Outsourcing vs. Managed Services

Jun 9, 2022

The terms managed services and outsourcing are often used interchangeably. While they both involve using a third-party or outside company for services or expertise, the difference lies in the level of service provided by the third-party vendor.

Outsourcing is a business practice whereby one company hires a third-party vendor to perform specific tasks, handle certain operations, or provide services that would otherwise be handled by the hiring company’s internal staff. Because the vendor’s sole focus is that particular task, operation, or service, the hiring company trusts them to do it faster and cheaper than they could internally. It also may result in a reduction of overhead costs, as the hiring company would not need to staff those positions internally.

While managed services can be viewed as a type of outsourcing, it emphasizes business outcomes and takes quality and service to the next level. Managed services contracts typically include Service Level Agreements (SLAs) that ensure the vendor relationship is more than a transactional one, and actually aligns with the goals and imperatives of the business. Said differently, a Managed Services Provider (MSP) becomes a true partner with aligned incentives to improve processes and experiences for the client.  

Recommended Read: How to Create a Data-Driven IT Help Desk

Drawbacks of Outsourcing

While traditional outsourcing is often a fast and cost-effective option, it’s not without its downsides. Some hiring companies find that the resources required for managing the outsourced vendor negates the “fast and cheap” benefits of outsourcing. “If you ask yourself who is managing the activity, that helps you know if it’s a managed service,” says Randy Wiele, Shared Services and Outsourcing Advisory at KPMG. “If the client is managing or co-managing, it is not a fully managed service.” There may also be challenges with internal cultural fit, and the unease among employees regarding the risk of layoffs. 

The Value of IT Managed Services Providers

Choosing to use a managed service provider (MSP) for a subset of your IT services doesn’t mean getting rid of your own IT staff. Rather, it frees up your IT staff for other, more strategic projects. More and more IT teams are turning to managed service providers to handle typically well-defined capabilities such as application support and data center management. MSPs help IT departments reinvent themselves, regain control over their technology infrastructure and refocus their efforts on achieving strategic goals.

Choosing a Managed Services Provider

The most successful CIOs choose a technology partner that:

  • Helps them achieve their strategic goals by understanding their business, rather than selecting simply the lowest-cost provider
  • Utilizes a combination of people, technology, processes, and customer experience mechanisms
  • Spans a range of cloud and end-user service areas 
  • Drives continuous improvement processes to enhance the end-user’s experience

How do we know this?

Crossfuze is an award-winning Managed Service Provider, having been named in the top-100 of the MSP501 annual list of best Managed Service Providers in the world for the 7th year in a row. As such, we’ve had the privilege of helping some truly amazing organizations deliver ever-better service to their users. 

Contact us today to speak with one of our Managed Services experts, or send us an email at LetsTalk@Crossfuze.com.

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