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Managed IT services vs outsourcing: what’s the difference?

Many organisations today use the terms “outsourcing” and “managed services,” especially when it comes to IT services, almost synonymously. But the differences between the two are crucial. Not least for those who want to maintain control, gain greater flexibility and reduce dependence on their IT partner. In this article, we explain both parts, and explain the advantages and disadvantages.

Many organisations use the terms ‘outsourcing’ and ‘managed services’, particularly when talking about IT services, almost interchangeably. But there are important differences between the two, especially if you want to retain control, increase flexibility and reduce dependency on your IT partner.

In this article, we explain the difference between outsourcing and managed services and look at the advantages and disadvantages of each approach.

Outsourcing: the traditional approach

Outsourcing is a traditional way of purchasing IT as a service. It involves an organisation transferring an entire function, process or department to an external provider. This can also include transferring employees or entire systems.

Outsourcing is common among larger organisations, where reducing costs is often one of the main drivers.

In short, outsourcing often involves:

• Transfer of resources and responsibility. The chosen provider takes responsibility for both operations and resources.
• Long-term agreements. Outsourcing often involves lengthy contracts in which the provider assumes overall responsibility for significant parts of the customer’s IT environment.
• Reduced strategic control. As the customer transfers a large degree of control and responsibility to the provider, this can reduce the customer’s strategic control over its IT environment.
• High vendor lock-in. Long contracts and the provider’s extensive responsibility for the IT environment can make it difficult to terminate an agreement or change provider.
• Limited transparency. With much of the responsibility resting with the provider, it can be difficult for customers to understand exactly what they are paying for and the value they receive.

Outsourcing should be approached with a clear understanding of the potential implications for innovation, agility and visibility across your IT environment.

Managed services: clear responsibilities and defined outcomes

A managed service involves engaging an external provider to deliver, monitor and continuously develop a specific IT service or function. This could include network operations, security, backup or endpoint management. The service is typically governed by a clearly defined Service Level Agreement (SLA).

In short, managed services often involve:

• Service-based delivery. Rather than outsourcing the entire IT environment, the customer purchases a clearly defined service or outcome for a specific IT function.
• Usage-based consumption. The customer pays for the services and capacity they use, rather than committing to a fixed cost covering the entire IT environment.
• Retained strategic control. The customer maintains strategic control of the overall IT environment, while the provider takes responsibility for the availability and delivery of specific IT functions.
• Continuous improvement. The provider is responsible for proactive management, optimisation and ongoing improvements.
• Lower vendor lock-in. The customer can distribute services across multiple providers, making it easier to change provider if requirements change.
• Greater transparency. Clearly defined services and outcomes make it easier to understand what you are paying for and the value the service provides.

A managed IT service enables organisations to reduce the operational workload without giving up ownership. Instead, they retain visibility and control, gain greater flexibility to scale and have the option to change provider as requirements evolve.

Outsourcing vs managed services: at a glance

Factor	Outsourcing	Managed services
Ownership	Provider	Customer
Transparency	Limited	High
Contract model	Long-term contract	Ongoing SLA
Flexibility	Low	High
Consumption model	Fixed price	Pay for actual usage
Innovation	Reactive delivery	Proactive improvement

Advantages and disadvantages of outsourcing vs managed services

How do I decide what is right for my organisation?

The choice between outsourcing and managed services depends on your organisation’s needs and maturity, as well as how much control you want to retain internally. Other common drivers include gaps in internal expertise and the need to reduce costs.

Large organisations often choose outsourcing, which in many cases means transferring all or part of the internal IT function to a provider. Day-to-day IT services may then continue with relatively few changes for the wider organisation.

Managed service providers, on the other hand, typically specialise in particular areas. They offer deep expertise and use specialised platforms and technologies to deliver and continuously improve their services.

If your main priority is to reduce internal staffing costs and transfer responsibility for your entire IT environment to an external provider, outsourcing may be the right approach. If you want to retain strategic control while gaining access to specialist expertise across your IT environment, managed services may be a better fit.

Not sure which approach is right for your organisation? Get in touch and we’ll help you explore your options.

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