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Outsourcing vs. hiring a managed service provider: The main differences you need to know | weBlog

May 6, 2022
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Running a business is demanding but scaling it to a global level or simply just increasing its dimension brings a completely new set of challenges. On one side, company owners must ensure that the business activity runs smoothly, clients are satisfied, and the revenues grow. On the other hand, being fully compliant with the legislation – even throughout multiple jurisdictions – and maintaining a cost-effective, flawless back office is another issue to tackle. But how does one secure the perfect balance without getting overwhelmed and spending too many resources?

Outsourcing: the best match to keep your business on track

The first solution most companies are familiar with is outsourcing. To put it simply, it allows to delegate the planned or ongoing business activities to another organisation. Think payroll outsourcing: you hire a company to process, calculate and distribute your employee payslips based on the local legislation, with all the reporting, tracking and additional work included. Although most companies can perform it in-house, hiring a third party significantly lowers the costs for labour, technology, licences and reduces the administrative burden, risk of non-compliance or privacy breach.

In general, outsourcing is based on a fee-for-service model where the service provider performs specifically defined processes and activities based on assignments rather than a wide range of strategies with a big portion of proactivity. It still brings unreplaceable benefits to any business, and in fact, in most cases it is just what a company needs. But when you run a global organisation or need more foresight, you may need a little something extra. That’s when the managed service model steps in.

Managed service provider: a proactive partner with strategic potential

The managed service model is a proactive approach to service delivery that focuses on deeply understanding the needs and processes of the client. The managed service provider (or MSP in short) works towards uncovering the gaps of effectiveness, suggests improvements on specific processes or replaces them with innovative solutions and finds ways to reduce costs, while maintaining the same level of quality. All the while customer satisfaction is set as top priority.

The MSP is more like a partner to the company rather than a third-party vendor solving just strictly specified areas. The main advantage of a managed service, whether it’s payroll, accounting, advisory or else, is that it approaches the issues of clients with a very personal attitude, in combination with other benefits. To name a few, the most common are centralised account management, access to the latest technology and a strategic approach to the client’s needs. The best managed service providers have global reach that ensures a seamless expansion of client businesses to any locations across the globe, while maintaining a single point of contact (or SPOC, in short) yet ensuring the best local expertise available. To find out more about the benefits of managed services, visit our dedicated article.

Choosing between outsourcing and managed services

You may ask, what is better for your business: outsourcing the core functions of your back office and other areas or hiring a managed service provider. After all, both options are cost-effective, offer the best expertise, technology, innovation and reduce a great number of risks. But to make a choice, it is important to revisit the key difference: outsourcing is reactive, while MSP is proactive. For every establishment, a different approach is suitable.

If you wish to unburden your company from administrative work and shift the responsibility so that you can focus on the core business, then outsourcing is the right match for you. This can work for both small and medium-sized enterprises or big, international corporations.

However, if you have complex needs, ambitions for global expansion or wish for a strategic steering wheel, a managed service provider is what you are looking for. The foresight and accountability for your success and effective operation is what makes managed services unique. The fact that a SPOC can cover and manage multiple vendors for you, no matter the location, makes running an international business or complex projects a piece of cake.

In Accace, we have vast experience with the two approaches on both local and global level. Our team is ready to discuss with you what could be the best choice for your business based on your needs, and how we can help with getting your payroll, HR administration and accounting to the next level, or find the best solutions for you with our team of tax, legal and corporate advisors.

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