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What is a managed services provider?

Managed services providers, or MSPs, offer a variety of outsourced support services for your business. But the right MSP can also help strategically grow your business.

MSP definition

A managed services provider (MSP) is an outsourced third-party company that takes on the ongoing, day-to-day responsibilities, monitoring, and maintenance of a range of tasks and functions for another company – their customer. The MSP and the customer are typically bound by a contract with a standardized service level agreement that defines the expectations and quality metrics of the delivered services.


Common MSP business functions include:

  • IT (connectivity, networking, data-backup and recovery)
  • Marketing (strategy, planning, copywriting)
  • Human resources (employee on-and off-boarding, payroll)
  • Contingent workforce (external workforce requisition, placement, tracking)
  • Supply chain (sourcing, procurement, logistics, distribution)

What services do MSPs provide?

Most commonly, MSPs provide off-site support for IT infrastructure, including connectivity, network monitoring, and security. But MSPs offer a much wider range of services for businesses like the management of a complete business function, such as administering payroll, monitoring supply chain and demand, or overseeing the end-to-end functions of an agile and skilled contingent workforce.


MSPs can also consult and advise on the best technologies or tools for your business. They can build a customized program based on your specific needs and objectives, oversee the implementation of the program, and manage the daily operation and maintenance of those critical functions.

In-house vs. MSP

Often it is more costly and time-consuming to manage a function or service in-house. MSPs offer expertise and experience in their field of services for a more predictable cost. Outsourcing managed services allow businesses to reduce the cost of dedicated personnel working in-house, along with the technology, tools, and other required resources.


Businesses can take advantage of an MSP’s capabilities and industry knowledge, while avoiding the direct cost of managing the program themselves. Further, companies that engage MSPs free themselves from burdensome functions outside their core skillset or business acumen, enabling them to focus on strategic projects and initiatives to grow the business.


MSPs can also consult and advise on the best technologies or tools for your business. They can build a customized program based on your specific needs and objectives, oversee the implementation of the program, and manage the daily operation and maintenance of those critical functions.


Scale your workforce

How to operationalize your external workforce strategy for maximum value.

What are the benefits of working with an MSP?

Outsourcing to an MSP is a growing trend in business as more and more companies realize the benefits of outsourcing many of their functional operations to a third-party expert.


Benefits include:


  • Control costs with a predictable, subscription-based model.
  • Rely on the experienced professionals to keep you up-to-date on the latest trends and technology
  • Increase availability and efficiency, while streamlining operations
  • Reduce risks and liabilities, as MSPs can guarantee compliance with government regulations and industry standards
  • Lower the overhead costs of managing the service with an in-house team of full-time employees


The demand for managed services has grown exponentially in recent years. The global managed services market was valued at $185.98 billion in 2019 and is projected to reach $356.24 by 2025.

What is the relationship between an MSP and a VMS (vendor management system)?

If an MSP were a builder, the VMS would be the toolbox.


In other words, an MSP takes responsibility for the full end-to-end management of a company’s contingent workforce, whereas a VMS, is the central technology that enables this business-critical function. Learn more in What is a VMS?


An MSP uses a VMS as a tool to efficiently manage a company’s external workforce, from talent pooling and recruitment to off-boarding and invoicing. The VMS provides acute visibility – tracking the who, what, where, and why of each temporary worker – while the MSP leverages the rich capabilities of the VMS, like applicant tracking, data and analytics, and comprehensive reporting, to build an entire external workforce management program for their customer.

Why use a vendor management system?

With 42% of workforce spend now on the external workforce, it’s no wonder that there is such high demand for MSPs. Companies today rely on an external workforce – contractors, gig workers, seasonal help, and others - to stay competitive, scalable, and responsive to rapidly changing business conditions.


But managing an external workforce from end-to-end – placing the right talent with the right skills in the right position at the right price – can be overwhelming and time-consuming for many businesses. According to research conducted by SAP Fieldglass in conjunction with Oxford Economics, less than half of executives consider themselves highly informed about compliance, contingent workers’ responsibilities, tenure, quality of work, headcount, and access to facilities. That’s a lot to manage while running a successful company and navigating today’s volatile and changing business landscape.


SAP and an expert MSP can help. If a company cannot support an in-house team to manage their contingent workforce with a VMS like SAP Fieldglass, MSPs can step in and provide full services, from the customization and implementation of a global external workforce program to the deployment of the software, to daily oversight and management of the entire program.



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