ITILv3 Service Provider Types

In preceding sections, and throughout our posts, you may have seen the term 'service provider'. If you’ve wondered what this is and how many service provider types there are, then this post is going to answer that question.

ITILv3 Service Provider Defined.

A service provider is anyone who supplies services to internal or external customers. In ITILv3 this often refers to an IT service provider.

Service Provider Types for ITILv3.

According to the ITILv3 definition, there are three service provider types:

• Internal Service Provider
• External Service provider
• Shared Service Unit

Internal Service Provider (ISP)

ISPs stay committed, and often included, to an individual business unit (BU.) Business units can also play a part in a bigger enterprise or organization.

ISPs can operate with their customers. This avoids certain costs and risk factors. that come with doing business with outside people. ISPs must have in-depth knowledge of business operations and goals of the BUs.

These ISPs have specialized skills. They usually concentrate on creating, customizing and supporting dedicated applications or a process.

ISPs work within BU’s internal ecosystem. The ISP's development has limits constrained by the business unit they support. In bigger organizations, every business unit (BU) might have its own ISP.

ISPs are not measured by revenue or profit as they operate in support of the business operations. This means that the owning business unit or organization handles all costs of the ISP. Functions are ISPs only if they support a BU.

External Service Provider (ESP)

External service providers (ESPs) are those who provide services to outside customers. This service provider type is hired by businesses to provide specific services.

Certain business strategies used by customers may need special capabilities. These are capabilities they generally do not have, and in this example, they may hire from outside. Even though ESPs are not as secure as ISPs they can sometimes fill a needed gap.

Because of competition, ESPs might offer competitive pricing and lower your operating costs.

Another reason for hiring ESPs is because they may have greater access to knowledge. They can also offer experience, scope, capabilities, scale and resources access. These are things your organization may not have or cannot afford.

Quite often the expertise of ESPs is not restricted to one organization or market. ESPs increase their experience by working with many customers. So, they will have a larger service portfolio.

Taking a wider view, ESPs are working beneath a large-scale shared services model. The drawback of this being that they could be providing the services you’re using to your rivals. This means the competition will have access to the same bundle of assets and services. This, in turn, can diminish your competitive advantage.

Shared Service Unit (SSU)

Shared service units (SSUs) are an extension of internal service providers (ISPs). Functions like finance, IT, and human resources are not always dedicated to a certain BU. They are often managed at the corporate level. They serve the business, consisting of many business units. This structure allows for improved control. IN this structure SSUs can focus on serving business units as direct customers.

SSUs can develop and thrive in an internal environment. They can compete with other service providers in the open market.

SSUs usually offer lower prices than ESPs but will usually charge more than ISPs. This makes sense. Especially if you take into consideration the breadth of their service abilities. Therefore, this model is often the most cost-effective for a business.

Additionally, with strategic changes, they can use an SSU to serve external customers. This can then increase their revenue.

Conclusion

In summary we hope you gained a better understanding of ITILv3 service provider types, along with their benefits and disadvantages.

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