ITIL Service Provider Types

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In previous chapters and throughout the entire ITIL training, we often heard a term called Service Provider. Do you wonder that what is a service provider and how many types of service providers are defined by ITIL?
In next few minutes, we would discuss all of the ITIL Service Provider Types, such as Internal Service Provider, External Service Provider, and Shared Service Unit.

ITIL Service Provider - Definition:

As defined by ITIL, an organization supplying Services to one or more Internal or External Customers is called as Service Provider.

In ITIL V3, Service Provider is often referred to and mean as IT Service Provider.

[Check Out: How the Service Provides Impact the Supplier Management?]

Types of Service Providers in ITIL:

Broadly specified by ITIL, there are three types of service providers.

Internal Service Provider,
External Service Provider,
Shared Service Unit

Internal Service Provider (ISP):

Internal Service Providers (ISPs) are such types of service providers who are dedicated and sometimes integrated within an individual business unit (BU). It is also a possibility that the business units themselves could also be a part of a larger enterprise or parent organization.

ISPs have the benefit of close operation with their owner - customers, avoiding certain costs and risks factors associated with conducting business with external parties.

Since Internal Service Providers (ISPs) are dedicated to specific BUs they're required to possess an in-depth knowledge of the business operation, its plans, and goals. They are typically highly specialized, and often focusing on designing, customizing and supporting specific applications or on supporting a particular type of business process.

ISPs operate within BU’s internal environment. So their growth is also limited by the growth of the business unit they belong to. In larger organizations, every business unit (BU) could have its own ISP.

The success of Internal Service Providers isn't measured in terms of revenues or profits, as they tend to be operating as a support to the business operation. All costs of ISPs are borne by the owning business unit or enterprise.

For example Business functions like finance, administration, logistics, human resources and IT can act as an ISP if they only support specific BUs.

External Service Provider (ESP):

External Service Providers (ESPs) are those who provide IT services to external customers. In other words, they are hired by business from outside world for getting specific services.

The business strategies of customers sometimes require special capabilities, which are not readily available from inside. In that case, they may choose to hire services from outside. Although they are not as much secure as inside resources, still the increased flexibility and knowledge fills the gap.

Due to extensive market competition, External Service Providers may also offer competitive price quote and bring down the total operating cost. The other main perspective to hire ESPs may be due to greater access to knowledge, experience, scale, scope, capabilities, and resources that are either beyond the reach of the organization or outside the scope of their investment portfolio.

Usually, the expertise of External Providers is not limited to any one enterprise or market, because they gather those experience by serving multiple customers with a variety of needs. Thus having a larger Service Portfolio.

From a wider viewpoint, ESPs are operating under an extended large-scale shared services model. So the disadvantage of External Service Providers is that they may also provide same types of support to rivals companies as well. This implies that rival customers may also have access to the similar bundle of assets and services, thereby diminishing any competitive advantage.

Shared Service Unit (SSU):

Shared Service Units (SSUs) are thought to be an extension of the Internal Service Providers. Functions such as finance, IT, human resources and logistics are not always dedicatedly assigned to any particular BU. Sometimes they are managed & maintained at the corporate level. And they serve the organization as a whole, consisting of multiple Business Units.

This model permits a more advanced governing structure under which SSUs can concentrate on serving business units as direct customers.

Shared Service Units can grow and sustain in an internal environment and improve themselves to compete with the service providers of the open market.

SSU offers lower price point than an ESP but may charge higher than ISP. But if we consider the span of their service area, then this model is the most cost-effective to an organization. Moreover, if company management makes strategic changes then they may also use the SSU to serve external customers to generate increased revenue.

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ITIL Service Provider Types | ITIL Foundation | ITSM