As Cloud Creates a Blurring of the Lines, What Separates Managed Services from Outsourcing?

The more white papers you review that define and talk about outsourcing, managed services, and the cloud the more entangled these models seem to become.  Yet there are clear differences, and understanding how the different options complement the core business of a company to generate maximum value is the obvious endgame.  We spoke to Hugo Harber, Portfolio Director at Colt, an IT managed services company based in the UK, and thought leader on the topics of cloud, managed services, and outsourcing to gain a better understanding.

“There is some cross over between the two, but they are two different models that live apart [outsourcing and managed services].  Outsourcing involves the transfer of assets, people, internal competencies, and responsibilities to another party that will guarantee specified cost savings over time.  Managed services can be quite varied in depth and acts as a complement solution to fill skill and infrastructure gaps and allows for an Opex solution (Operating Expenses) to what would traditionally be a Capex (Capital Expenditure) investment.

Cloud is more about delivery over virtual environments of hosted apps, unified communications, etc. in a way that is usually less customizable, but more flexible; buy per user per month and no infrastructure,” stated Harber.

From talking to an industry veteran like Hugo it is clear that the question is not which one you choose, but instead which mix.

“You may have an organization that outsources its call center, uses managed services for application management, and cloud for their executives’ unified communications stack,” added Harber.

As with any business it depends on how the mix complements the company’s core competencies. Companies not looking to outsource their entire IT department because the internal know-how loss would negatively impact the company’s core competency look to retain high level engineers while not wanting to maintain basic infrastructure and labor needed to do so, managed services comes into play as companies seek to minimize Opex.  Jack Welch wrote, “You shouldn’t have something in your back office that exists in someone else’s front office.”

The virtualization of a company’s services is in its infancy in terms of the cycle it will run to diminish systems and application duplication, provide ubiquitous mobility, and contribute to jobs being even more origin independent.

Cloud

It is not just because of retaining internal competencies and reducing Opex that some companies turn to a mix favoring managed services and cloud.

“In my view managed services and particularly cloud based managed services are an alternative to outsourcing for many IT Directors, they give the opportunity to ease growing pains whilst concentrating on maintaining the level of service they currently offer their organization, particularly if the step to outsourcing seems a bridge too far,” remarked Harber.

Harber went on to say that the cloud based services and managed services lend themselves to fuller transparency in terms of cost for productivity and cloud enables IT assets like Platform as a Service (PaaS), hosted apps, storage, unified communications, etc. at low commitment whether they be managed or not.

One thing is for sure, the virtualization of a company’s services is in its infancy in terms of the cycle it will run to diminish systems and application duplication, provide ubiquitous mobility, and contribute to jobs being even more origin independent.