Managed Service & Outsourcing definitions, differences, similarities

Managed service & Outsourcing – definitions, differences, similarities

Managed Service and Outsourcing service both involve delegating activities to a third-party, outside of your own business organization. Both terms are often misunderstood & misused due to characteristics they have in common. There are also significant differences that we’ll explore in this article.

What are Managed Services and Outsourcing services?

In order to understand the specifics of “outsourcing” and “managed services”, it is necessary to define the two terms in the first place.

Outsourcing covers a wide umbrella of IT, ITO, BPO, KPO tasks, including Managed Services as an OUTSOURCING SERVICE TYPE and ENGAGEMENT MODEL.

In terms of similarity…

Generally, Outsourcing is delegating planned or existing business activities to an outside organization. Every time you enlist a third party to perform a task, you are outsourcing the job. Managed Service also involve seeking assistance from outside organizations. In both cases you ask the third-party company to perform the business activities you need from them and they do those activities. In exchange you pay them for their services.

However, beneath this surface-level similarity, the actual services you receive from outsourcing and managed services can be vastly different…

Differences appear in the way of execution and overall approach

Let’s compare the two in a way it is to be understood by a person who is totally unfamiliar with outsourcing terminology. We’ll use a very basic analogy involving day-to-day tasks and obligations in the office. We found it as self-explanatory example (situation) of how outsourcing services and managed services look like. Keep in mind these examples do not cover completely the complexity and specifics of outsourcing and managed service.

examples of outsourcing and managed services regarding the office maintenance

Outsourcing service – basic example:

Your office premises have things to be maintained, sometimes repaired or renewed. The list vary from office furniture, window frames, air conditioning, office supplies, beverages, snacks, to maintaining the cleanness of the premises.

You’ll have to call a service provider to repair your window frames if there’s a problem (break – fix). This is simply delegating the task as an OUTSOURCING SERVICE. It is the same task outsourcing when you approach a 3rd party company, as in any of the following examples:

  • supply of office materials
  • supply of beverages like coffee, water, tea, probably fruits in the office
  • office cleaning, maintenance and reconstruction
  • office network and connectivity maintenance

What are the execution options

A) All these tasks are manageable in-house if you have qualified employees hired to perform those activities on demand and daily

B) You call an outside company to perform a specific task for you (repair the air conditioning system, or cleaning company, or office supplies vendor, or network provider) – you outsource the job to this third party. When you outsource execution of activities regarding the office maintenance to multiple outside organizations you’re the one who have the obligation to control, coordinate, organize and monitor those processes. These tasks also have a very specific character, process flow and duration you’ll need to set, align and track.

Managed service analogy – basic example:

In this case you consolidate all tasks which may occur on demand or on a regular basis under Managed Services company. This partner has the know-how & proven competence of how to perform a high-class facility management. This company won’t only take care of breaks and fixes or regular maintenance activities. The Managed service provider will:

  • assess an prevent issues
  • propose improvements
  • manage on your behalf the health & safety compliance, connectivity, interior, supplies, budget for office and facility management while delivering better cost efficiency

Choosing either of the two approaches depends on demand, complexity, business needs, priorities, level of control, level of know-how, availability to do it in-house, organizational culture, and budget. You decide if either simple outsourcing service or holistic managed services approach is what you need.

managed service or outsourcing service visual

Is Managed Service Better than Outsourcing?

The short answer is: Not necessarily. Both have a place in the modern business world.

Outsourcing service covers tasks which you typically can perform in-house. You delegate them to an outsourcing service partner when you aim to deduct your total cost, enlarge the talent pool and get support. Last but not least you ensure a certain level of scalability as per the business needs. 

Outsourcing service is well known under the IT Outsourcing on a break-fix model of service. In this style of IT support, the provider responds to issues as they come up. If a piece of technology breaks down, an outsourcing provider will answer the call to help fix it, which will involve some downtime as they respond.

It’s a reactive approach, where the IT company springs to action after something goes wrong. There is no preventive maintenance. IT is just one form of outsourcing. Types of BPO include knowledge process outsourcing, such as research and analysis services, travel arrangements process, data coordination and management, project management.

Another function of business process outsourcing (BPO) is its focus on specific tasks. Usually when you enlist a third-party service provider, you get help with a particular duty or a collection of jobs. Pricing may run on a task-by-task basis. Even if payment is hourly, they focus on specific jobs.

Managed service provides comprehensive support

As type of Outsourcing, Managed service also involves hiring an external organization, but for much more comprehensive support. Managed services offer a long-term partnership with a wide reach of services, helping to minimize downtime with personalized support to fit the needs of your business and / or infrastructure. The external company (organization, or so-called Service partner) will adopt a much more holistic approach. Also payment often occurs on a subscription-type basis.

For comparison, the Outsourcing service is rather delegating quite narrow and specific tasks to the third-party. A good Managed service provider initially performs an assessment of the current infrastructure and operations to understand the sore points. After that the partner determines whether any operations are compromising the performance. Then the service partner creates a plan for immediate improvements and long-term enhancements. All of this is done by your managed service partner in addition to providing skilled staff to support the company’s business needs. A skilled Managed services provider will also proactively share best practices and suggest ways to increase savings and trouble-shoot problems before they arise.

How to choose between Managed services and Outsourcing services?

It is entirely based on the needs of your business. The advantages of the Outsourcing are valid for Managed services since they are an outsourcing engagement model. Both provide protection and reduce your risk while generate certain efficiency in costs. It is the specific circumstances of your business that will point out which approach would work better in your case. Working with the right service partner can propel a business forward faster and more effectively than doing it alone.

The key is to define your business needs: do you want to outsource a specific business process or do you need extensive support?

Find an external organization that always has your back. Choose a service partner who can provide know-how, various support models, flexibility and scalability to meet the needs of your enterprise.

Looking for an Outsourcing partner applying the Managed service model in Bulgaria?

We certainly know how to help you establish and develop your outsourcing operations on the Bulgarian market. WE, ACS BULGARIA, can propose various engagement models fitting to your business strategy, needs and environment. Our team consists of experts with over a decade of experience in performing Agency contracting services, Managed services and Transition & Transformations services for local and international clients.

Let us know what you need.

Our knowledge in cost effective and performance efficiency models makes us the right choice for the task.