What is a service

Last updated: 2024-01-31
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A service is the output of labor or resources provided by a service provider that has value to the customer. In general both the customer and the provider can be anyone inside or outside the organization. Services are generally non material products. Unlike them, the service cannot be stored.

  • Service is the output of some process
  • Services are intangible products
  • Like tangible products, they are outputs of a production process
  • Unlike tangible products, a service cannot be stored
what is a service

Who is the customer of the service

When the customer of the service is located outside the organization, it is an economic entity on the market to which the company provides its services as its core product. The customer of the service can also be inside the organization. In this case, the customer is an organizational unit, department and people in it, or it is all the employees inside the organization.

  • customer outside the company, in the market, is it a company (B2B) or an individual (B2C)
  • customers of the service are employees within the company

Who is the service provider?

  • when you provide services to your customers in the market, then the company is the provider
  • when it comes to internal services, the provider is another organizational unit
  • when you buy services, then the provider is the company that provides services to you

Basic characteristics of the service

  • A service is the output of some processes and activities, which must have value for the customer
  • A service always consumes inputs and resources (financial, information, labour, material and other assets) and turns them into value for the customer
  • A service must always have a customer who appreciates its value
  • The service must always have some provider who enters into a relationship with the customer
  • The service must always have some indicators of its quality (Service Level), by which its quality is measured

Service as the main product of the organization

Service is the main product of all companies and organizations operating in the service sector. This means providing services to the customers and not producing goods or materials outputs. This includes a large spectrum of companies from trade, transport, finance, education to social services. That is, practically everything except production, mining and agriculture. 

  • The provision of services consumes inputs and resources such as finance, information, people and human labour, material and other assets
  • Service (provided to the company customer) as a main product stands at the top of the company's value chain
  • All the inputs that are needed to provide the service are critical for the company
service as a core product

Support services

Every organization uses a variety of services from other companies or from its own departments in order to operate company processes. It does not matter whether the company buys the services or provides them itself. Company acquires or uses services from external providers (companies) if does not want, is unable or unable to provide them itself. Examples of support services:

  • financial services, account management
  • insurance
  • transport services
  • energy security
  • maintenance of machines and equipment
  • bookkeeping
  • management of payroll
  • Internet connection
  • IT services
internal support services

Purchased services

Companies and organizations purchase various f services because it is either convenient for them or because they have to and cannot provide them themselves.

  • Organizations purchase many services from other service providers
  • The guarantor of the purchased service is always an internal organizational unit

Examples of purchased services

  • Energy supplies
  • Internet connectivity
  • Bank services
  • Insurance
  • Transport services
  • IT services
purchased services