coverage, depth of account management, industry knowledge. But very few can combine this with the Tier 2/3 provider benefits, with stronger relationships, flexibility, agility and usually easier processes to accommodate “off piste” things when you most need them. No-one ever got fired for buying [generic Big Brand], but if you’re worried about that, try mitigating the risks with a [specific Smaller Brand who loves you] and save yourself some money in the process..

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