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The Difference Between Managed Service and BPO

by | February 1, 2022

The Difference Between Managed Service and BPO

Many factors go into running a business. From IT to payroll, successful companies must juggle various systems and time-consuming functions that can shift focus away from their primary goals. Managed service providers and business process outsourcing are two services that free up company leaders’ time and resources to spend on revenue-generating tasks.

BPO became a popular business strategy in the 1980s, and it eventually led to the development of managed services — a more comprehensive and specified version of outsourcing. These business strategies are similar because they involve trusting an external service with select types of tasks. However, they differ in some noteworthy ways. Depending on your unique needs, either service can be beneficial to your business.

What Is a Managed Service?

Some of your organization’s daily functions are essential, but do not directly contribute to bottom-line revenue generation. These include IT management, payroll and human resources. A managed service provider allows your team to focus on its core competencies by taking over these specialized applications.

For example, a managed service provider can oversee your company’s information technology needs, implementing tech solutions to help employees do their work more efficiently. Managed services also help companies save money by reducing overhead costs such as office space, salaries and benefits. They can provide more services and faster access to the latest technology than an in-house team can, which results in a higher return on investment. Managed service providers work with companies to build a partnership and help their business thrive.

What Is BPO?

BPO, short for business process outsourcing, is a practice in which a business delegates an intensive business task to an external service provider under contract. The external service provider manages, owns and administrates the task based on measurable and defined performance metrics. BPO services fall into two categories — vertical and horizontal.

Vertical offerings require in-depth knowledge of a specific industry’s processes. In contrast, horizontal offerings can apply to similar functions across multiple industries.

Your business could consider using BPO for front- and back-office functions. Front-office tasks include marketing, customer services and sales. Back-office functions encompass IT services, quality assurance, human resources, accounting and payment processing.

BPO Evolved Into Managed Services

Comparing Managed Services and BPO

When contrasting managed services vs. BPO, you might assume they are two different terms for the same offering. Both forms of external assistance help busy managers complete tasks and focus on their core goals. When employees have too much on their plates, they often decrease productivity by shifting focus away from critical projects. Managed services and BPO can help these overloaded workers by taking over some of their responsibilities.

Managed services and BPO handle specific tasks many growing companies don’t have the time or internal resources to maintain independently. These services can help companies with responsibilities such as IT security, server installations, document processing, desktop monitoring and even recruiting skilled employees to build teams. However, there are some differences between the two types of services.

BPO Evolved Into Managed Services

BPO officially became a business strategy in 1989, and it eventually sparked the evolution of managed services as a similar offering that uses a more holistic approach in helping companies. Outsourcing began as a solution to provide different businesses with an array of turnkey offerings, while managed services grew from this practice to provide more comprehensive options. Managed services are very similar to BPO, but they cover more details than BPO services do.

Managed Services Are More Customized Than BPO

Managed services are more specialized than BPO. For example, if you contract with a managed service provider to oversee your IT, you will work closely with a liaison who will consult with you to determine your needs and provide a customized plan. As a result, your managed service provider will take over responsibility for specific information technology functions your company can’t handle on its own.

Managed Services Provide Longer-Term Solutions

BPO is usually a short-term solution for companies that need help with a specific problem, while companies typically depend on managed service providers to provide more permanent assistance. Managed service providers will often integrate with your company’s team for a long-term partnership.

The Costs of Managed Services Are More Predictable Than BPO Costs

The costs involved with BPO can be unpredictable if they depend on performance pay and the deals a company makes with other businesses. Managed service providers are more financially predictable because they will give companies an upfront cost even for recurring services. Most providers have a monthly fee, so there are no surprises about what you will pay each month.

Businesses Receive More Support From Managed Service Providers

BPO companies will complete their required tasks on time, but their services end there. They do not promise to offer the same foresight as a managed service provider, which will proactively look for innovative strategies your company could use to be more successful.

When you hire a managed service partner, you will gain a partner who wants to help your business succeed. They will help you oversee business operations and suggest long-lasting solutions to help your organization grow, save money and work more efficiently. At Instant Teams, our remote, on-demand teams allow you to create, scale and manage without the stress associated with hiring, compliance and payroll.

Learn More About Instant Teams

Recruiting skilled employees is a time-intensive task that can shift your focus away from mission-critical goals. Contact Instant Teams to learn more about how we can help you build a team of skilled employees in as little as seven days, saving you time and money.

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