Differences between Internal and External Customers 1

Differences between Internal and External Customers

Internal customers External customers
Funding Funding for IT services is provided External customers fund the service
internally so IT is a cost that needs directly in the form of revenue. IT
to be recovered. becomes a generator of income for the
In commercial organizations the organization. The cost of the service,
internal customer has to use the IT plus a margin, must be recovered from
service to generate revenue which has the customer.
to cover the cost of the IT service and The ability to provide service to
all other costs. multiple customers is funded by the
Many internal IT service providers fail incremental revenue obtained from
to quantify the cost of individual IT each new contract. As revenue
services and link these to external increases, so too does the funding for
revenue sources. These service staff and technology to provide the
providers risk the situation where service.
multiple internal customers demand
services from a limited pool of staff
and technology, believing that they
have already paid for them through
central IT budget allocation. The
resulting competition for IT resources
can be damaging to the organizations
ability to achieve its strategic
objectives.
In non-profit or government
organizations the IT service has to
support activities that will ensure that
donors or government budget bodies
allocate funds to the organization,
which are used to cover IT and other
costs.
 Differences between Internal and External Customers 2
Internal customers
Link to business The service provider has the same
strategy and objectives overall organizational objectives and
strategy as its customers. Ideally, the
service provider and customer work
together to deliver external services
and optimize operational efficiency
and effectiveness.
The term customer is used to ensure
that the business outcomes are placed
first, and that the service provider
prioritizes its activities appropriately,
but the term colleague may be more
accurate in describing how two
internal groups are related to one
another.
Accounting The cost of service is the primary
driver. It is possible to build a profit
margin into services, but this is always
subject to enterprise financial
management policies.
The aim of providing services to
internal customers is to provide an
optimal balance between the cost and
quality of the service to support the
organization in achieving its
objectives.
External customers
It is helpful for the service provider to
understand what outcomes the
customer wants to achieve, so that the
service can be properly designed to
meet the expected levels of
performance and functionality. This
will ensure customer satisfaction and
retention.
The objectives and strategies of the
service provider and the customer,
though, are different. The customers
objectives are set by their executives
and are appropriate for their business.
The service providers objective is to
sustain its business by providing IT
services. The service provider and
customer are typically in different
businesses, otherwise they would be
competitors.
The cost of the service is normally not
disclosed to the customer. The price of
the service is the primary driver.
In a commercial organization, the
service provider must ensure that the
price of the service is higher than the
cost of the service. The aim of the
service provider is to maximize
profitability while still remaining
competitive with pricing.
In non-profit and government
organizations, the aim of providing
services is to achieve the objectives of
the organization while covering costs
partially by donations or taxes, and
partly by recovering some portion of
the costs from the customers.
 Differences between Internal and External Customers 3
Internal customers
Involvement in service Service design is dependent on
design enterprise policies, resource
constraints and expected return on
investment.
Customers tend to be involved in
detailed design specifications, often
covering both functionality and
manageability of the service since
both of these impact the level of
investment required.
Involvement in service Customers are often involved in
transition and building, testing and deploying
operation services.
Changes have to be assessed and
authorized by customers as well as IT
managers.
Customers are involved in defining
deployment procedures, mechanisms
and schedules.
External customers
Where a customer purchases pre-
defined services they might be asked
for feedback about their experience,
which is used to improve the service
design.
If each service is designed for each
specific customer, the focus is on the
functionality of the service, and the
price to ensure that it performs to
expectation.
Customers may get involved in design
work during needs-based and demand-
based positioning. Otherwise
customers typically do not get
involved in design work and the
service provider does not typically get
involved in calculating the customers
return on investment.
Customer involvement in change
management is clearly documented in
the contract, along with clauses about
how changes will impact service
pricing. Requests for change are
assessed by the customer in terms of
impact and price.
Customers are generally not involved
in detailed design and testing of
services, and have little visibility into
the processes whereby these are
managed.
Involvement in deployment is usually
carefully scripted, and customers are
trained in how to execute their
deployment activities.
 Differences between Internal and External Customers 4
Internal customers
Drivers for Improvements are driven by impact on
improvement the business, specifically optimizing
the balance between cost and quality
and the ability to help business units
meet their objectives.
Improvements are also aimed at
improving the way services are
designed, delivered and managed.
Customers are often involved in the
detail of service improvement plans,
as they have skills which could help
IT become better service providers.
SS Table 3.1: Differences between Internal and External Customers
External customers
Improvements are driven by the need
to retain customers that contribute to
the profitability of the service
provider, and to remain competitive in
the market. Changes that impact
pricing and profitability drive
measures that reduce cost while
providing competitive service levels.
Customers are not often involved in
defining and executing service
improvement plans, instead focusing
on the expected results. How the
service provider achieves those results
is generally not important to the
customer.
At the same time, it should be noted
that customers can be involved in
defining service improvement plans
especially where a relationship with
the service provider (typically
outsourcer) is in difficulty.