OPBOK® - Outsourcing Professional Body of Knowledge - Glossa

Activity-Based Costing :  Activity-based costing looks at aspects of an organization's operations and attempts to answer the very simple, but sometimes hard to answer question, "How much does it cost to do that?" For example, how much does a company spend processing a receivable or taking a customer call? How much does it cost a city to fill a pothole? The term relates to outsourcing in that once an organization can answer the cost question at the activity level, it can more objectively compare the cost of internal versus external sourcing for performing it.
ARC :  "Additional Resource Charge" is the pricing band for volume greater than baseline volume defined in the contract.
ASPs :  Application Service Providers are companies that remotely host software applications and provide access to and use of the applications over the internet or a private network. Typically, the service fee is usage based, for example, per user per month. Although the term itself has somewhat fallen into disfavor because of the number of ASPs that were formed and then failed at the end of the dot-com bubble, today almost all outsourcing service providers rely on the ASP model for linking aspects of their services to the customer organizations.
Barriers to Outsourcing :  Companies often see resistance, especially from inside the organization, to outsourcing. Commonly referred to as 'barriers to outsourcing' the most common ones are: fear of loss of control, viewing an activity as too critical to outsource, loss of flexibility, concern over potential customer issues, and concerns over potential employee issues. All of these barriers can not only be overcome but turned into positives through properly structured and managed outsourcing relationships.
Benchmark :  An objective measure of performance that can be used to compare operations across organizations. Most commonly used to compare the cost for an activity, but can also be applied just as effectively to other aspects of an operation. For example, day's sales outstanding would be used to compare the performance of companies to each other in their collections activities. The comparison is often termed in quartiles, with the top quartile being the best 25 percent of companies and the bottom quartile being the poorest 25 percent.
Best-of-Breed Sourcing :  When a business divides the outsourced work between different providers based on their capability matched against requirements, it is considered to be a "best of breed sourcing" model.
Business Process Outsourcing (BPO) :  Business Process Outsourcing puts together two powerful business tools - business process management and outsourcing. Business process management uses technology to break down barriers between traditional functional silos, such as those found in finance, order processing, and call centers. Outsourcing uses skills and resources of specialized outside service providers to perform many of these critical, yet non-core activities. BPO means examining the processes that make up the business and its functional units, and then working with specialized service providers to both reengineer and outsource them at the same time.
Bundled Sourcing :  When a company bundles multiple processes and sub-processes into a single transaction and outsources as a whole. Generally, this is done to achieve a greater level of process efficiency and take advantage of technology installation, such as ERP.
Captive Center :  A company-owned offshore operation. The activities are performed offshore, but they are not outsourced to another company.
Case Study :  A case study is a more collaborative approach to defining a customer's requirements styled after a Harvard Business Review case. It is used to engage a small number of pre-qualified providers in the conceptual design, development, and proposal of an outsourcing solution.
Change Management :  Change management is recognizing and addressing the questions and fears expressed by various stakeholders who are affected by outsourcing. Communication is a key element within Change Management.
Commercialization :  Outsourcing often provides an opportunity for an organization to 'commercialize,' that is, generate incremental revenue dollars or equity value, from its internal operations. This can be done in many ways, such as selling existing internal assets to the provider, licensing intellectual properties, and entering into a strategic alliance or joint venture with a provider.
Commoditization :  Power is essentially shifting from the producers of goods and services to the consumers. As a result, a company's ability to command a higher price for the unique value it offers lasts only for a shorter and shorter period of time. Once commoditized, a product or service can no longer be differentiated in the marketplace and is selected by the customer based almost exclusively on price.
Consortium Sourcing :  Several units and/or companies can jointly outsource an activity (by forming a formal or informal consortium) in order to gain economies of scale. Cloud computing is designed to provide a platform for such activity.
Core Competencies :  The unique internal skills and knowledge sets that define an organization's competitive advantage - as seen by its customers. Core competencies are usually limited in number and are embodied in the organization's products and services rather than being the actual products or services themselves. For example, Microsoft's core competencies are software design, development, and marketing. Chrysler's are product design, process design, and marketing. These are the capabilities that enable these companies to produce and sell their uniquely competitive products for the customers they serve.
Critical versus Core :  Many operations are critical to a business's operations but do not represent a differentiating competitive capability; that is, they are not core competencies. A classic example is payroll. Processing payroll accurately and timely is critical to the success of any organization, but is a core competency of very few organizations - mainly those that provide this service to other companies as their business.
Due Diligence :  The due diligence - or provider evaluation - process begins before identifying the potential providers and continues through the acquisition process (RFI, RFP and contracting) and eventually becomes a part of the ongoing governance process.
F.BITDA :  "Earnings Before Income Tax, Depreciation and Amortization". This is a measure of net impact of savings on profit.
E-Sourcing :  Internet-based outsourcing that takes advantage of the application service provider (ASP) delivery model. This approach enables the delivery of business process outsourcing over the Internet.
Functional Process Outsourcing :  A company's business processes end at its true customers, the people paying the bills. There are, however, many internal processes that exist to support people within the company and are often performed within a single department. Human resources, finance and accounting, travel, and facilities services are examples. When these functional processes are outsourced, along with the supporting technologies and supply chains that feed into them, it is referred to as functional process outsourcing.
Gain-sharing :  A contract structure where both the customer and provider share financially in the value created through the relationship. One example is when a service provider receives a share of the savings it generates for its client.
GBPOV :  The Global BPO Value Equation is an expanded value model for outsourcing where: GBPOV = [(Business case) x (Acceleration + Flexibility)] A Innovation. That is, the full value of global business process outsourcing is the traditional business case multiplied by the improvement to the organization's acceleration and flexibility, all raised to the power of innovation.
Governance :  The oversight and management of all aspects of an outsourcing relationship. Areas of focus include: change management, communications management, performance management, operational management, risk management, strategic management, and others.
Just-in-Time Sourcing :  The organization adopts a continuous sourcing planning process that takes place on a project-by-project basis. Sourcing decisions are considered to last only as long as the projects that created the need for them. Shared services centers are often managed this way, with the organization's internal customers free to take their business on a project-by-project basis o the source they believe can best contribute to the outcomes they seek, whether that source is inside or outside the organization.
Knowledge Management :  Knowledge management is the explicit and systematic management of vital knowledge - and its associated processes of creation, organization, diffusion, use and exploitation.
Knowledge Process Outsourcing (KPO) :  Knowledge process outsourcing is becoming prevalent to describe services where there is a greater content of using deeper level knowledge (domain, topic, data mining) as a part of the process.
Make versus Buy :  Outsourcing is often referred to as a 'make versus buy' decision on the part of the customer. The question is, "Is it in the organization's best interests to continue to (or start to) perform the activity itself using its own people, process expertise, and technology or to 'buy' the activity from the service provider marketplace?"
Market-Driven Sourcing :  A market-driven approach to sourcing means that the organization's sourcing decisions are in direct response to the capabilities of the marketplace of available providers. Where the organization's internal capabilities are superior to the marketplace of providers, the activity is performed internally; where they are not, the activity is performed externally.
Master Agreement :  Agreement between customer and service provider containing terms that apply to all current and future services agreement. It also contains schedules that define overall conditions and requirements.
Nearshore Outsourcing :  When companies select a destination country that is closer to the home country where work is performed (e.g. Canada, Costa Rica for US based companies or Ireland for English companies)
Net Present Value :  Net present value (NPV) is a standard method for the financial appraisal of long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.
Offshore Outsourcing :  The outsourcing of any operation, whether information technology, a business process, or manufacturing, to a company whose principal base of operation is outside the country. Terms such as near-shore outsourcing or close-shore outsourcing are also used to indicate that while still outside the country, there is a closer proximity between the customer organization's primary operations and that of the provider. For example, for a US company Canada might be considered near-shore while India is offshore.
Offshore/Offshoring :  Performing or sourcing any part of an organization's activities at or from a location outside the company's home country. Companies create captive centers offshore, where the employees work for them, or outsource offshore, where the employees work for the outsourcing provider.
Outsourcing :  A long-term, results-oriented relationship with an external service provider for activities traditionally performed within the company. Outsourcing usually applies to a complete business process. It implies a degree of managerial control and risk on the part of the provider.
Outsourcing at the Customer Interface :  Outsourcing where a provider assumes responsibility for direct interaction with an organization's customers. This interaction may be in person, over the telephone, via email, mail, or any other direct means.
Outsourcing Framework :  The outsourcing framework is a structure for mapping all of the activities of an organization in a way that allows consistent evaluation, planning, implementation, and management of sourcing decisions.
Outsourcing Process :  A repeatable, multistage, management process for identifying outsourcing opportunities and moving those opportunities from concept though implementation and ongoing management.
Outsourcing Process Maturity :  Uses an industry best practice framework (such as CMMI) to analyze current and target state maturity levels for outsourcing
Outsourcing Teams :  Multi-disciplinary working groups that form for specific purposes throughout the outsourcing process.
Out-tasking :  The term out-tasking implies that the business is responsible for the entire process except for a task that is done by a third party provider. It is often applied in the context of manufacturing processes where a business engages a third-party manufacturer to perform a manufacturing task (such as anodizing a formed part).
Performance-Based Pricing :  Contractual pricing mechanisms that link compensation to meeting specific performance objectives or outcomes.
Process Enterprise :  A process enterprise operates its business as a collection of end-to-end business processes where executive leadership, education, responsibilities, measurement, and reward systems are all oriented to this view of the business's operations. This process orientation is in direct contrast to the traditional hierarchical view of an organization.
Provider :  See entry for Service Provider.
Regulation Compliance :  Outsourcing processes must comply to all regulations (state, country, industry, financial market) and the sourcing process must recognize the impact of these regulations on the strategy, implementation and governance of outsourcing
Risk :  Risk refers to the chance for unexpected negative business outcomes resulting from internal or external factors. There are four major classes of risk associated with outsourcing: strategic risk, operational risk, result risk, and transactional risk.
RFI - Request for Information :  A document requesting information from potential outsourcing service providers demonstrating their capabilities, resources, experiences, and overall approach to providing services.
RFP - Request for Proposal :  A document detailing a customer's outsourcing requirements and the evaluation criteria that will be used for selecting the ultimate provider. RFP's are typically sent to a limited number of potential providers, around three to five, that have been previously qualified as capable of delivering the needed services.
RRC :  "Reduced Resource Charges" The pricing band for volume lower than baseline volume defined in the contract.
Rural Sourcing :  When a provider establishes a center in a rural area where the labor rates may be lower than an urban-metro area and companies take advantage of such an arrangement
Scope of Services :  The services provided under an outsourcing agreement.
Scorecard (Balanced Scorecard) :  A scorecard, or balanced scorecard, is a way of measuring how much value has been delivered through the outsourcing relationship. Scorecards attempt to look at benefits beyond the mere level of service (see Service Level Agreement, below) and may include measures of overall economic value achieved, such as revenue, share price, market share changes, or measures of business-wide achievements, such as, speed to market and innovation.
Services Agreement :  Agreement between customer and service provider containing terms for a specific process outsourcing and is supporting the terms laid out in the Master Agreement. However, a services agreement may overrule certain terms in the Master Agreement.
Service Level Agreement (SLA) :  Outsourcing is a service. The service level agreement, or SLA, defines the intended or expected level of service. For example, how quickly a service will be performed, what availability, quality and cost targets will be met, what level of customer satisfaction will be achieved. In essence, every outsourcing agreement is made up of three basic elements: a description of the services to be performed; a scorecard or SLA defining in objective, measurable terms the standards for the delivery of each service, and; a pricing formula for how the service provider will be compensated.
Service Provider :  A company that provides outsourcing services. Terms such as provider, vendor, and partner are often used interchangeably each carrying a slightly different connotation intended by the user.
Shared Services (Shared Services Centers) :  Shared services are common activities that are used by more than one division or unit within the company. When these services are combined into a central operation they are often referred to as shared services centers.
Skills :  Skills and disciplines required for the members of outsourcing teams through all phases. Some of the skills are common through all phases (such as communication) while some skills are specific - specialized for a particular phase (such as tax and treasury for implementation phase when contract terms are being defined)
Sourcing :  Sourcing is generally the broadest term used in the field. It reflects the simple but essential point that everything the organization does has to be 'sourced' in some way - internally, externally, or a mix of the two.
Sourcing-as-Strategy :  Sourcing-as-strategy is a powerful way to improvean organization's ability to serve customers, compete in its markets, and grow. It is a strategic approach to outsourcing that involves mapping the markets the organization plans to serve, the competitive advantages it seeks in each market, and then identifying the sources of those competitive advantages - whether they come from inside or outside the organization.
Stakeholders :  Stakeholders represent all people whot have a vested interest in a business or organization (economically mostly). These include shareholders, affected employees, unaffected employees, shareholders, industry influencers (watchers as well as market makers), partners, customers, suppliers and even the civic community where the business is located.
Strategic Outsourcing :  Outsourcing to achieve better return on investment and accelerated growth. Strategic outsourcing is approached as a redirection of the organization's resources toward its highest value-creating activities - its core competencies.
Supply Chain :  The interlinked chain of contractors and subcontractors that provides components, subcomponents, and services that become part of the company's deliverable to its customers. Typically used to refer to the chain of suppliers in a manufacturing company's operation, but is also used more generally in regard to any product or service.
Tactical Outsourcing :  Outsourcing to achieve operational efficiencies. Tactical outsourcing is approached as a competition between existing internal operations and outside service providers.
Transactions :  Business process outsourcing often involves transaction-intensive processes. Transactions, by their very nature, are clearly defined sets of related actions making them easy to describe, measure, and monitor. They are information-intensive and repetitive. While they are certainly critical to the operation of any business, they seldom offer much opportunity for creating competitive advantage.
Transformation :  Activities that will transform the current customer's process (and/or systems) into a higher performing process.
Transformational Outsourcing :  Outsourcing to take advantage of innovation and new business models. Transformational outsourcing is approached as a way to fundamentally reposition the organization in its markets. The term Business Transformational Outsourcing is also used to combine this idea with that of Business Process Outsourcing.
Transition :  Transfer of responsibility from customer to the service provider.
Value Proposition :  What value is the organization looking to gain through outsourcing? Overall, about half of organizations state that reducing costs is their primary reason for outsourcing. This also means that something other than cost savings is the primary value sought in the other half of the cases. The other reasons most frequently cited are: focus on core competencies, a more variable cost structure, access to needed skills, grow revenue, improve quality, conserve capital dollars, and increase innovation.
X-sourcing :  There is an extensive list of prefixes put on the word sourcing to suggest a specific approach to outsourcing. Co-sourcing, smart-sourcing, e-sourcing, in-sourcing, business process outsourcing, strategic sourcing, strategic outsourcing, and multi-sourcing are just a few. Each has a slightly different meaning intended by the person using it to indicate a slightly different approach to outsourcing.
Zero-Based Sourcing :  Zero-based sourcing means that the sourcing decision for each and every aspect of a business's operation is re-justified every planning cycle from an assumed base of zero. This approach ensures that the organization is consistently and objectively re-testing its internal operations against the best available external solutions.