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 40 names in this directory beginning with the letter P.
Parent Organization
Organization that receives the support services from the captive service provider or GIC. Includes both the departments and direct users of the support services

Parent Stakeholder
Key stakeholders of the parent organization. Includes executives belonging to the following three categories: Corporate sponsor (senior executive sponsor, key corporate executive (e.g., CEO, CFO, CIO, COO)
Global sourcing program office (governance, oversight) Executive using captive of GIC services (Business Unit/Functional Head/Process Manager). Account/relationship manager responsible for managing interactions with GIC

Partial Termination
Termination of part of service in an outsourcing contract

Pass-through Expenses
Expenses incurred by the service provider passed through to buyer without markup/administration fees

Payment of progress
Method of payment with a payment schedule based on progress of the work committed

Payment on planning
Method of payment with a linear payment schedule.

Payment on product
Method of payment with a payment schedule based on delivered products or services

Payment schedule
The payments as agreed upon between the client and service provider for the major milestones, including contract signature, installation and acceptance as set out in a Payment Schedule

Peer comparison
The practice of going out and benchmarking service levels, staffing size, transaction costs and other details against other comparably-sized organizations that are non-competitive

Penalty clause
That part of an outsourcing contract that specifies the penalties imposed by the client on the service provider in the case where the client experiences service degradation

Percent of Services Offshored
Percent of services offshored refers to the percentage of total services of a company that are moved offshore. It is primarily driven by two variables: the process offshored and the company’s sourcing strategy

The term performance refers to a measurable result achieved by the service provider. It refers to the measurable results that activities, processes, products, services, systems and organisations are able to achieve. Whenever they perform well it means that acceptable results are being achieved (met) and whenever they perform poorly, the results are unacceptable (not met).

Performance audit
Confirmation that service levels are being met consistently. This may require access to transaction data within the vendor's IT platform used in managing the client's business processes. Contractual terms may spell out timetables, frequency and support offered by the provider

Performance monitoring
A continual check of service levels to ensure they're being met. One decision organizations must make in outsourcing is how tightly the monitoring must be. Too tight leads to a rise of transaction/coordination costs and reduction of trust. Too loose on the other hand will increase risk.

We believe that as a starting point the service provider is responsible for the quality of the work it delivers to the client. For this the service provider is expected to have an effective quality control system in place and verify the quality of its deliverables. The results of this verification are presented to the client in a performance and accountability report. In addition the service provider conducts an objective examination and evaluation (audit) of its quality control and reporting system. The resulting audit report is shared with the client and will provide the client evidence and confidence that the service provider is in control of its delivery processes and that the performance and accountability reports are trustworthy and fair.

Performance monitoring by the client is based on a dynamic mix of controls. This mix is determined by the value drivers of the engagement and the associated risks. To identify the main risks to value, the parties will periodically engage in a joint risk assessment session on the basis of which the client will determine its performance monitoring focus areas. These focus areas will also be reflected in the supplier’s performance and accountability reporting.

The mix of controls for performance monitoring consists of 3 types of control:

System control
A system control addresses the quality of the management system the service provider has in place to manage the engagement as a whole including all contractual duties, obligations and deliverables. A system control focuses on the management activities conducted by the service provider to ensure that all obligations are met in an effective and efficient way and in compliance with client requirements. A system control for example can be applied on the level of the overall engagement, on a specific project. (E.g. transition project) or a specific service cluster (e.g. application development). A common way of conducting these reviews is through interviewing key employees of the supplier and analysing supporting documents. The emphasis of the review is to assess the working of the Deming circle.

Process control
A process control addresses the working of primary service delivery processes or supporting administrative processes used by the service provider. A process control for example can be applied to service management processes like incident management, problem or configuration management. In software development engagements a process control might address requirements management or testing. Also supporting processes like the invoice process or the contract change process can be reviewed. These processes are typically described in project plans or the Daily Agreed Procedures (DAP).

A process review includes the following:
a) a description of the process;
b) input – output relations to other processes (interdependencies);
c) timing and speed;
d) process management;
e) use of underpinning tooling;
f) a reference to the working procedures;
g) a periodical review which addresses;
o current use and effectiveness of the processes;
o Deming circle to monitor and improve process performance.

A common way of conducting these reviews is through interviewing key employees of the supplier, observing the execution of processes and analysing supporting documents. To evaluate the governance processes one might consider conduction a survey among the people involved in the various governance processes.

Outcome control
An outcome control inspects if the products and services meet quality requirements, with the aim to verify the correctness of the service provider’s service performance / quality reports. An outcome review is conducted through a test or measurement of the product or service and the results are compared the with verification or test reports of the service provider. The review does not imply the client taking over accountability for quality. For complex product or services the client may want to consider the use of expert third-party reviewers. Another instrument for this type of control is a user satisfaction survey.
It should be noted that all deliverables are regarded as a product here. It is not limited products or services used by the end-user. Deliverables like a customer satisfaction report, a benchmark or audit report are also considered to be products.

Performance report
A detailed accountability statement that measures the results of some activity in terms of its success over a specific time frame. In outsourcing the performance report typically reflects the extent to which the service meets KPI levels.

Performance Standards
Reasonable standards of performance that is expected to deliver a particular level of service

Personal data
Personal data means any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person

Pilot project
A risk mitigation tool in which the client tests a potential service provider candidate with a small endeavor or a limited engagement. The idea is to reveal potential problems that may or may not be resolved before a larger scale outsourcing initiative is undertaken

Platform-based Solutions
Platform-based solutions are BPO solutions wherein the software platform is provided (i.e., owned and maintained) by the provider

A guiding principle, typically established by senior management, which is adopted by an organization or project to influence and determine decisions.

Policy and Procedures Manual
A manual describing how the service provider will perform the services as well as the equipment, software and processes used (such as, for example, operations manuals, user guides, forms of Service Level reports, call lists, escalation procedures, emergency procedures, and requests for approvals or information)

Potential for Offshoring
The potential for offshoring refers to the maximum possible level of in-house scope that can be delivered from an offshore location

An aspect of the outsourcing contract's Terms and Conditions. A full description of the involved parties and processes

Price Point
Price point is defined as the average annual revenue per employee. It refers to the average annual price which the service provider is charging per employee for a transaction. In the analysis, whenever there is an average price considered across transactions, it has been weighted by the employee size of each transaction

Pricing Structure
Pricing structure refers to the mechanism by which the charges from a service provider to a buyer are determined. This includes the type of pricing units, degree to which elements are fixed versus variable, impact of volume fluctuations on the total charges, and the mechanisms used to adjust prices over time. Pricing structure does not refer to the actual price

Prime contractor
Sourcing scenario in which a single provider manages service delivery but accesses multiple providers to deliver the services

A process is a set of activities that are interrelated or that interact with one another. Processes use resources to transform inputs into outputs. Processes are interconnected because the output from one process often becomes the input for another process. It is expected that supplier’s processes are planned and carried out under controlled conditions.

Process Management
The execution and monitoring of repeatable business processes that have been defined by a set of formal procedures

Process Mapping
Comprehensive understanding of how a business process is organized and executed. Essential to laying out an outsourcing or offshoring analysis

Process Migration
Sequence of activities required to transfer a process to another organization

Process owner
The individual responsible for process design and performance. The process owner is accountable for sustaining the gain and identifying future improvement opportunities on the process

Processing means any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction

Controller is defined in the General Data Protection Regulation (GDPR) as a natural or legal person, public authority, agency or other body which processes personal data on behalf of the controller

Procure-to-Pay (P2P)
Procure-to-pay (P2P) process is an integrated end-to-end process that includes sourcing support, day-to-day purchasing, catalog, accounts payable, T&E processing, spend analysis, business analytics, reporting, audit, and compliance management

Procurement Outsourcing (PO)
The transfer of ownership of some or all procurement processes or functions to a service provider. This could include administrative, delivery, or management-related processes or functions

Program Management
Management of the overall migration of a process or sets of processes to the service provider

Proprietary Technology
Technology solution(s) deployed by service provider that are developed in-house or are acquired

Providers refers to captives, GICs or shared-service units as well as third-party service providers

Pure GIC Model
Pure GIC of captive model refers to an offshore business model in which a 100 percent subsidiary company setup in an offshore location provides services exclusively to the parent company

Pure Third-party Offshoring
Pure third-party offshoring refers to an offshore business model in which one or more business or IT processes are offshored to a service provider specialized in providing such services.