In IT, a tier 2 vendor is a smaller or less well known provider compared to tier 1 provider. There are attributes such as target market, company size, revenue, profitability and market presence of the provider’s company which distinguishes a tier 2 vendor from a tier 1 vendor.
Following are the benefits of having a tier 2 vendor
- Having a tier 2 player among the larger global providers keeps the big ones on their toes. Having multiple vendors bring in a competition and competition bring out the best from the providers.
- Tier 2 vendors are more flexible than tier 1 vendors. Tier 2 providers tend to be more amenable to their client’s needs while tier 1 providers focus mainly on structure of the contract.
- Tier 2 players have an extreme domain knowledge
- Buyers have more access to executives of Tier 2 providers which makes tier 2 vendors more customer centric than tier 1
- Tier 2 providers tend to spend more time trying to understand customers needs and are willing to go an extra mile to meet those requirements
- The larger global players typically want to charge “for everything they provide.” Tier 2s, on the other hand, are more willing to provide value-added services outside of the contract at no additional cost.
- Tier 1s either charge for their idle full time employees (FTEs) or assign them to another account. Tier 2s on the other hand, either shares the cost of the idle FTEs or assigns them to study the process at hand and come up with improvements thereby reducing the cost and providing more competitive prices.
- Having tier 2 providers along with tier 1 mitigates the risk. It is good to have more than one service provider on ones account in case something goes wrong with one.