Types of Service Providers

      Very often people gets confused in understanding their service providers and matching it with their requirement. Understanding and distinguishing between different service providers is very important. ITIL talks about three types of Service Providers.

Type – I : Internal Service Providers::

Internal Service Provider exists within the organization servicing to single business unit. Different business function of the organizations may be the customer of the IT team.

Internal Service providers are required to operation according to the business requirement. Being part of same organization, they have a better pairing with business. For such a team, the business requirements are narrow and specific. Since these service providers need to respond to very specific need of business, they are mostly dedicated and expected to provide very high service levels. The future of Type 1 service providers totally depends upon the growth of business they serve.

Since they are totally dependent on single business unit, it poses huge risk to the Service Provider. Another issue with such providers is the wastage of capability and capacity.

Type – II: Shared Service Units::

A shared service unit again exists within the organization but they serve to multiple business units. Type –II providers mostly considered as an autonomous Unit.

In this model, scope for the Service unit widens to some extent. Now, their growth prospect is more diverse as it doesn't depend on single business unit. These service units usually charge the business units for their service and hence maintain their own profit, GM and growth. Hence they have competition with external service providers but due to the advantage of being part of same corporate, they are in position to offer lower cost to the business unit.

Alignment of Type-II service providers is bound to be little less as compared to Type –I as they have to design their services to serve multiple business units but they are very much in-sync with overall corporate targets.

Type –III: External Service Providers::

These providers exist out of the organization. Corporates or business units may need External Service providers in multiple cases like-

• Specific capability required that is provided by the Service Provider.
• Competitive Cost.
• Unavailability of Type-I and Type-II Service Providers
• Fixed cost.
• Risk Avoidance…etc