An identity service provider is a system entity that creates, maintains, and manages identity information for principals while providing authentication services to relying party applications within a federation or distributed network.
It usually offers user authentication as a service. Relying party applications, such as web applications, outsource the user authentication step to a trusted identity provider. Such a relying party application is said to be federated, that is, it consumes federated identity.
An identity provider is considered a trusted provider that enables consumers to use single sign-on (SSO) to access other websites. SSO enhances usability by reducing password fatigue. It also provides better security by decreasing the potential attack surface.