Outsourcing vs Managed services: What does your business need?

Many organizations use outsourcing and managed services for more effective and efficient business operations. These two strategies also have significant differences that could spell out what a successful business is.

Let’s dive into the advantages and disadvantages of outsourcing and managed services. Then you can find out which of the two is best for your business.

How outsourcing works

Outsourcing is the practice of delegating your business activities to an outside organization. Instead of assigning these activities to an in-house member,  businesses choose a third-party company to reduce labor, overhead, and equipment costs.

Tasks usually outsourced are defined processes—be it a specific role or a whole department—but not broad strategies. That means, if you asked the organization to perform specific work, your provider will complete the tasks and bill you for the work done.

Outsourcing services and functions give you flexibility and scalability advantages. You can simply hire for a particular role when you need it, without worrying about overhead costs. 

You can partner with outsourcing services providers when you need help for your business processes or a specific project.

How managed services work

Managed services, on the other hand, is hiring an outside organization to deliver comprehensive support. Instead of delegating straightforward tasks, managed service providers submit to a subscription-type payment model.

Unlike outsourcing, a managed service provider would assist your organization and manage a whole department—that includes, but not limited to, uncovering improvements, investing in long-term projects, and developing effective solutions to drive your success.  

If you need a specialized job done for your business, outsourcing would be your best bet. However, if your goal is to keep a particular department running smoothly and securely at all times, hiring managed service is the way to go. 

Advantages of outsourcing and managed services

Expertise

Service providers will bring in specialized and well-trained talents to help your business operations. They will handle your projects and business requirements with the utmost professionalism to reach your business objectives.

New technology

These service providers have access to tools, programs, and resources specific to your business and industry. They have already invested in the most up-to-date technology and software.

Once you hire them, along with these assets, you’ll be sure to stay competitive within the field.

Work flexibility

Outsourcing and managed services can provide flexibility for your business. Both these strategies will take care of your tasks and operations. You and your team can spend more time on core business competencies, including service and product development.

Increased efficiency

If you have the right partner, they will give you all the resources to fulfill the roles and responsibilities you need. You can spend less money while gaining more time to advance more areas of your business. 

Reduced labor costs

Outsourcing companies hire experienced employees to work on your business. They are prepared and equipped to help you save on recruitment, training, and overhead.

Compared to outsourcing, however, managed service providers have more expenses and higher costs.

Level playing field

Outsourcing would be a good option for most small businesses that cannot afford to match the in-house support services that larger companies maintain. Providers can give you access to the similar technology, and expertise large companies enjoy. 

Disadvantages of outsourcing and managed services

Accountability with your provider

Many business owners are worried about the idea of another company having access to their internal processes. When sharing responsibilities with any third-party service provider, measures for accountability should be practiced and put into place.

Outsourcing and managed services can give the impression of losing control of your processes. But then again, when outsourcing companies and managed services providers take these processes off your hands, that’s when they’re most effective. 

They simplify your business operations to make them more manageable. They’ll establish connections with your company that will make monitoring their progress in real-time and through reports easy and accessible.

Internal staff development

Since outsourcing companies and managed services providers train employees to specifically meet your operational needs and business goals at lower costs, it can be easy to overlook your in-house team.

Be sure you balance them out and create a synergy between your internal team and your third-party service providers – make it so that they can work together and learn from each other.

What does your business need?

The general idea of managed services as a business model is more of a partnership than a one-off service. 

Managed services would be the best option for large internal projects. Their integration into the team makes them incredibly needed in gathering unique insights and propelling your business to new heights. 

Outsourcing will solve your worries away. It will address the nitty-gritty parts of your operations. You can be sure that trained and experienced experts in the field will manage your specific business process requirements.