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Managed Services versus outsourcing: What’s the difference?

By April 4, 2019 July 17th, 2019

Imagine you’re in charge of technology operations for a progressive business firm. Your in-house IT department is stretched too thin providing support across multiple time zones. Application monitoring blind spots, infrastructure failure, or other disruptions can cause support costs to spike unexpectedly. Whenever your lone resident expert on a specific technology calls in sick, you find yourself praying nervously that nothing goes wrong.

These and other vulnerabilities might have convinced you that it’s time to seek help outside your organization. “We need operations outsourcing,” you might say to yourself, and search for companies that advertise themselves as cost-appropriate technology outsourcing service providers. However, your time might actually be better spent searching for a managed service provider providing “Everything as a Service” (XaaS) for technology.

Wait, what?

Outsourcing by another name?

Most people’s first impulse is to assume that “managed services” is just a fancy name for technology outsourcing, especially since the latter can bring to mind the worst-case scenario: semi-trained remote workers that you can barely understand. Is managed services essentially the same, just dressed up differently?

Thankfully, the answer is no. While it’s true that both managed services and outsourcing involve hiring an external organization, they involve vastly different scopes of work.

Outsourcing firms provide discrete services that are responsible for narrowly defined business processes. You might want to outsource your tier-1 helpdesk, for example, or maybe you need someone to take care of a non-IT task like data entry or document scanning. With outsourcing, you pick specific services and ask an external company to help address specific business needs.

Managed services, on the other hand, take a much more holistic approach to providing excellence in technology services. A managed service provider offers a comprehensive range of technology services within one or many technology domains. Their large team of skilled IT professionals creates a superior end-user experience by providing operational support and enhancements for a wide range of IT applications and services.

Managed services in action

For example, suppose your ERP system has gone live but still requires particular features or extensions before it can offer significant return on your investment. This gap is causing your employees to use only a handful of the system’s features. For most business tasks, they still prefer to use Excel spreadsheets, external ERP tools, or other manual methods that your new ERP platform was meant to replace. In this scenario, it’s probably better for you to get in touch with a reliable ERP managed service provider.

Your managed service provider will step in and perform an assessment to figure out why your staff isn’t using the ERP suite that you paid so much for. They’ll recommend points of immediate improvement and gradual enhancements to appropriately align your ERP implementation with the way you actually run operations. They’ll determine whether any components in your hardware infrastructure are compromising performance. They’ll even let you know if you need to enhance or customize your ERP system with add-ons or integrate it with other business software. If a pre-packaged solution doesn’t exist on the market, a quality managed service provider will have skilled technology professionals that can develop a custom solution just for you.

Designers of long-term success

It’s important to note that a core difference between outsourcing and managed services is the degree of foresight they exhibit. An outsourcing provider will mechanically churn out as many invoices, transcripts, or shipping manifests you ask them to, but will never tell you if there’s a more efficient way to run your business. That isn’t what you’re paying them for, so it simply isn’t in their best interest.

On the other hand, a managed service provider genuinely wants to see your business succeed. They will propose solutions that are effective and long-lasting, not provisional measures that are merely expedient.

Sometimes the changes proposed are profoundly transformative. They might suggest that you use AI to optimize your supply chain or use web APIs to establish entirely new revenue streams. Managed services go far beyond simple break-fix support. In the hands of a competent managed service provider, your IT operations will go from being your biggest cash sinkhole to saving your business millions each year.

Finding the right provider

Not all companies that bear the “managed services” moniker are equally competent. They range from top-notch outfits that can literally manage every aspect each technology deployed in your global organization to outsourcing firms trying to portray themselves as something more.

There are several features that can help you tell the difference between a mediocre managed service provider and a truly great one. Asking for referrals and customer success stories is a great first step. Look for a provider with long-standing partnerships with clients that resemble your own organization. Make sure that they’re intimately familiar with your industry and the digital technologies you use.

Your managed service provider should be an IT army that always has your back. They should have multiple in-house specialists in a wide range of technologies and skillsets, various onsite, near-site, and offsite support models, and the flexibility and scalability that your enterprise needs. For more information on managed services, please contact Visionet.