How outsourced managed services providers can help organizations improve their internal efficiency

Outsourcing a range of internal functions and processes to a third-party managed services provider can offer a number of benefits to an organization. It can improve operations, supplement internal resources and expertise, and reduce budgetary expenditures through staff reduction or process optimization.

A managed services provider can take over part or the entirety of a function on a company’s behalf to accommodate different budgets, organizational structures, project sizes and objectives.

When services are partially outsourced, the organization benefits from the associated cost savings since it hands over only the most critical parts of the service. This approach is typically used when there is a lack of in-house expertise or in cases where the limited available internal resources need to focus only on key activities.

Partial outsourcing, however, brings with it challenges of process and system integration, in addition to difficulties in establishing cooperation and collaboration between internal and external teams. This may require additional time to plan and define each party’s roles and responsibilities and to establish a solid reporting and communication structure. In other words, the main disadvantage of partial outsourcing is the complexity of coordination between various program participants.

Total outsourcing eliminates most of the communication, integration, setup and collaboration issues associated with partial outsourcing and gives complete control of the selected functions to the managed service provider. Though this approach requires more financial investment, once a suitable provider is selected and the services are handed over, the organization can concentrate on its core business tasks, while having peace of mind knowing its operations are being addressed by a reliable third party. Total outsourcing also simplifies accountability, which is another major benefit for compliance purposes.

Is it time to consider outsourcing to managed services?

Managed service providers can help organizations overcome specific challenges unique to the industry or the organization. Common challenges include:

• Inefficient processes: Unstructured and unoptimized processes are prone to error and therefore are often reworked and reviewed multiple times. This results in redundancy and delays in the decision-making process and the execution of operational tasks. Procedural errors that are not caught in time can jeopardize the entire operation, impact a company’s reputation, and have significant legal and financial repercussions.
  
  
• Outdated technology: Existing technologies that are not upgraded in a timely manner become obsolete. Rigid platforms are unable to keep up with organizational and technological changes and are unable to provide effective support or integrate with new organizational processes and operational demands.
  
  
• Ineffective approaches: “One size fits all” approaches are not effective because they don’t allow organizations to excel in any specific aspect of their operations or find complete solutions to specific problems they face. Broad approaches often limit a company’s growth and expansion capabilities and increase the likelihood of missing opportunities and misidentifying risks to operations. This in turn can prevent organizations from acting rapidly to take advantage of an opportunity or detect and respond to a threat in a timely and appropriate manner.

The challenges noted above can also be accompanied by several aggravating factors such as:

• Increased capacity demands: When a new competitor enters the market, new regulations are introduced, or there is a sudden increase in demand and output requirements, organizations need to be able to pivot quickly to stay competitive. This requires access to additional resources who are ready for rapid deployment and who don’t require training time to get up to speed.
  
  
• Challenging regulatory environment: Industries are becoming more regulated each year. With increasing regulatory requirements and accountability expectations, it’s difficult to keep track of all the changes, and to plan appropriate courses of action to remain compliant.
  
  
• Increasing costs and budget restraints: Support operations can be costly, especially in a constantly evolving market where frequent changes are required to existing processes and functions. These costs are difficult to estimate, often leading to overruns and difficulties in planning and managing budgets.
  
  
• Workforce shortages: With employees retiring or leaving to pursue other opportunities, critical in-house expertise that was developed over the years can be lost. This can negatively impact operations and coordination between departments and processes in an organization that is not ready to deal with the shortage and did not prepare a succession plan.
  
  
• Abundance of choice: The market is flooded with choices of software and service providers, making it increasingly difficult to identify a reliable solution that is a good fit for the organization.
  
  
• Conflicting priorities: Operational support functions require a great deal of attention, effort and significant investment in resources, which are often neglected in favour of revenue-generating activities. This leaves support programs understaffed and — when coupled with heightened regulatory expectations, inefficient systems, lack of personnel and other factors mentioned above — can result in organizations struggling to meet their objectives and obligations.
   

By capitalizing on their expertise and rapid deployment capabilities, managed services providers can help organizations overcome challenges by providing the necessary resources and knowledge to address issues and offer solutions based on proven concepts and modern technologies.
 

Another important benefit of a managed services provider is the subscription-based pricing model for outsourced services. This provides a predictable, set pricing model that in some instances can be more cost effective than internal solutions due to the readily available expertise and access to leading technology and tools. This cost predictability can facilitate budget planning, which provides room to allocate resources for other projects according to operational and strategic priorities, while avoiding the unpleasant surprise of cost overruns.
 

The foundation

Handing over control of internal services or functions is not easy, especially when it’s done for the first time or with a new service provider. However, there are control elements that both the client and the third party can put in place to facilitate a smooth transition and a good start, as well as reliable continuity of operations. These controls include:

• Governance: Clearly defined roles, responsibilities and scope of services are the foundation on which the entire process is built. It’s crucial to take the time during the initial transition stage to thoroughly go over tasks that will be handed to a third party and agree on the manner those tasks will be executed.
  
  At this stage, decision-making trees, organizational structure, workflows, standard operating procedures, process exceptions and communication channels should be discussed. Other common issues that are expected to arise should also be explored and accompanied by a well-defined change request procedure that can accommodate changes in the scope of services.
  
  
• Assessment: to evaluate the performance and the effectiveness of the outsourced service, key performance indicators must be identified and monitored regularly to track various aspects of operations and allow both parties to make appropriate adjustments when necessary.
  
  
• Communication: Access to information is an important factor that can help identify problems and allow stakeholders to make appropriate, timely decisions. Those decisions can then be communicated back to the managed services provider and other parties involved to reduce risks and improve the efficiency and effectiveness of operations. Having clear communication channels will also help avoid misunderstandings and prevent tasks from falling between the cracks, especially in the case of partial outsourcing.
   

Final thoughts

Regardless of whether the services are partially or completely outsourced, managed services providers can play an important role in companies’ operations and bring many benefits to the table, provided a solid foundation that promotes clarity in roles and responsibilities and allows for good communication to take place between all parties is established up front.
 

A managed services provider’s strength — especially the larger firms — lies in its wide range of capabilities and ability to rapidly and efficiently respond to clients’ needs, while offering them peace of mind that experts are taking care of specific operational functions and allowing the stakeholders to make decisions based on predetermined budgets.