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What is the difference between "Cloud Computing" and "Managed Services"?

application managed services vs cloud computing


Peter Lyons, MBA, CMA
Title: Finance and Technology Enthusiast
Company: Currently Looking
(Finance and Technology Enthusiast, Currently Looking) |

This is a great question...

The main difference is control over the data and/or process. In a managed services arrangement, the client outsources the day-to-day functions to a particular vendor for an increase in efficiency as it relates to a process. For example, a lockbox solution comes to mind when I think of a managed services arrangement. There are typically service level agreements in place that support the managed services arrangement.

A cloud computing arrangement is more of a subscription to use a tool available. For example, I may subscribe to an ERP cloud where I pay a monthly subscription to setup my company on the tool. I will be responsible for setting up my firm's chart of accounts, user rights, and importing external data into the tool.


Mark Richards
Title: President
Company: KalioTek
(President, KalioTek) |

Cloud Computing is a buzzword thrown around loosely by different groups in the industry and can mean many things. As a managed services provider and enabler of cloud services for companies, we’re involved with both and offer the following clarification. Since you asked this question in the Cloud/SaaS Accounting and ERP Software area, I’m thinking you are most interested in the Software as a Service described below.

Managed Services typically means you have specific servers and other components assigned to you, and the provider is doing the things your IT department would do if you were sourcing the computing services internally: keeping hardware up and running, applying patches and updates, monitoring systems and keeping historical trend data. You still manage any applications running on the systems.

Cloud Computing Models
Software as a Service – Per Pete’s post above the vendor is managing the software application and typically provides a SLA for application uptime. You are responsible for the specific setup/configuration of the application and your business processes it automates. This model is the most expensive and adds the most value.

Platform as a Service – You get a specified configuration such as firewall, servers and load balancers that are managed by the vendor up through the level of the operating system. You need to install and manage any applications that run on top of the infrastructure.

Infrastructure as a Service – This model provides you with access to virtual servers and networking devices but in many ways you need to manage them just as you would if they were sitting in your own data center. This is the least expensive option and provides the least added value. You might have a 3rd party managed service provider manage the environment for you.

In all of the above models note that many add-on fees may apply so be sure to add up the total cost and estimate how they will scale as your usage grows. The per-server per-hour fee is just the beginning. These can include: internet bandwidth consumed, data storage, data transfer to and from storage, server CPU usage, server memory usage, backup frequency and size, etc.


David Barrett
Title: Founder, CEO
Company: Expensify
(Founder, CEO, Expensify) |

I was at Intuit yesterday and they break it down as:

- Software as a Service (Saas) is an online-only service, such as QuickBooks Online. My service Expensify (expense reports that don't suck!) would also qualify as SaaS because it's all via a web browser.

- "Connected services" are things like Intuit Payroll -- even if you use QuickBooks desktop, might pay through Intuit Payroll which is "connected" to your desktop.

It's a pretty arbitrary difference.

Founder and CEO of Expensify

Theresa Wilt
Title: Independent Contractor
Company: Multiple U.S. Clients
(Independent Contractor, Multiple U.S. Clients ) |

MSP = "Managed Service Provider" can also be providing accounting personnel or other back-office staff experienced to perform functions on the hosted software.
Like Temp help, but with specific expertise in the software systems hosted by the provider. As I heard it, that was a steady source of revenue to secure at the end of an implementation. So on the dark side, a complex system setup is an underhanded way to ensure client remains confused and dependent on provider.
Carpe diem!

Topic Expert
Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

Managed services has been well explained here, and cloud computing with software as a service has been covered nicely as well. I would add that there are benefits possible with cloud computing – specifically, a public cloud environment, shared among multiple users - that leverage technology and the democratize high end computing in a way that managed services can’t. In a public cloud environment, these benefits provide high end capabilities to customers that would not otherwise be affordable to them.

While a public cloud environment requires careful attention to security, isolation, and process, it also offers significant management and cost advantages over the managed services model. For example, 100 managed service customers may require 200 or more servers to support. The same numbers of public cloud customers may only require something in the order of 20 servers with the appropriate management technology. The cost savings for a public cloud are evident, but these numbers actually translate into significantly improved security, since there are far fewer servers that need to be monitored.

Another benefit of a public cloud is “high availability,” which basically boils down to this: there’s no single point of failure. In a managed services or an in-house, on-premise model, you would need to duplicate – at a minimum – every feature of your infrastructure to achieve high availability. In addition, a public cloud environment will include data management technology that is far beyond the average mid-market company’s budget, but can be provided cost effectively in a public cloud.

The choice of what’s right for your company depends on the type of technical service and software subscriptions you need, of course. But, there are compelling reasons for the popularity of the cloud model, chief among them being its ability to make high end computing available to companies who couldn’t afford the same level of technology in a comparable in-house system.


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