What are Managed Service Providers?

“Managed Services” is a term normally associated with IT related industries. Another name for it is “outsourcing”, however, outsourcing is a more broad term that often relates to smaller efforts with less planning involved. Managed service providers who provide these services normally offer services which repeat or renew over a period of time-based on a contract created between the client and the managed service provider.

Benefits of managed service providers for your organization:

Managed service providers normally specialize in providing IT services which clients are not able to offer from within their organization. There are many reasons why choosing to outsource to a managed service provider could be beneficial. Your organization might not have adequate resources to effectively provide the service. Your organization might not have access to the same level of information as the provider, especially in a fast-changing area like IT. Your organization might have limited resources or limited options for training. Most commonly, the overall cost of providing these services on a small scale is higher than through hiring a managed service provider who already has streamlined processes which are essentially “wholesale” because they are shared across multiple clients.

Concerns to consider with managed service providers:

Managed service providers may have experience with the particular service offered, however, they may lack detailed knowledge in particular industries which is required to make the service offering a success. For example, managing a call center through a managed service provider may be effective for general needs within major industries, but attempting to set up specialized processes for unique call center needs may prove less feasible than creating a plan to run the service in-house.

When entering into a contract with a managed service provider, be aware of the terms of the contract and how your business could be affected if those terms are changed with a follow-up contract. Managed service contracts are often long-term, such as five-year contracts. When entering into one of these arrangements, consider questions such as what would happen if the cost structure and scope of a next contract was very different than the current one. What would your organization do to separate from the provider? Does the contract lay out terms for standards to maintain? What if the people you are working with at the provider change? What are the ways you could back out of the agreement if necessary?


Managed service providers are often a cost-saving and positive option for providing services which would be difficult to manage from within your organization, however, be sure to consider the situation in detail before entering into an agreement which may not be as beneficial as expected.