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 18 names in this directory beginning with the letter F.
Facilities management
The solution by which the customer entrusts to an external services provider the responsibility for operations and software applications and for the management of the associated instrumentalities (hardware, software, applications programming personnel, etc.), while retaining the general oversight and supervision of its information technology. In broader terms, facilities management may apply to other fields, such as applications maintenance, updating, or revision

Farmshore sourcing
Comparable to rural sourcing. The placement of jobs in low-cost regions of the service recipient's home country  

Fast track process to select
A Gartner-defined method for speeding up the traditional RFP process. It moves much of the detailed work about expectations, baselines and service levels typically done during negotiation into the preparation phase, before a given service provider is engaged. The process recommends pre-qualifying providers to limit the number being evaluated 

Fee-for-service pricing
Variable pricing framework based on the amount or quality (or both) of the service delivered. The provider's costs aren't covered unless the service levels are reached. The client organization bears some risk, since costs aren't entirely predictable and service levels may not be achieved. An appropriate structure for efficiency and enhancement deals

Feeny-Lacity-Willcocks model
A method for identifying service provider capabilities by examining competency in three critical areas: delivery, transformation and relationship, each of which overlaps the others. Delivery competency encompasses governance, leadership, program management, behavior management, domain expertise and business management. Relationship competency encompasses planning and contracting, organizational design, governance, leadership, program management and customer development. Transformation competency encompasses technology exploitation, process re-engineering, customer development, leadership, program management, sourcing and behavior management.

Finance & Accounting (F&A)
Refers to the all the Finance & Accounting processes or functions of a company

Finance & Accounting Outsourcing (FAO)
Transfer of ownership of some or all finance and accounting processes or functions to a service provider. This could include administrative, delivery, or management-related processes or functions

Financial audit
Investigation and examination of supplier's financial records and other documents for the purpose of verifying amounts charged (including any price changes as stipulated in the contract) and/or credited (e.g., SLA credits)

Financial 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 financial obligation is a type of obligation that defines the financial terms of the agreement. It covers both the pricing and the incentives model, and is clearly related to specific value or control obligations.

Fixed Bid Pricing
A fixed price offer made by a service provider for a given scope of work. All changes to the scope of work (outside a negotiated tolerance perhaps), go through a change management process and are effectively a new bid

Fixed pricing model
A model of pricing in which a project is undertaken by the service provider for a pre-agreed-upon price. One advantage is that it's easy for the client to budget for the project. Two disadvantages are that the service provider may overestimate costs beforehand for possible unforeseen conditions or cut corners during the project to compensate for expenses that are higher than anticipated. The service provider will charge a premium for a fixed price relative to the risks involved. Appropriate for efficiency deals

FMEA is short for Failure Modes and Effects Analyses. It is a methed founded by NASA as a method to identify and evaluate risks that is now used across many industries.

FMEA is a qualitative and systemetic tool to help organizations anticipate what might go wrong with a product, service, system, process or activity. In addition to identifying how a product or service might fail and the effects of that failure, FMEA also helps find the possible causes of failures and the likelihood of failures being detected before occurrence. Each of these 3 factors (impact, likelihood of occurrence and probability of detection) is given a 1 to 5 score which results in a single risk priority number ranging from 1 to 125. The analysis allows organizations to timely implement appropriate controls to address the risks.

Follow the sun
24×7 service, in which work is handled onshore, then passed off to an offshore service provider that is in a completely opposite time zone

Force majeure
A standard clause found in sourcing contracts, it exempts the contracting parties from fulfilling their contractual obligations for causes that could not be anticipated and/or are beyond their control. These causes usually include act of God (natural disasters), act of man, act of parliament, and other impersonal events or occurrences.

An intentional deception, for unjust advantage, that causes loss or inconvenience to the party relying on the false or misleading statement. In contract matters, a fraud is the cause of an error bearing on a material part of the contract

Full-service index
Full-service index for a provider is based on the ratio of the number of processes that are offered for the given vertical, to the total number of processes that can be offered for the vertical

Full-Time Equivalent (FTE)
An FTE of 1.0 equals one employee working 100 percent of the time, while an FTE of 0.5 means that the employee is only half-time

Functional redundancy
Duplication of services, which are often only discovered when an analysis across business units is performed by an outside entity. When an organization outsources a major function, such as IT or finance & accounting, the service provider squeezes costs out of the processes by uncovering and eliminating or consolidating redundant functions