When does outsourcing become managed services?

  • Posted on July 24, 2013

This article was originally written by Avanade alum Dave Carmichael.

Ask a hundred ‘experts’ about managed services and you’ll probably get a hundred different answers. But (and it’s an important ‘but’), you should see some trends and consistency in the responses. For those of us that work and live in the space, it’s an increasingly important subject.

Outsourcing has been around as a term since the late 1980’s; specifically to when Eastman Kodak made the decision to outsource it’s IT operations in 1989. Since then, we've seen it evolve, grow and morph to incorporate Business Process Outsourcing (BPO), hosting and offshoring (including its various derivatives). The dot com boom ushered in new terms like Application Services Provider (ASP), which seemed to disappear almost as quickly as it appeared. And then, of course, in the late 2000’s we started to see the term ‘cloud’ be used ubiquitously (think ‘find’ and ‘replace’) in marketing literature that related to outsourcing.

And this is where the problem lies. Outsourcing has become a catch all; an umbrella term for pretty much anything you can throw over the fence to a third party provider to the extent that its meaning is diluted to the point of being meaningless. For many, it is now considered a legacy term for increasingly commoditized (cost-centric) services.

This is why the term Managed Services is growing in significance. It reflects the growing demand for outcome based models such as SLA’s that have a business meaning delivered on a subscription basis. It is a more descriptive term for specific solutions that go beyond just cost savings to align with growing expectations.

Increasingly, Managed Services use cloud technologies. But another important distinction for Managed Services vs Outsourcing is that Managed Services is a 'management' option, not a 'deployment' option. It’s really about people, processes and tools.” This means that the technology used is pretty much irrelevant.

A great analogy for this is a chef. Yes, a chef. Think about it. A great chef can cook anywhere; in your garden, your kitchen, their own restaurant, a marquee or a ship; it really doesn't matter. That’s because a great chef has the skills and employs the right people for the job. They have great tools (knives, pans, etc) and, of course, great processes (recipes).

The same is true of a Managed Services Provider (MSP). A great MSP can provide their service regardless of how the technology is deployed. They could be delivering the service remotely for technology deployed on premise or hosted in a third part data center. It could be delivered out of the provider’s data center or the cloud (public or private). Increasingly, it will be all the above as we move more into the hybrid world.

The important thing from the perspective of a consumer of these services is the ability to choose because one size does not fit all and the deployment technology matters to businesses for a myriad of reasons. So, when does Outsourcing become Managed Services? It’s all in the sauce!

Som Dev Yuvaraj

Informative post about Outsourcing. Outsourcing companies in India saves us time and money. They have skilled experts to manage our needs.

September 12, 2016


Very appropriately defined the expectations now a company is having from an outsourcing firm. From the time to reduce cost expectations arose now for giving add on in company's growth and this increases responsibilities as well as challenges for an outsourcing firm.

August 30, 2016

Michael Robbins

I think more in terms of when the Outsource traverses the stage "Engagement" to a trusted resource within the team dynamic. Only then does MSP begin within the client''s process. Even with chefs...it is about reputation, mindshare and specialization to maintain a longterm relationship with the diners. The internet can provide the means for anyone to have great recipes, presentation and equipment...it is the frequent successes that make a great restaurant (or MSP practice). Very few successful MSP practices rely on "Happy Hour" prices to maintain a full restaurant.

July 25, 2013

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