How should your organization’s managed services be delivered?

As executives navigate significant cost pressures, revenue challenges, and persistent workforce shortages, managed services have become a critical lever for operational resilience and cost efficiency.  

The decision of where to source—on-shore, near-shore, or off-shore—is not simply a matter of cost. It’s a strategic choice that reflects an organization’s appetite for innovation, its regulatory obligations, and its tolerance for operational complexity. It may also depend on the services being provided—for example, medical coding may require certain skills and expertise that only exist on shore, while it may be possible to take a more global approach to financial compliance and processing.  

Because each sourcing type has its benefits and its risks, leaders should consider a strategic approach that balances all three.  

Off-shore 

Off-shore sourcing—most commonly in India or the Philippines—delivers the greatest cost savings and is well-suited for standardized, repeatable tasks such as IT maintenance, back-end revenue cycle functions, and monitoring for downtime or cybersecurity threats. The model is ideal for non-critical tasks that can be handled through a ticket system or email exchanges. 

Advances in English as a second language (ESL) training and video conferencing have improved communication, reduced knowledge gaps, and resolved quality issues that were commonplace a decade ago, but this model still presents challenges. Limited time zone overlap, cultural differences, and variability in data security mean that executives must demand rigorous planning, accurate forecasting, and constant oversight from their vendors.  

Most off-shore agreements include at least a minimal onshore presence to help facilitate knowledge transfer and serve as a liaison during regular business hours. For large-scale operations, it is very common—and beneficial for long-term success—to include a gradual transfer from on-shore to off-shore resources. 

Near-shore 

Near-shore sourcing, typically in countries like Mexico or across South America, strikes a balance between cost and collaboration. With time zones closely aligned to the U.S., near-shore teams can engage in real-time communication, making them ideal for design and development work that requires collaboration and feedback. While off-shore teams are ideal for break-fix IT work and ticket-based work, near-shore professionals are more often utilized for complex problem-solving and upgrades that may require discussion.  

While near-shore models offer labor arbitrage and cultural proximity, they still require strong governance and may not meet compliance thresholds for certain industries, such as healthcare or financial services. 

On-shore 

On-shore sourcing, which keeps work within the United States, offers the highest level of control, collaboration, and compliance. It’s particularly well-suited for roles that require close collaboration with clinicians, direct engagement with sensitive data, or work that demands deep domain expertise. Due to regulations, it’s currently the only option for the federal government.  

Staff work in a variety of settings: on-site at a client’s facility or office (necessary for patient-facing roles), at a vendor’s service center facility, or fully remote, which is often the case for high-demand roles with unique expertise.  

Because of the business hours overlap and access to a skilled domestic workforce, this model comes at a premium—often several times more than the cost of off-shore or near-shore alternatives—and may not scale as efficiently for high-volume, standardized tasks.  

The emerging role of automation and AI  

Automation and AI are reshaping managed services as vendors use the technologies to support and supplement their staff. Selecting a vendor now involves evaluating both the location of the work and the methods used to complete it. While buyers could purchase or develop in-house solutions, this is yet another area where a vendor’s specialization, expertise, and speed-to-value make a sourcing partnership an attractive option.  

But organizations must ensure that digital labor assets—like bots and AI tools—are governed appropriately and remain under their control. If automation is developed within a vendor’s ecosystem, it risks becoming non-transferable, creating long-term dependency. Buyers should confirm that these tools and workflows remain usable if a vendor relationship ends. 

How to get started 

For most organizations, a hybrid approach that includes a mix of on-shore, off-shore and/or near-shore resources is going to optimize margins and service quality while enabling continuous improvement. But transitioning between these models, especially from on-shore, in-house operations to off-shore or near-shore outsourcing, is a significant inflection point and requires transparency and collaboration with a vendor.  

The calculus isn’t just about cost. It’s about aligning sourcing strategy with organizational values, innovation goals, and compliance requirements that are unique to each industry. Here’s how to set a solid foundation:  

• Identify your guiding principles for outsourcing: Align internally on why your organization is choosing to outsource certain functions—is cost the main factor? Are you seeking to fill staffing gaps or need higher-quality talent? Are you looking to focus on innovation and/or core business activities? Use this information to begin exploring vendors and services and consider how you can focus your highest skilled resources on the highest value initiatives.  
• Demand transparency: Be wary of opaque delivery models that obscure performance and erode trust. Leaders should ask pointed questions to potential sourcing providers about what work is being done on-shore versus off-shore and seek information about vendors’ command and control frameworks. This can materialize through service level agreements (SLAs), operating level agreements (OLAs) and clearly outlined success criteria and KPIs.  
• Document your processes—and ask the same of vendors: In preparation for transitioning tasks to a third-party vendor, leaders should take inventory of all of the processes that are required under their existing workflows. A sophisticated managed services vendor will also have a library of processes their staff can perform and be able to customize for new clients.  
• Develop a comprehensive change management and communication strategy: Take note of any IT, credentialing, HR, and training tasks that may be needed to integrate a managed services partner into your organization and develop a process for escalating issues. Create a plan for communicating organizational changes, both internally to employees and externally to customers. 
• Ask about resource planning: No outsourced team is 100% productive at the beginning of a relationship as staff get acquainted with your workflows. Experienced vendors allocate more resources early on and are able to accurately forecast when they’ll complete implementation.   
• Prioritize physical and cybersecurity: Physical security and cyber precautions are critical considerations for tasks that involve the handling of sensitive data or require access to secure networks. Make sure potential vendors have the necessary certifications and safeguards.  

Managed services initiatives are significant endeavors that require careful planning, close vendor relationships, and constant adjustments. Whether on-shore, near-shore, off-shore, or a hybrid, the best approach is one that aligns with your organization’s goals and grows with changing needs. With the right planning and partnership, these partnerships can be a powerful tool to help organizations work more efficiently and stay focused on mission critical processes and core competencies.