One has to make a clear distinction between outsourcing, managed service and cloud. Outsourcing is all about wholesale transference of internal competencies, responsibilities and assets of a department or function to another party, these are almost always bespoke models with cost dependant outcomes based on mutually agreed SLAs.
A managed service is a point solution which is delivered in such a way to add value to the component parts and offers a Opex alternative to traditional Capex based business investments. The cloud is much more about the structure and delivery of services affecting how you buy and consume product.
If you look at the functions an outsourcer might provide they fall into 3 broad categories; infrastructure management, application management and end user management/ support. In the case of infrastructure the removal of assets from the customer’s books is the key feature, a managed service provider (MSP) will generally offer new assets but would smooth the investment curve, whereas a cloud provider where flexibility and elasticity are key features, will tend to offer scalability and remove the excess capacity at non peak times.
In the application management environment a managed service is a good tool to use in a world where technology is changing too quickly for enterprise IT departments to keep up with and where implementation is a potential issue. In the case of both managed and cloud based services they are ways to achieve a cost base which is directly proportional to productivity. An outsourcer may also cover the same functionality but slight changes in spec or capacity or SLAs will tend to lead to a contract negotiation.
In my view managed services and particularly cloud based managed services are an alternative to outsourcing for many IT Directors, they give the opportunity to ease growing pains whilst concentrating on maintaining the level of service they currently offer their organisation, particularly if the step to outsourcing seems a bridge too far. Talented IT staff are not always the best people to manage outsource contracts whereas they are generally good at understanding how to deliver service across a variety of environments.
What is most important is that the organisation chooses the model which best meets the desired business outcomes. If you want to get rid of your IT department then outsource it, if you want to get better productivity from your IT department an MSP would probably be your best bet, alternatively if you just want easy, low commitment access to IT assets like applications or storage (managed or otherwise) then why not try the Cloud.