The IT industry recognizes all three types of service, although they are specifically defined by ITIL and the US. ISPs are dedicated service providers and often integrated into an individual business unit. Business functions, such as finance, administration, logistics, human resources and IT, provide the services required by various parts of the business. They are financed from overhead costs and must operate strictly within the company's mandates.
To address this issue, services from such shared functions are consolidated into a special autonomous unit called a Shared Services Unit (SSU). This model allows for a more decentralized governance structure, under which SSUs can focus on serving business units as direct customers. SSUs can create, grow and maintain an internal market for their services and model themselves along the lines of service providers in the open market. Like corporate business functions, they can take advantage of opportunities across the enterprise and spread their costs and risks on a broader basis.
Unlike corporate business functions, they have fewer protections under the banner of strategic value and core competence. They are subject to comparisons with external service providers whose business practices, operating models and strategies should emulate and whose performance should approximate, if not exceed. Type II customers are business units under a corporate matrix, common stakeholders, and an enterprise-level strategy. What may be suboptimal for a particular business unit can be justified by the advantages gained at the corporate level for which the business unit can be compensated.
Type II can offer lower prices compared to external service providers by leveraging corporate advantage, internal autonomy to function as a business unit. Type II providers can make decisions outside of policy constraints at the business unit level. They can standardize their service offerings across business units and use market-based pricing to influence demand patterns. A successful Type II service provider may find themselves in a position where they can provide their services both externally and internally. In these cases, they are providers of Type II and Type III services. ESPs can offer competitive pricing and reduce unit costs by consolidating demand.
Internal service providers, such as Type I and Type II, do not adequately address certain business strategies. Customers can look for sourcing strategies that require services from external suppliers. The ESP experience is often not limited to any company or market. The breadth and depth of that experience is often the most distinctive source of value for customers. The breadth comes from serving multiple types of customers or markets.
Depth comes from serving multiples of the same type. If you incorporate IT teams (IT service providers) into each of these business units, you will end up having as many IT teams as there are business units. Teams that provide IT services to customers within the business unit are called internal service providers. This model is the most preferred and is optimized; however, it may not provide favored service to each business unit. External Service Providers (ESPs) are organizations that provide IT services to customers outside their own organization. It's common for organizations to prefer several external service providers; it's wise not to put all your eggs in one basket and distribute the services you seek among several service providers. ITIL service providers and service portfolio are two phases of the same coin.
While one of them handles the delivery of services between internal and external customers, the other ensures that there is an efficient combination of services that supports the entire service strategy in the organization. Learn more about these processes and best practices with ITIL 4 Foundation certification training and take your service management career to the next level. If a service cannot be perceived by the companies with which it participates, then it would be considered a support service and not a customer-oriented one. But outsourcing IT services is more cost-effective, allowing them to reap the benefits of the best equipment without having to pay for their ownership. In these cases, it is important to make a strategic decision to provide services both externally and internally and to establish appropriate governance and management structures. A service portfolio reflects the commitments of a service provider and its investments in all of its customers and market spaces in which the service provider operates or intends to operate. These services allow the IT processes and services used by the IT service provider to provide other services, but are not directly visible to the customer. There is a fixed cost that is paid to the service provider, and the company does not have to worry about paying salaries individually or over time, as it is the duty of the service provider itself to manage it.
IT outsourcing helps organizations cost-effectively obtain IT services and get the most out of their investment. Learn more about service management best practices through Invensis Learning IT Service Management Certification Training at ITIL 4 Foundation, SIAM Foundation, SIAM professional, VeriSM etc. For example, if your company decides to outsource managed desktop service - which is often the most expensive part of IT service - you will no longer have a substantial amount of monetary value locked up in equipment and software that must be managed and maintained; it loses value over time. While it's not uncommon for a person...
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