The Difference Between Outsourcing and Managed Services for Business

5 min read
May 21, 2020 3:56:35 PM

The world is changing, and businesses need to adjust how they operate.

With new pressures on businesses, such as supply chain disruption, work from home orders, and new regulations to ensure the health and safety of customers and employees, companies need new solutions. The procedures that worked in the past may not work in the new normal.

Which is why so many companies are turning to managed services.

Defining Managed Services

With managed services, a company will hand responsibility for business processes and functions to a provider. Many companies utilize IT (Information Technology) Managed Services. An IT Managed Service Provider (MSP) will plan and anticipate the technology needs of a business to ensure an operations state. This means the MSP is handling the planning, maintenance, training, security, and upkeep of a software system. The business can rely on their technology systems meeting their business requirements at a price they can budget.

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But managed services aren’t limited to technology. Many companies are using MSP resources to manage procurement, communications, marketing, finances and more. Any range of services a business may have can be managed by a service provider.

This is a change from how business used to operate. They would bring everything in-house and hire as needed, and then outsource only when in-house resources can’t manage. It was expensive and inefficient, with business leaders having no idea of the true cost of maintaining business processes and functions.

Let’s look at how managed services is an advantage over data outsourcing.

The Advantages of Managed Services over Outsourcing

In the past, most companies were reluctant to turn over business function to a provider. They would bring everything in-house, hire as needed and keep throwing resources at a business function to get by. Anything that slipped through the cracks of their in-house coverage would be outsourced on an as-needed or event-based contract.

If a printer went down, the company would make a service call. If the marketing team needed a new video, the business would hire an agency. If you had to purchase critical supplies, someone would reach out to an outside vendor.

Today, outsourced services no longer provide the strategic value larger companies need. Costs are high and results are lacking.

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Instead, more and more companies are finding advantages in managed services. Here are three of the top reasons why leaders are turning to managed services.

Managed Services is Outcome-based

With outsourcing you are buying a service. It’s defined by a single action, such as installing a new software system, fixing a broken printer or producing a sales brochure. The scope of work is rigidly defined – no more and no less than what is written in the contract.

Sure, it produces an outcome the company needs, but the potential gaps around the action (the service or purchased product) can hurt the business. What if employees aren’t trained properly in the new software? Who will handle maintaining the system? What happens when the market changes and suddenly that brochure is worthless? That’s where outcome-based services lose value.

With managed services, you are buying an outcome. Depending on the provider, you can define performance-based outcomes the company needs. Want to save 10% on operational costs with that new software? Work with an MSP. Looking to generate leads with a new sales brochure and accompanying campaign, then work with the provider on a strategy rather than buying another brochure.

With managed services, you’re getting everything you need to ensure your business reaches a desired outcome.

Manage Services means Management

Because outsourced work is event-based, it means your team and employees are picking up the slack. The hired company will install the software, fix the system, or provide you with marketing content. After that, your team is left to optimize the work and deliver the ROI. There is a strictly defined beginning and end to outsourced work – it’s typically written that way in the contract – and it leaves your business struggling to deliver the expected results.

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Managed services provide you management (it’s in the name) to deliver optimized results. Businesses need more than just a service. They need support to see a project to the end. That could mean training, upkeep, maintenance, additional planning or even the strategic evaluation of data to assess what steps to take next.

With the provider handling all the details and managing the service, you and your team can focus on more important, and profitable, tasks.

Managed Services is a Strategic Advantage

Today, businesses need to access to a wide range of specialized expertise for even relatively simple tasks. It can be the difference between success and failure.

Procurement of critical supplies isn’t a simple process of buying what you need when you need it. You need to understand the market and industry to ensure you are buying high-quality products at a reasonable price. You need to consider the supply chain, and make sure you are working with reputable vendors with enough inventory and redundant supplies to ensure you have enough stock on hand and rapid restocking when you need it. Is the business protected from supply chain disruption? Is your procurement team staying ahead of potential problems? A single mistake can mean lost revenue and lost business.

This isn’t an isolated example. Most companies aren’t hiring industry leaders or specialized expertise, and it’s adding business risk.

With managed services, it’s possible to bring on specialized, market-leading expertise without constantly recruiting, hiring and training a new employee whenever a need arises. The MSP works in the specialized niches, bringing on the expertise the strategic needs of the business. Best practices come with that expertise. Cost is shared across the provider’s customer-base. The business can then call on the provider for the expertise as needed, for a significantly lower cost than utilizing outside resources.

How Does Managed Services Work?

While every industry is different, most managed services work like a partnership, rather than a simple contract.

The MSP works like an extension of your existing team, providing support. The success of the provider is directly connected to the success of your business. The parameters of the partnership are set in the beginning, with the scope of work and expected run state of the business defined. After that, the MSP will supply the resources and expertise to meet those goals. Typically, you’ll have an assigned Account Manager who acts as a go-to resources between your team and the provider.

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There’s shared responsibility – you maintain oversight and let the provider handle the work. It provides flexibility, offering additional resources that understand your business when you need it. With the MSP support, your business operates more efficiently, so you can focus on core business processes while the MSP operates in a support role.

If you’d like to learn more or discuss how and where managed services can provide benefits for your business, then contact GO2 Partners today. You’ll talk to one of the account managers who can assess your current requirements and provide an estimate and cost-savings you’ll see who managed services in place.

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