The Difference Between Managed Services and Outsourcing

 Last Updated: Oct 17, 2022  |    MIN READ

Managed Service and Outsourcing

With so many options on how to improve your business processes, many companies are often in the middle of so many choices, which can lead to confusion and not being able to find the most optimal solution that is a tailored fit for their business.

Often, offshoring and managed service come to mind when trying to find the solutions that could enhance your business operations.

While offshoring can be beneficial to most companies, these terms can be quite confusing to some. Understanding the difference between managed service and outsourcing can provide clarity on which business process solution is the right fit for you.

Let's start with the basics by understanding the definition and role of outsourcing and managed service.

What is Outsourcing?


According to Statista, the global market for BPO services and outsourcing amounts to over 95.2 billion US dollars and has been one of the most in-demand business services globally.

Outsourcing in the IT industry also means growth for businesses that engage with it. They can easily optimize their business growth and can lead their clients through the digital transformation that is necessary for the company.

Outsourcing also promotes product and service diversity as it allows companies to tailor-fit their requirements according to the current situation of the business or towards specific projects.

Outsourcing a team of dedicated experts for certain roles and projects can help your business achieve not only improved methodical business processes but also increase the opportunity of increasing profitability as outsourcing can be more cost-efficient than hiring locally.

As much as outsourcing offers flexibility, there can be situations where companies and businesses would like to take control of the arrangements between their business and their offshore team.

This likely happens when companies are looking into improving specific projects or processes.

This solution is known as managed service.

The nuance between managed services and outsourcing has confused many professionals.

But what is Managed Service?

To compare outsourcing and managed service, managed service is a business model and solution where you can easily customize the offshoring solution that you would like to have for your business according to your own rules and specifics.

Managed Services providers give access to client companies to their offshore team of specialists.

This means from the hiring process up to the briefing and day-to-day operations of their offshoring service.

This type of managed service method allows your business to maintain a good relationship with your offshoring provider, as it establishes trust in allowing the offshore team to accomplish your business goals.

Through managed service, the local team of your business can also focus on increasing their productivity and allocate their efforts towards high-value tasks while their offshore counterparts can take more on the administrative and repetitive daily tasks like data encoding on their behalf.

What is a managed service provider?

There is no managed service and outsourcing solutions without the provider of service itself.

A managed service provider should be able to offer you a dedicated team of experts that you can easily deploy and integrate into your specific business processes.

While clients handle the hiring process of this type of managed service, your provider should be able to also filter through and provide you with the best candidates that are fit for the task and also the company culture that your business upholds.

Your managed service provider should also be able to provide your business with access to the latest, if not the most effective, software and hardware that can enhance the way you work.

Your offshore team gained from this type of managed service is also available to you virtually and has the same flexibility and be able to cater to your customers or your operational hours no matter where you are in the world.

What are the types of managed service offerings?

While both managed service and outsourcing solutions aims to help businesses achieve scalability.

Managed services has 2 types of service offerings. The best advantage of client-managed service is that it is fully customizable and can be catered to your preference and distinction.

There are also different managed services you can avail yourself of.

Fully Managed

Fully Managed Service

This is a type of managed service where your offshoring provider will take care of your day-to-day operations as well as how your team works around in your processes and projects.

Your offshore team will also be in charge of managing your business KPIs and protocols, depending on the result that you would like your business to achieve.

This type of managed service is often considered by companies who would like to inject more expertise in improving their business processes or have the flexibility to reach out to markets beyond their borders.

Client Managed Service

Client Managed Service

This type of managed service is where the client has full control of how their offshoring set-up will be like. It provides the most flexibility out of all the offshoring solutions as it also gives back control to the client.

It means the client has full control over the day-to-day operations and manages all directives for the team’s workflows, KPIs, and protocols.

This is perfect for companies who would like to have more flexibility and cost-efficiency or very specific expertise integrated into their system.

This is also perfect for businesses who would like to still ensure quality by injecting additional help and human resources into their existing systems.

What are the distinctions between managed service vs outsourcing?

While there is no right and wrong answer on which managed service, you should have your business engaged with.

It is always a matter of finding the best-managed service model that fits your goals and aspirations as a business.

This could bring out the best in your business and achieve great profitability and growth in just a short amount of time.

But the difference between managed services model and outsourcing is predominantly the setup and chain of command with working with teams and daily operations.

Both still present significant advantages and similarities, like access to industry experts, effective tools to improve your business, flexibility, and time and cost-efficiency.

The best way to determine which managed service is the best for your business is best to sit and discuss with your managed service provider and let them know what you want to achieve in acquiring this type of service.

There are many ways in how different offshoring solutions can help you maximize profitability through managed services.

Managed service providers allows you to recruit according to your specific requirements, as your offshore team should always reflect your company's DNA.

Managed services offerings usually come with high expertise and value for those looking into improving their business processes and workflows with a long-term effect.

No company is the same and the right service can only be determined depending on the level of need that you have in your business.

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