Key Differences Between Outsourcing And Managed Services

Any growing business owner will become overwhelmed with customer demands at some point in their journey. For instance, a company that’s looking to expand its operations to other nations can feel the pinch when its in-house IT team is stretched too thin, especially if the employees are expected to serve across multiple time zones.

If your company is in a similar situation, your first impulse will be to increase the number of employees. But is that a good move financially? Your budget might be flexible enough to accommodate a few more employees, but there are other cheaper options you might want to consider.

Outsourcing your IT and other important services to an external team of technicians, for instance, might help you save some money. After all, the main objective of any business is to reduce operational costs and make more profits. In your research, you’ll probably come across another popular phrase in the corporate world: managed services. What distinguishes it from outsourcing? (1)

Here are the main differences between outsourcing and managed services:

One thing that distinguishes managed services from outsourcing is how the services are delivered by the provider. Both involve hiring an external professional to take care of your business needs, but there are a few distinctions.

So, rather than finding different technicians for the pending tasks you have, you can just find a reputable managed service provider that can tackle all your issues as a package.

Another difference between these two aspects is how long they can be employed by a business owner. Since outsourcing is more specialized, people opt for it when they need something done immediately. For instance, if you have a network issue and all your IT team members are busy, you can find an external technician to tackle the problem. Once that task is done, the hired technician is paid, and the entrepreneur moves on to other things. (2)

Managed serviced, however, works quite differently. The operations and deals are long-term. For example, if your business is growing and you don’t want the hassle of hiring more employees, you can opt for managed IT support. Unlike outsourcing, this will act as a long-term solution to your problem.

You can sign a contract with a managed service provider so they can take care of all IT-related tasks in your business for a given number of months or years. The technicians will avail themselves whenever your business faces issues in that department. Keep in mind that their services can be offered on-site or remotely depending on the problem at hand. In return, you’ll pay for all these services as a package rather than paying for each task differently. Thus, in the long run, you’ll be able to save a significant amount of money. (3)

Perhaps one of the biggest differences between these two subjects is the payment structure. With managed support services, you’re usually expected to make monthly payments. In other words, most providers use a subscription-based structure. Also, since you’re receiving all services from one organization, it becomes easier to track your expenses. (3)

With outsourcing, however, managing your finances is a little difficult since you might need to hire different technicians for every task. You’ll only know how much you’ve spent once you’ve paid all service providers. As such, it’s quite difficult to manage your budget or even plan your expenses beforehand.

When your business starts growing, the next thing you’re compelled to do is to increase the number of your employees to maintain a reliable workforce. However, that’s not always the only solution in such situations. You can opt for either outsourcing or managed services. The former is a short-term solution, while the latter is structured to serve you for a long-term period. If you also want to keep monitoring your expenses closely, then opt for managed IT services.

1. “How To Determine If Managed IT Services Are Right For Your Business”, Source: https://www.forbes.com/sites/forbestechcouncil/2019/04/09/how-to-determine-if-managed-it-services-are-right-for-your-business/
2. “Understanding Outsourcing”, Source: https://www.investopedia.com/terms/o/outsourcing.asp#:~:text=When%20a%20company%20uses%20outsourcing,the%20work%20for%20less%20money.
3. “Pros And Cons Of An IT Managed Service Provider For A Small Business”, Source: https://www.businessnewsdaily.com/5115-managed-services.html