Supplier Classification Model

DEFINITION

The Training Supplier Classification Model classifies vendors of training products and services based on the breadth and depth of their capabilities and business attributes. The model is designed to assist buyers of training products and services with sourcing the right supplier based on their needs. The model classifies companies into four types.

OVERVIEW

This model was developed by TrainingIndustry.com to guide buyers of training products and services in selecting vendors based on their capabilities and business attributes. The model also helps buyers ensure that the supplier’s capabilities align with their particular business needs. The classification of suppliers is based on two factors: scope and viability.

Scope

Scope addresses the breadth and depth of a supplier’s process capabilities. Scope utilizes The Training Process Framework as a tool to define the process breadth and depth around the four functional areas of a training organization: administration, content, delivery and technology. A supplier may have expertise in several areas; the number of processes in which they have expertise will help define their classification. As a strategy, training suppliers can focus their capabilities around a variety of training processes. Service companies are generally more process-oriented, while product and technology companies tend to be less process-oriented.

Viability

Viability addresses a supplier’s geographic reach, financial stability and cultural and vertical industry experience. Geographic reach refers to the number of geographic locations in which a supplier has dedicated resources. If a supplier has a great reach, they have resources in multiple countries and continents. Viability also looks at a supplier’s financial strength. If a supplier has access to substantial capital, they can typically engage in larger financial contracts. In addition, if a supplier has experience in several industries, they will likely be more culturally compatible with a range of organizations.

CLASSIFICATION SYSTEM

Classification has no reference to a supplier’s level of revenues. Type 1 suppliers don’t necessarily have more revenues than Type 2 or 3 suppliers – they just choose to have a broader portfolio of services. In the global training marketplace, some of the companies with the highest revenue are Type 3 suppliers. Type 4 suppliers generally have the lowest level of revenues.

The four Types of Training Suppliers are defined below.

Type 1: Comprehensive Service Providers (CSP)

Type 1 companies, or Comprehensive Service Providers (CSP), typically possess the broadest range of capabilities and can therefore perform virtually all of the processes defined in the Training Process Framework. Sometimes considered generalists, they usually do not specialize in a particular process area, but rather focus on integrating processes for large scale service engagements. In addition, these companies have the highest level of financial autonomy, and have resources in multiple continents and countries. Type 1 companies represent less than 1% of the global market of training suppliers, and are often synonymous with Training BPO companies.

Type 2: Selective Service Providers (SSP)

Type 2 companies, or Selective Service Providers (SSP), are similar to Type 1 companies in that they have the ability to perform many, if not all, of the processes defined in the Training Process Framework. SSPs are limited by geographic reach, financial size or industry experience. SSPs often support more clients than Comprehensive Service Providers, but the financial size of their engagements are often smaller. Selective Service Providers represent less than 2% of the training suppliers in the global market.

Type 3: Niche Product and Service Providers (NPS)

Niche Product and Service companies (NPS), or Type 3 suppliers, offer specific capabilities or products for targeted market segments. These companies are often referred to as content, course, or technology companies and define themselves based on their product portfolio. Some of these companies are the largest companies in their respective industries, based on revenues. Type 3 companies often have a broad geographic reach, primarily because products can be sourced easily around the globe. Some NPSs focus on industry verticals; meaning the content they provide is targeted to one industry segment. Other NPSs, like those that are technology-oriented, may limit themselves to a particular service area in a broad range of industries. For example, a Learning Management System (LMS) company may choose not to do custom content development. Another example would be if an IT Training company chooses not to do leadership training courses. Type 3 companies represent approximately 20% of suppliers in the global market.

Type 4: Independent Contractors and Consultants (ICC)

Independent Contractors and Consultants (ICC) are the most common suppliers in the industry, representing more than 75% of those in the global training market. ICCs, or Type 4 companies, are typically specialized around a process capability, such as instructional design or delivery. They are generally small businesses operating independently of other training companies, and are sourced on a project, hourly or transactional basis. They typically do not have defined products or intellectual property.

USES

This classification model should be used by organizations that have already assessed and identified their sourcing needs, and are ready to evaluate prospective suppliers. Buyers should be aware of the type of sourcing engagement they are undertaking, and should use the model to select a supplier that will best manage their particular engagement. If a buyer needs a company to manage several processes across geographic regions, they should likely consult either a Type 1 or Type 2 supplier. Once buyers consider which type of supplier would best match their engagement, they should refer to the Competitive Differentiators Model, which will ensure that the process capabilities, business attributes, and general criteria of suppliers will align with their overall sourcing needs.

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