Glossary of terms

This glossary is intended to assist you in getting a general understanding of commonly used terms and concepts when dealing with outsourcing and outsourcing governance. We welcome your contribution to further improve and expand the glossary.

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
There are currently 56 names in this directory beginning with the letter C.
Call Center (CC)
A centralized operation that provides voice-based services such as managing incoming telephone calls from customers or making outgoing telephone calls to customers (telemarketing). Such operations may also respond to letters, faxes, e-mails and similar written correspondence, and in the generalized cases, the operations are often referred to as a "contact center"

Capability Analysis / Assessment
The analysis or assessment of a service provider performed to determine or provide an opinion on the on their abilities to deliver services to a client for specific solutions

Captive Center  -  also referred to as Global In-house Center (GIC)
Offshore companies set up by organizations to provide internal services and in some cases to sell those same services to clients. Often U.S. and European organizations set up captive centers for their outsourced work

Cash penalty
Penalties paid by the service provider to the client in cases of severe service degradation. For example, a service provider might incur a penalty for failing to meet user response times or customer deadlines. In some situations, the penalties escalate as the degradation becomes more frequent

Central & Eastern Europe (CEE)
Includes Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Former Yugaslav Republic of Macedonia, Georgia, Greece, Hungary, Latvia, Lithuania, Maldova, Montenegro, Poland, Romania, Russia, Servia, Slovakia, Turkey, and Ukraine

Change Management
A systematic approach to dealing with organizational change. It encompasses planning, initiating, realizing, controlling and stabilizing change processes on both, corporate and personal level. Change may cover such diverse problems as strategic direction or personal development programs for staff

Change of character clause
A clause in an outsourcing contract (frequently introduced by the service provider) that stipulates that any changes in functionality are subject to excess fees

Change of Control
The change of a company (buyer or service provider) where there is a change in one of the following: 1) legal beneficial or equitable ownership, directly of indirectly, of xx percent; 2) the right of appoint, directly or indirectly, a majority of the board of directors; 3) the right of control; 4) the position of sole general partner, in case of a partnership

Change Request
A formal request for a change or an additional to the services. Change requests typically are for additional or increased services leading to an increase or reduction in charges

Chargeback system
The opposite of "General allocation systems." An accounting system used in organizations to apply the expense for services where they're actually used. For example, an IT department may implement a chargeback system to give visibility to excessive demands from a particular business unit or department

The amount (fees) set forth in a contract that the buyer will pay to the service provider for the delivery of services

Chief Sourcing Officer (CSO)
Executive level person who oversees sourcing governance elements in an organization. Typically, the CSO and his or her team is responsible for overseeing every sourcing decision made

Chronic SLA failure
Repeated or persistent SLA failures, the occurrence of which is agreed by the parties to justify a remedy or remedies in addition to the award of SLA credit(s), such as termination of the impacted services

A provision in a contract that requires a party who has taken a benefit to return the benefit due to subsequent conditions.
In essence, the benefit was never earned because, in retrospect, the party who got the benefit did not deliver what it had promised and it would be fair, taking into account all the risks and circumstances of the events after the contract was signed, to require return of the benefits. In equity, when a court orders restitution, it normally does so as part of the general rescission of the agreement due to inequitable circumstances that prevented the parties from obtaining the benefit of their bargain. In contracting, a clawback (particularly in outsourcing) adopts the restitution concept without imposing a rescission of the entire contract

Traditionally many parties in outsourcing – both clients and service providers – applied a “winner takes all” approach to the governance of their sourcing arrangements. This approach suggests the engagement to be a zero-sum game where the win of one party resulted in the loss of the other party.

This conventional thinking however is giving way to a realization that in the networked economy, which includes sourcing from multiple service providers, companies must both cooperate and compete. Termed “co-opetition,” this new perspective requires companies to create business strategies that capitalize on relationships in order to create maximum value in the marketplace. The concept of co-opetition was expanded upon by Adam Brandenburger and Barry Nalebuff, professors at the Harvard Business School and the Yale School of Management respectively.

Conventional thinking is that the fairest approach is simply to share the pie, with each party to the engagement getting a slice of the exact same size. Behavioural economics, however, has shown that our natural tendency is to want to optimize our outcome and win. This means getting the biggest piece of the pie. In an outsourcing relationship where the parties are contractually bound, this also means that tension builds in the relationship.

Co-opetition advocates a more productive way of cooperation between the parties. It shows that parties that actively cooperate and work together to increase the size of the pie, will both end up with a bigger piece. Instead of a self-optimized outcome they aim for an optimized collaborative outcome.

The term used to describe organizations that execute a shared services center with an external vendor.

Collaboration principles and behaviours
In driving constructive collaboration the client and service provider should strive to uphold the following principles and behaviours. Adhering to these principles and behaviours of productive collaboration allows the parties to demonstrate they are thrustworthy by showing competence, honesty and reliability.

The support of the other collaborators in the process is important, especially at times of crisis or unforeseen difficulties. The focus needs to be on helping each other on solving problems and realizing the objectives and not on placing blame for things that went wrong. The team needs to work on the basis of the trust in what is called a psychological safe workplace. It’s an environment where it’s safe to take risks and where, if someone has questions or is in need of help, that support would be available.

Structure and clarity
Clear goals, roles, strategies, communication and decision paths are critical to keep all parties focused and aligned. These mechanisms are critical to allow team members act in a structured and coordinated way to achieve objectives. A ‘single source of truth’ and a free flow of information and ideas are critical to keep all parties attuned to everything that is going on.

Collaboration benefits from a wide range of skills and expertise in the pool of participants. A diverse team from both the client- and supplier-side that work together in a non-hierarchical manner and who can count on each other to do high quality work on time is critical to success.

Motivation is a strong driving force for effective teams. Effective collaboration requires everyone involved to understand and share common goals and feel that they gain something from the collaboration and feel that they are doing something that is personally import to them.

The team must be able to solve problems together and team members have to fundamentally believe that their contribution matters. Effective problem solving involves dealing with uncertainty, assessing and mitigating risks, evaluating options and solutions, decision making and resolving conflicts. All of this needs to take place near their origin within the team. However, if conflict solving failed within the team escalation follows in adherence to the agreed escalation mechanism.

Collaboration strategy
Collaboration strategy refers to a high level plan to optimize collaboration to achieve the objectives of a sourcing arrangement. Research by Professor Robert Axelrod presented in his book “The Evolution of Cooperation”, has shown “Tit for tat” – an English saying meaning "equivalent retaliation" – to be a highly effective cooperation strategy.

Data from the research reveals four properties which tend to make a cooperation strategy successful:

• Kindness: Avoid unnecessary conflict by meeting your commitments as long as the other player does;

• Provocability: Respond firm and decisive when the other party doesn’t meet its commitments;

• Forgiveness: Respond proportionately when the other party doesn’t meet its commitments and let bygones be bygones.
    In outsourcing a proportional response might mean that:
    a. On first defection the defecting party is given the opportunity to implement operational measures to prevent a second default;
    b. Upon a second default the defecting party will owe the other party the financial value of the two non-delivered commitments;
    c. In case of continuous defaults legal action should be considered against the defecting party.

• Clarity: Be clear about your behavior so that the other party can adapt to your pattern of action.

Comanagement process
Business strategies change during the course of a sourcing relationship. A comanagement process is the mechanism for communicating changes, by ensuring that the parties in the relationship understand and agree on the current business strategy, sourcing maxims, sourcing strategy and delivery strategy

Commercially Reasonable Efforts
A level of offort that equals or exceeds the level used by other sophisticated companies providing simular services, and in any event a prompt and diligent effort, made in a professional and workmanlike manner, using qualified individuals

Compentence center
Mechanism for implementing the functions of a sourcing management office. It provides centralized services in advising and coaching other divisions in the organization. It collects and disseminates best practices and recommends standards

Competitive insourcing
A process in which internal employees may engage in bidding to compete with competitive, thirdparty bidders for a defined scope of work

Complexity in outsourcing is detrimental to realizing to value from an outsourcing arrangement if the contract or the governance function is too complex.
Complexity results in:
• processes being prone to error;
• organizations to slow down;
• increased management costs;
• harmed team morale;
• troubled partner relationships.
Complexity levels are influenced by:
• Number of elements - activities, processes, products, technologies, KPI's, contract clauses, obligations, reports, meetings, organisational units, people, etc.
• Number of relations - connections between the elements; e.g. KPI's per services, people per meeting, activities per proces, etc.
• Ambiguity - clarity / insight in the elements and the interrelations between the elements
• Flux - change in the elements and the relations between the elements
Within an organization 4 types of complexity can be distinguished:
• Imposed - Complexity enforced by external agents like company policy makers, the governement, regulators or NGO's
• Inherent - Complexity rooted or build in the nature of the business, service or market
• Design - Complexity originating from deliberate design of contracts, operating and/or financial models, KPI's, reports, accountabilities, organization and communication strucutures, product portfolios, multi sourcing supplier alignement
• Emergent - Complexity that unintentionally developed over time. (an extra report, extra people in a meeting, extra validation, extra KPI's)

Compliance audit
investigation and examination of supplier's records and/or premises for the purpose of verifying supplier's compliance with data security requirements, specific legal requirements, employee screening requirements, and/or other supplier contractual obligations (other than SLAs, which are covered by the Service Quality Audit)

Computing on tap
See On-demand computing

An aspect of the outsourcing contract's Terms and Conditions. Requires the parties to keep confidential, information they acquire with respect to each other

Configuration Management Database (CMDB)
A repository of information related to all the components of an information system

Conflict resolution
In outsourcing relationships conflicts are inevitable. In every relationship things happen - obligations can be misinterpreted, people don't always get along, systems go down, mistakes get made, and expectations can conflict. The way these conflicts are solved however however can make a difference between weakening the relationship and strengthening the partnership in the long run.
We distinghuish 3 different ways of conflict resolution.
On the one hand there are what we call "aggressive", which focus on maximizing the short-term commercial interest of one side of the relationship. On the other hand, "balanced" and "collaborative" approaches. These approaches are no less conscious but are able to forge a path that keeps the relationship viable and helps it thrive in the long term.
•Aggressive conflict-resolution approaches are charactorized by a party's spirited defense of its own interest, without consideration of the effect on the other party's interests. It's more like haggling over the price of a used car than talking about the potential value to result from a longterm outsourcing arrangement. One party digs in its heels, and the other party normally reacts with a similarly aggressive stance. This approach will most likely weaken the relationship.
• Balanced approaches take an attitude that, over the life of the relationship, "you win some, you lose some." That is, advantages temporarily won by one side or the other tend to even out over time. Clients and service providers are tough but fair negotiators. When conflicts arise, they are resolved quickly and often result in strengthening the partnership.
• Collaborative appoaches to conflict resolution are characterized by close partnerships in which both sides seek to understand each other's concerns. Both parties look for a win-win solution. In this approach, conflicts can be resolved in a way that actually strengthens the partnership in the long run. This approach however doesn't mean that the parties don't argue. They do argue but keep the other party's interest in mind.

Conformity is the "fulfilment of a requirement". To conform means to meet or comply with requirements and a requirement is a need, expectation, or obligation

Consequential damages
Those elements of damages arising from a breach of contract that are measured by loss of income or lost business opportunities.

Contact Center (CC)
Contact Center includes voice and non-voice customer service, sales and marketing support, order processing voice support etc.

Contact Center Outsourcing (CCO)
Transfer of the contact center service to an external entity. The external entity owns responsibility for service provision and quality of service delivery

Continuous Performance Reporting
The ongoing responsibility of communication, monitoring and reporting of service level agreement metrics. You need to address how performance is monitored and reported; how targets are established; who is responsible for reporting; what the schedule is for client reviews; what the timeframe, content and format will be for standard reports; and when and how exceptions are to be reported

An contract is a legally binding agreement between 2 or more parties that establishes a set of obligations defining each party's compliance requirements to create value, control risk and realize a set of business objectives .
The basic elements of an effective contract are:
1. Deal intents
2. Business objectives
3. Value obligations
4. Control obligations
5. Financial obligations
6. Legal framework

The law will consider a contract to be valid if the agreement contains all of the following elements:
1. offer and acceptance;
2. an intention between the parties to create binding relations;
3. consideration to be paid for the promise made;
4. legal capacity of the parties to act;
5. genuine consent of the parties; and
6. legality of the agreement.

An agreement that lacks one or more of the elements listed above is not a valid contract

Contract management
Contract management covers all operational activities by the client organisation, during the operational stage of the contract, aimed to ensure supplier delivers the services according to the terms in contract and to ensure that associated risks are effectively controlled. This includes managing ambiguity, omissions and changes or revisions to the contract to realize the overall intents and objectives of the engagement.

Contract term
Duration of an outsourcing contract. Contract term drives the period over which the buyer amortizes one-time costs such as set-up costs, transition costs, etc.

Subcontractors (of any tier) of service provider, including shared subcontractors. Each of the subcontracts are usually approved by the buyer

To be in control requires organizations to have a process in place for assuring achievement of business objectives, compliance with laws, regulations and policies, reliable reporting and the ability to direct corrective measures where needed. In other words, it means to exercise restraint or direction over someone or a situation which implies that you have a way of measuring the current state or direction of the object you want to control.

Control measure
An action aimed to address the risks associated with achieving a defined goal at agreed performance attributes in terms of quality, cost and time.

A control measure can have two forms: 
• Mitigating actions by the supplier including avoiding, reducing or transferring the risk; and
• Assessment actions by the client to obtain insight in the realization of the defined goal.

Control obligation
The term obligation is used in reference to anything that an organization is required to do because of a promise or contract. It refers to a contracted or moral duty that an organization can be forced to perform or penalized for neglecting to perform. A control obligation is a control measure agreed between the parties to the contract. 

Controller is defined in the General Data Protection Regulation (GDPR) as the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by the European Union or Member State law, the controller or the specific criteria for its nomination may be provided for by the European Union or Member State law

Cooperate sourcing option
Acquisition of services through joint ventures, consortia and models in which two or more organizations pool resources to deploy a solution, for a services company or develop a shared service offering

Core compentencies
Those aspects of an organization that drive its success. A manufacturing firm may consider its product engineering, marketing and brand management a core competency, but not the actual manufacturing of the products it sells. During the 1990s, many large companies abandoned their ambitious diversification strategies — pursued to mediate risk — to focus on their sustainable competitive advantages

Cost and value discovery
The ongoing effort to capture the full value and expenses of outsourcing, as it moves through its various phases. In other words, once the business case is made, it continues to be changed, refined and revised to reflect ongoing discovery

Cost management
Management of cost related activities achieved by collecting, analysing, evaluating, and reporting cost information used for budgeting, estimating, forecasting, and monitoring costs

Cost of Living Adjustment (COLA)
The annual adjustment to fees or salaries to continue to maintain or provide the basics necessities at the same level

Cost Plus pricing
Also known as "open-book" pricing. In this model, the client pays the service provider for the actual cost of the service plus a markup or profit margin. Popular with offshore development center (ODC) or build-operate-transfer models. Frequently used as an interim contractual measure. Only appropriate for efficiency deals

Cost-benefit analysis
Process of weighing the total expected costs vs. the total expected benefits of one or more activities in order to choose the best or most profitable option

Cost/benefit model
Quantifiable costs plus quantifiable benefits adjusted for the risks equals value. An attempt to quantify every benefit and cost for inclusion in the financial analysis, even the so-called intangible or "soft" costs and benefits. The reason it is important to quantify everything possible is this: If no financial value is assigned to an agreed cost or benefit, that impact contributes exactly nothing to the financial analysis

Customer Relationship Management

Cure period
The period of time where a service provider or client is allowed to "cure" or correct a deficiency in their performance to the contractual obligations

Customer / Client
Buyer / receiver of a service as identified in a contract

Customer Interaction and Support (CIS) / Customer Service
Refers to the whole gamut of customer relationship management (CRM) services including general query handling, service support, and sales and marketing services

Customer Management Outsourcing (CMO)
Refers to multi-scope outsourcing of customer management processes, within which there is an emphasis on integration of customer contract around individual functions within the organization

Customer satisfaction
Customer satisfaction is a perception of a service recipient. It's also a question of degree which can vary from high satisfaction to low satisfaction. Since satisfaction is a perception, customers may not be satisfied even though all contractual requirements are met.

Customer satisfaction benchmarking
A measurement of how users feel about the services being delivered to them. Frequently, the benchmarking or survey work is done by a third-party firm