What are managed services and why do businesses use them?

By Indeed Editorial Team

Published 11 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

As a company grows, it requires an increasing number of services to support its business activities. These business support services could include IT, data management, human resources, finance and accounting and a variety of logistical roles. Managed services allow businesses to outsource the provision of some of these essential support services to specialist companies, for a fixed fee. In this article, we help you to understand the role of managed services in business, when companies may use them, the different types of services offered to businesses and the advantages and disadvantages of using these types of services.

What are managed services in business?

Firstly, let's answer the question 'What are managed services?' in more detail. Managed services are companies that offer specialised services to businesses, to support them in their everyday operations. By taking on responsibility for certain core business services, managed service providers can provide the infrastructure that smaller and growing companies may require to grow, but couldn't afford to supply in-house. The provision of managed services can also allow growing companies to focus on their main business objectives, without struggling with the complex processes that support the business.

Related: 12 services examples and what services are: a guide

When do companies use managed services?

Companies may employ managed services for a variety of reasons. Below are several reasons why a business might choose to outsource certain services to managed service providers:

When the company requires specialist support

Some companies may lack the capacity or resources to employ specialists to carry out specific tasks for their business. For example, companies might commission IT specialists or data management services if they require support in this area and don't have the structure and resources to support them as full-time employees of the company. Some businesses may require intermittent specialist support that doesn't require a full-time employee, and as such, they may choose to outsource these functions to managed service providers.

Related: What does the IT department do and what are IT roles?

To save costs

Commissioning managed service providers to handle certain functions of the business can save costs for smaller or medium-sized companies. Departments such as human resources, finance or IT may require a variety of different roles, and the costs associated with establishing a whole department and paying the salaries of a full-time team can be a burden for smaller firms. The ability to outsource these functions to managed service providers can reduce these costs. Using managed service providers can also save companies the cost of various overheads, including insurance, office space, pensions and other benefits on top of salaries.

To streamline the business

Outsourcing a variety of business support services can help a company to remain streamlined, or to become more streamlined as it grows. If a business is facing challenges, either financial or logistical, managed services can reduce the strain on directors and managers and help make a business more agile.

To help the business to grow

Small businesses may reach a stage of their development where they require certain infrastructure and support, which can help the business to grow further. These structures of support, including human resources and IT support, can provide the foundations for a company to grow and support the company as it transitions into being a larger organisation. Managed service providers can offer that support to businesses before the businesses themselves are capable of providing the services for themselves. As such, managed services can provide a platform for growth.

Related: What is the back office and why is it important?

Different types of managed services

There are numerous types of managed business services, provided by a variety of companies, including some large, multinational corporations. Some services that companies may choose to outsource to managed services providers are as follows:

IT services

IT is one of the most commonly outsourced services. Managed IT services can be useful for office-based businesses that aren't large enough to have their own IT departments. Services can provide basic IT support remotely, including security, software installation and server provision, alongside other, more complex and specialist tasks and roles. Managed IT services can reduce the burden on internal staff by taking on responsibility for certain tasks, or they can assume responsibility for the entire IT support infrastructure of the organisation.

Human resources

Human resources is an essential back-office department that oversees the workforce, manages recruitment, payroll and other critical internal services related to staffing. Managed human resources services can provide a comprehensive human resources package to companies that might be too small to provide it for themselves. As a company grows, the demands on human resources become more and more complex, so managed services can provide a useful solution to companies dealing with changes in scale and scope.

Related: Core HR functions and different human resource specialities

Finance departments

Similar to human resources, finance teams provide essential business support to companies and require staff with a range of specialist skills. Outsourced finance teams can provide qualified accountants to manage your company's finances for a fixed fee, leaving you and your team to carry out your main business activities.

Building and facilities management

There are numerous managed service providers that offer buildings, facilities and estate management services to a range of clients, large and small. This can include organisations with multiple office locations and several properties. Packages can include building security, maintenance, landscaping, equipment provision and facilities logistics. Logistics could include office moves and designing and managing office layouts.

Transportation and shipping

Specialist shipping companies can take away the significant logistical burden for businesses, of managing their own transportation and shipping. For smaller companies, it may be impossible to manage shipping in-house, owing to the high cost of acquiring and deploying a fleet of delivery vehicles, and the logistical challenges shipping presents. It can be useful for companies to outsource their entire transportation operations to third-party providers.

Marketing services

Companies may require marketing support across a range of services that they're unable to provide internally. The range of marketing activities that a company may employ covers numerous specialisms, from creative work to operational and strategic positions. Full-service agencies can provide marketing services, to devise and manage campaigns from start to finish, but they may also include specific functions, including web design, graphic design, social media support and copywriting services.

Serviced offices

Serviced offices provide office space for companies that may be unable to rent their own dedicated office. The offices can provide individual desks, communal workspaces or even entire office buildings, depending on the requirement. Shared office buildings can be useful for smaller companies, as they tend to include shared meeting rooms and other useful facilities that a larger dedicated office would provide. They tend to be available at a much lower cost than the price of renting a dedicated office space.

Related: Why work in HR? A guide to careers in human resources

Advantages and disadvantages of managed services

The advantages of employing managed services for your company may include:

  • A simple, fixed fee payment structure: Managed services tend to be available for a simple fixed cost. This can be more attractive to company directors than setting up new departments and employing specialists directly, which provides the potential for various hidden and unforeseen additional costs.

  • Provision of specialists: Managed services can provide specialists that may be difficult to recruit directly, or that your business may not require in a full-time capacity. Managed service providers can also stay up to date with the latest industry trends and advancements in technology.

  • Provide support to enable businesses to grow: Support services can provide businesses with the potential to grow. The services provided may increase the scope of the business, or release employees to work on the core business objectives rather than taking time on administrative and support work.

  • Increased efficiency and productivity: Managed services can often deliver the support businesses require with greater efficiency than they could provide themselves, owing to the large scale of the service companies and the specialists they employ.

  • Improved risk management: Outsourcing certain business support services to third parties can lower the risk and liability on the company itself.

The disadvantages of using managed service providers to support your business may include:

  • Employing reputable managed service providers can be costly: Managed services can provide a cost-effective solution for businesses that lack the capacity to provide the necessary support for themselves. Reputable managed service providers can be expensive, especially if your company outsources several essential business services.

  • Lack of physical presence in your office: Managed services such as IT support tend to be almost exclusively remote. This can result in difficulties if you have a hardware issue, or require an in-person visit. Some firms do provide on-site support, though this is usually only available at an extra cost.

  • Limits to their scope: Managed services can provide excellent support in numerous specialist areas of work. It's possible though, that they may lack the scope to provide all the support you need, which could leave your business still requiring employees or contractors to fill any gaps in provision.

Explore more articles