Managed IT Services Vs IT Outsourcing: Which one should I choose?
By: Evgeny Melnikov
Tags: Information Technology, It Outsourcing, Outsourcing, Managed It Services, Managed Service Provider

Technology has become an integral part of the business ecosystem, and every organization is trying to adopt frameworks that make them stand out from the stiff competition. For the startups and SMEs who mostly operate on low budgets, they have to look for cost-effective solutions to keep up with the ever-changing technology world. Managed IT services and outsourcing are just but a tip of the iceberg of solutions that offer these businesses a ray of hope to work towards their core-objectives.

With the managed services industry estimated to generate $293 billion dollars by 2023, while the IT Sourcing Industry (ITO) was revenued at $66.5 billion back in 2019, these may be the solutions your business has been missing all along. The Covid-19 pandemic, along with the need to adopt technologies such as cloud computing into their workflow has driven businesses to opt for managed IT services and Outsourcing to help them in the digital transformation process. Some services that are offered by managed IT service include network monitoring and information security, data analysis, and many others. Some tasks that IT outsourcing can handle include administration, software development and management, support services, and data center management.

However, many businesses are stranded as to which way to go; should I choose Managed IT or should I outsource professionals to do the job? This is the billion-dollar question that most businesses are asking.

But, I don’t believe you are getting the question right. Outsourcing and Managed IT is the same concept, and many times, the term is used interchangeably. Thus, the question you should be asking is; what is the best solution for me?, as opposed to what is the best, between managed IT and IT outsourcing.

With most articles and material on the internet providing a biased comparison between the two(So they can promote their services ), I aim to use a data-driven approach, backed up by case studies and logic to provide you with a comprehensive guide on which approach you should take so you increase productivity and scalability in your business.

Let’s get started!

Managed IT Services: A Sneak Peek

Despite Managed IT services having a little level of similarity to outsourcing, the two have several differences. Managed IT services denote hiring external service providers to provide your businesses with complex and specialized IT services such as cloud management, penetration testing, network configuration, and monitoring, and many other tasks (mostly paid monthly), as opposed to having a on-premise team handling the task.

I can hear some of you asking, what is the need to hire another organization to do a job that can be done by someone within the organization? The answer is simple:

Specialization=Maximum productivity.

By giving opportunities to organizations that specialize in a specific task, you give your team members a chance to be productive in what they do best. It is important to note that the difference between outsourcing and managed IT services lies mainly in the foresight exhibition.

Blue Ops is a small web development startup with 8 professionals. They recently integrated a cloud computing strategy for development into their workflow, and they are having trouble managing the cloud platform. There is no professional in the team that can manage the platform, and soon, the platform crushes. They have two options, they can either hire a managed IT service provider to handle the entire platform, while helping them scale, or they can outsource a professional/organization in the field to fix the problem, and leave them to figure the rest to themselves.

I know it’s somehow a complex analogy but I hope you get the point.

To help you further understand managed IT, here are some pros and cons of Managed IT services:

Pros and Cons of Managed IT Services

Pros

Specialization gives them the ability to provide efficient and reliable solutions

Managed IT services provide chances to nature long term business solutions, which is an important ingredient to scalability

Managed IT services give businesses control of their IT costs

Most Managed IT service providers keep tabs on emerging technologies, and can advise you as their client thus capitalizing on opportunities

Managed IT services provide a level playing field in the business world since they give small organization skilled manpower that is available in big organizations

Managed IT services guarantee compliance hence risk reduction

Managed IT service providers provide you with real-time reports, which can be used scaling your business

With a level service agreement, Managed IT services provide you with what you can expect by collaborating with them. This helps you have a clear vision of your goals.

Cons

It’s difficult to find a Managed IT service provider that you can rely on. This is because the number of IT service providers is rising rapidly, and most of them don’t have what it takes to scale with you.

Sometimes, reliable MSPs can be very expensive.

If you are not collaborating with MSP in your local area, it may be troublesome.

The scope of work provided by the selected IT managed service provider may not cover every essential element in an organization.

Now let’s talk about IT outsourcing.

Outsourcing: A Sneak Peak

As stated earlier, Managed IT is also an example of outsourcing.

What is IT outsourcing? Investopedia defines it as a delegation of planned or existing business activities to outside operations. The work in question can be done on-premise, but the organization chooses to use a third-party source for reasons such as cost-effectiveness or efficiency. This is not any different from freelancing, you hire them, they do the work, and they bill you. In relation to IT outsourcing, many companies outsource services such as software development, call center management, and many others.

Some of the main advantages and disadvantages of IT outsourcing include:

Pros and Cons of Outsourcing

Pros

You get access to skilled manpower

Cost reduction in terms of the equipment used, labor, and other related costs.

Some IT outsourcing can increase scalability and flexibility in the company.

Helps balance between profit and risk

Cons

Lack of quality in some instances

You lose control and flexibility

In some instances, it may lead to poor working motivation in the on-premise workforce hence lowering productivity

Managed It Vs Outsourcing

Now that I have gone into the brass tracks of Managed IT and Outsourcing, it is easier to spot the differences. However, since the terms are close when it comes to meaning, it is vital to note that some differences may only apply to certain contexts. The first main difference between the two lies in the definition (which you have come across several times in the article).

The other notable difference is that Managed IT works towards creating a long-term framework to solving a problem, while outsourcing solves a certain problem when it occurs. This outsourcing model of operation can be disastrous since it waits for the problem to happen before solving it. For Managed IT, prevention is always the best way to go. Think about information security for instance. With managed IT, they are likely to deploy precaution mechanisms such as intrusion detection systems or perform network penetration tests. For outsourcing, companies are likely to hire professionals after a data breach has occurred, which can bring about financial destruction and privacy violations of the end-users.

Managed IT services charges consistently at a given time period (mainly monthly or yearly) while outsourcing payments are done based on work done. In some instances, you may even overpay for a service. But, both of them have advantages and disadvantages when it comes to payment models.

Another difference between the two is that Managed IT services are more accountable for what they do. Managed IT service providers always work towards making sure that clients get what they pay for. Real-time reporting creates accountability when collaborating with Managed IT services providers, which increases scalability and reliability in the business. On the other hand, outsourcing depends on the reputation or skill level of who you are dealing with.

Have any other differences that you may have spotted? Please add them in the comment section so you can help others expand their knowledgebase on the topic.

Which One Should I choose?

It never is a matter of which, but a matter of why. Before choosing between managed IT and outsourcing, it is good to contemplate what you are looking for, and document it. Are you looking for scalability and reliability, or looking for a one-time fix to a problem that may never arise again in the near future? What defines your vision, long-term commitment to achieving what you have always worked towards, or short-term commitment to achieving nothing beyond the limits but what is expected for you? If you are thinking long-term, and looking for scalability and reliability, then Managed IT is the best to go. However, in cases where you need a quick fix, outsourcing should work just fine.

Summing It Up

IT has become an integral part of business, and it is almost impossible to do without it. Most startups and SMEs have budget constraints, and can’t manage to hire an in-house professionals to do tasks such as network monitoring, cloud management, and other related tasks. For such organizations, it is logical to collaborate with IT managed service providers as opposed to outsourcing, or hiring on-premise professionals.

There is no one-fits-all framework that can help you choose between the two with a high degree of certainty, hence a need to analyze the two models based on their pros and costs, before making a decision.

I hope the article was filled with valuable information that helps you take your business to a whole new level. If your analysis drives you towards the Managed Services IT model, then be sure to check out ITGLOBAL.COM’s game-changing services.