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Difference Between Outsourcing and Managed Services

outsource managed servicesAs Supply Chain Management (SCM) grows, so does the electronic commerce interface that is required. After all, you cannot run Supply Chain Control Tower unless all the pieces of the puzzle are present. Let's discuss specifically suppliers.

The retailer would be the one setting the standards and requirements. You, the supplier will now have a vital role. Let's not forget it is NOT a one-sided deal. YOU will be participating in the benefits from this exchange.

The first thing for you to do is determine if you have the internal capabilities and resources to successfully implement your own EDI department or should you outsource your EDI requirements to a 3rd party EDI provider. A 3rd party EDI provider will act as your own EDI department and will take away the problems and complexities of using EDI. Typically you currently do not have or require a large organization, so ramping up and running a dedicated EDI operation could be an expensive mistake.

Don't go away yet! Another choice is still to be made. Do you simply outsource EDI or do you search out a managed services solution? The typical reaction to this question is: “What is the difference?”

Simply stated, plain old outsourcing is great when you are already running an EDI operation and searching for a more cost-effective way to do it. Managed Service is geared for the company who bluntly does not have an effective strategy yet.

Now let's consider:
  • Taking advantage of optimal technologies to support changes in mission needs (remember your customer is measuring you on your ability to produce solutions).
  • Managed services solutions have a predefined statement of deliverables and generally includes end-to-end service, service level agreements, and maybe assets.
  • A managed service typically is billed monthly so that it is a more predictable cost approach. (managed by service-level agreements).
  • Because this is their core competency, the managed service provider uses the best facilities, processes, resources, and tools.
  • Cost effectiveness is made through process standards and a standard operating environment.
  • Managed services can operate either as a “BOCO” (Business-owned, contractor- operated) or “COCO” (contractor-owned, contractor-operated) environment.

EDI can be simply sending EDI invoices or it could also be a complex line of traffic where you use orders, order confirmations, pricelists and many other services. It can also be about global business or just local.

The definition of  managed IT services in the marketplace varies depending on who you talk to. There is a common misconception that managed IT services is just another guise for outsourced services.

Managed services make their clients more efficient and effective, even after a profit margin is included.

One key difference is that a managed services agreement takes on the responsibility of managing a company's people and processes to minimize operational disruption while outsourcing contracts typically involve processes being managed by new resources, often in a lower cost environment.

Managed service providers are also typically viewed as a company partner or staff augmentation to ensure delivery of services and products while outsourcing contracts tend to be managed with a formal vendor or "outsider" relationship.

A managed services provider has industry-specific expertise.With evolving services and solutions, you never have to worry about staying up to date with emerging technologies that could benefit your business.
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