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Managed Services
Managed services is a method of outsourcing business functions in which the service provider takes full responsibility for the function it performs. It’s executed by third-party service providers hired by companies to manage certain functions completely on a long-term basis.
What’s the difference between managed services and outsourcing?
Outsourcing simply means hiring another business to perform tasks on a company’s behalf. The most common model for outsourcing functions is the on-demand or break/fix model. In this model, the company hires a service provider to perform functions as needed, such as when repairs to equipment or installation of a computer network are needed. The outsourcing firm then bills for work completed or hours worked.
Managed services is a specific form of outsourcing in which a service is managed holistically over a longer period of time. Service providers are contracted to manage whole business functions such as payroll or recruitment. They not only perform services but also plan them out with the client company to help that company’s business improve and become more streamlined. Managed service providers (MSPs) typically bill up-front and on a monthly basis for their ongoing services.
How do managed services benefit businesses?
The concept behind managed services is that an MSP should be able to perform a business function better than the company it supports. Ideally, more than one of these benefits will be realized by the managed service provider:
- Increased speed: Service providers can perform functions faster than the businesses they support, such as delivering products or solving problems quicker.
- Improved efficiency: By specializing in a specific process, a service provider may be able to reduce the resources and energy normally wasted by the client company.
- Lower cost: MSP specialization often translates to reduced costs, even when considering the MSP’s fees.
- Greater scale: When scaling up is necessary, an MSP may be able to provide services with more equipment or a larger workforce.
- More accuracy: Managed service providers employ teams of specialists and use advanced software solutions to ensure greater precision and accuracy in their processes.
What types of services are commonly offered under managed services contracts?
Managed services refers to the method of outsourcing business functions and in no way limits the functions that can be contracted to a third party. At present, some of the most common types of services offered by managed services providers include:
- Physical security
- Data security
- Information technology management
- Customer service
- Logistics
- Marketing
- Data backup
- Payroll
What factors should a business consider when choosing a managed services provider?
It’s important to do a full assessment to ensure that managed services are going to be able to make real improvements to business processes. Factors to consider when choosing the best MSP from a group of candidates include:
- Communication: Find an MSP with whom you can communicate easily and effectively. Look for a provider who always has time to talk to you.
- Experience: A well-established service provider will have the experience and know-how to pivot quickly when changes and solutions are needed.
- Reputation: Check the service provider’s ratings and reviews to see how happy clients are with their services.
- Cost: Find an MSP that won’t charge you more for the same quality as in-house execution.
- Scale: Consider whether the MSP actually has the capacity to perform services at the appropriate scale.
What are the challenges of implementing managed services, and how can they be addressed?
Using managed services should save your business time, effort, and money. However, there are also challenges to getting started that you should keep in mind, such as:
- Data security: Hiring a third-party provider means you need to find secure ways to share data.
- Restructuring: When you choose to use managed services, you may need to downsize in-house teams that will no longer be providing these services.
- Systems integration: You and the MSP may use different technology. Your systems will need to be integrated to work together effectively.
- Regulatory compliance: You’ll need to work together with the MSP to ensure they comply with the regulations that govern your specific industry.
How can companies measure the success and ROI of managed services?
While your planning might predict that a managed service provider will be faster and cheaper than your in-house team, you must ensure this is the case long-term. That means choosing key performance indicators (KPIs) and monitoring them continuously. You should find that you save time on processes and money on staff and equipment by using managed services.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
