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 48 names in this directory beginning with the letter S.
Software as a service. A model of delivering software through a network rather than as a stand-alone application on the computer. The activities behind the software — including data management — are handled from another location  

Sarbanes-Oxley (SOX)
The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improve the accuracy of corporate disclosures.

Statement on Auditing Standards 70. SAS 70 was replaced by SSAE 16 on service organizations on 15 June 2011.

Supply Chain Management

Scope is the boundary that determines which processes, functions or services are included in a transaction

Security audit
An audit that examines the service provider's ongoing security and privacy practices. The terms of this type of audit should spell out timetables, frequency, reporting results and what action should be taken in the event that problems surface

Selective sourcing
A strategy that treats a given function — such as IT — as a portfolio of activities, some of which should be outsourced and others of which should be performed by internal staff. This approach moves away from the idea that all of a function should be viewed as a commodity, easily handed over to a service provider. Also known as "multisourcing."

A service is a coherent, self contained provision (unit of work) made available by a supplier to a client and that is supported by the supplier during its utilization. In this context a provision is a combination of a tangible product and human activities. From this service provisioning is defined as the "delivery of a client supporting provision". A service is characterized by its functionality (what it does for the user) and its working (how it's done), and this applies to the "provision" component of the service and to the "support' component.

In outsourcing the following types of services are common:

• Technical services - relate to software or hardware components
• Infrastructure services - relate to technology focused product and service bundels. e.g. hosting, networks
• Application services - relate to software applications
• Business services - relate to business functions offered to other business partners. e.g. payments, clearing, call center
• Facility services - relate to the working environment. e.g. gardening, cleaning, catering, access to buildings, office space and meeting rooms
• Professional services - relate to knowledge intensive activities. e.g. accounting, software development, legal support

A service is defined by the following properties:

• A definition of the service and the value it holds for the consumer (fit for purpose - see service value)
• A definition of service availability and marks of quality (fit for use - see service value)
• A definition of underlying or enabling services necessary for the service operate successfully
• The accountable service provider
• The inferface describing how the consumer requests the service • The price of the service

Advantages of services in outsourcing:

• Services structure the outsourcing landscape in an orderly way
• Services allow clear service descriptions and meaningfull marks of quality
• Services reduce interference between various units of work
• Services are recognizable across the organization and can easily be related to business objectives
• Services allow clear accountabilities
• Services allow transparant pricing
• Services simplify the outsourcing governance function

Examples of services in outsourcing:

• IT Helpdesk
• Delivery of end user devices (e.g. laptops)
• Network provisioning
• Email provisioning
• Hosting
• Provision of catering
• Housekeeping
• Security / Access control

Service accountability
The extent to which the client will hold a service provider responsible for meeting designated service levels. Experts recommend specifying 100% service accountability in contracts, though this can have multiple tiers. For example, a client may specify that a service provider process 90% of all requests within three days. What needs to be added is an additional specification that addresses the remaining 10% — for example, that those be processed within five days

Service Agreement
The section or component of an outsourcing agreement that details the services, level of services and charges for services between a buyer and service provider

Service characteristics
Services can be described in terms of their key characteristics, sometimes called the "Five I's of Services".

Services are by definition intangible. They are not manufactured, transported or stocked.

Inventory (perishability)
Services cannot be stored for a future use. They are produced and consumend simultaneously.
Services are perishable in two regards:

• Service-relevant resources, processes and systems are assigned for service delivery during a specific period in time. If the service consumer does not request and consume the service during this period, the related resources may go unused. From the perspective of the service provider, this is a lost business opportunity if no other use for those resources is available. Examples: A consultant available to a client cannot service an other client at the same time. The availability is a service desk costs money even it it's not used.

• When the service has been completely rendered to the consumer, this particular service irreversibly vanishes. Example: a user has been assisted by a service desk agent and the call is over

The service provider must deliver the service at the time of service consumption. The service is not manifested in a physical object that is independent of the provider. The service consumer is also inseparable from service delivery. Examples: The service consumer must be on the telephone with the service desk agent in order to receive the service. Correspondingly the service desk agent must be on the other end to deliver the service.

Inconsistency (variability)
Each service is unique. It can never be exactly repeated as the time, location, circumstances, conditions, current configurations and/or as signed resources are different for the next delivery, even if the same service consumer requests the same service. Many services are regarded as heterogeneous and are typically modified for each service consumer or each service contextual . Example: a call to the service desk for a assistance on a particular problem is different from a call to the same service desk a week later - another point in time, perhaps a different agent, a different request and a different conversation. Another and more common term for this is heterogeneity.

Both service provider and service consumer participate in the service provisioning

Service Credit
See Service Level Credit

Service Level Agreement (SLA)
A contract clause that defines the level of performance quality required by the buyer of a service from the service provider. It also defines the extent to which the service provider will be held responsible for attaining the required level of performance.

Service Level Credit
A clause which is invoked when the service provider fails to meet the required performance defined by a service level. When triggered, the service level credits penalize the provider by returning some significant portion of the provider's revenue to the buyer. Additionally, when linked to an escalation schedule it can result in the termination of a service

Service level measurement
The level of required service. The capture of resource usage data to benchmark the efficiencies, costs and results of a function. The measurement is usually done by an automated monitoring system

Service level reports
The reports provided by the service provider to the client, specifying how performance measured against service level requirements. Clients should make sure that reports provide useful detail — service level agreed upon, service performance for the current period, exception reporting for missed measures, and trend analysis of the performance from previous reporting periods. Reports do have a price

Service Provider
A service provider is a company / entity that provides outsourced services under contract to a customer / buyer

Service quality audit
Investigation and examination of supplier's records for the purpose of verifying that service levels are being met

Service value
Services in and of themselves have little value. Their value is what they enable the business to achieve. Therefor it's the business who determine how valuable a service is.

Services are described by their utility and warranty:

• Utility describes how well the services meets the needs of the consumer. Does it provide the features, ease of use, cost and other requirements. The associated phrase is "fit for purpose".

• Warranty describes how wel the service, in practice, meets the requirements. For instance, the service may be designed to provide 7/24 access, but in actual use, it is so unreliable the people dread using it. Or, an other example, the service is required to replace a mobile phone in 2 days, but in practice it takes almost a week. The associated phrase is "fit for use"

Service-Oriented Architecture (SOA)
A model of software architecture that defines the use of loosely coupled software services to support business processes and users. In an SOA environment, resources are made available as services that can be accessed without knowledge of the underlying platform implementation

Set-up Cost
Setup cost refer to the initial cost incurred in setting up an outsourcing relationship. This includes costs incurred in knowledge transfer, the procurement process (external legal counsel, third-party consultant, travel), software, etc.

Shared risk/reward
Flat rate pricing structure with additional payments based on achieving specified outcomes. Appropriate for enhancement and transformational sourcing

Shared Services
Shared services is the provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key here is the idea of 'sharing' within an organization or group. This sharing needs to fundamentally include shared accountability of results by the unit from where the work is migrated to the provider. The provider on the other hand needs to ensure that the agreed results are delivered based on defined measures (KPIs, cost, quality etc.).

A negative deviation or defect from the required outcome. A short coming may by weighted by the contract manager as being severe or minor. Based on the shortcoming a part or the full payment term may be suspended until the shortcoming is restored.

Simplicity is the state or quality of being simple. Something which is easy to explain, understand, remember and execute is simple, in contrast to something complex. Embracing simplicity helps to create unduring relationships and support the realization of contract value.

Simplicity is not easy to define in a single sentence, but this is what people say simplicity means to them:

“Simplicity liberates you rather than constrains you”
“It amplifies possibilities"
"It unleashes your ability to have impact”
“It empowers to think differently, to have a point of view and express the truth”
“Helps you to stand out, cut through the clutter and get things done”;
"Simple is challenging";
"Simplicity pays";
"It helps you see the beauty";
“Simple is sustainable”;
"Simplicity is a matter of focus;
“Simple is smart, it saves money and makes life easier”

Levers to improve simplicity:

• Focus on what matters, remove the superfluous, reduce the number of elements (producs, technologies, KPI's, reports, services, meeting, people)
• Maximize coherence and autonomy of the elements and minimize relationships and interdependence between the elements
• Improve transparency, focus on facts and work from a shared truth
• Clear roles and responsibilities
• Work with simple (generic) rules
• Focus on useability
• Keep change to an absolute minimum - maximize steady state period -

Site selection
The process of determining which is the optimal city, region or country for taking work to. One methodology — espoused by Mercer Human Resources Consulting, suggests examining such factors as labor availability, labor quality, labor costs, risks, infrastructure, community, openness, regulatory environment and economy

Site visit
The process of spending time in the offices of a prospective service provider. One objective is to spend as much time as possible with as many people as possible: team leaders, project managers, customer service agents, technical professionals and upper management. Another objective is to evaluate whether the vendor has reliable voice, data and power systems; the ability to scale up; and experience with the exact process or task being considered for outsourcing

Six Sigma
A rigorous and disciplined methodology that uses data and statistical analysis to measure and improve a company's operational performance by identifying and eliminating "defects" in manufacturing and service-related processes. Commonly defined as 3.4 defects per million opportunities

SLA Credit
The credit provided by a supplier to a customer for an SLA failure

SLA failure
The failure of a supplier to meet its obligations under an SLA

Software licensing agreement
The contracted terms organizations have with software publishers for the use of the software. Frequently, the terms should be negotiated with the publisher to encompass a transfer of the license to the service provider if outsourcing is a possibility

Software-as-a-Service (SaaS)
Software as a Service (SaaS) is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet

Sole Source
A procurement approach in which a buyer of outsourcing services seriously evaluates and negotiates solutions with only one service provider

Source Code Escrow
Source code escrow is the deposit of the source code of software with a third party escrow agent. Escrow is typically requested by a party licensing software (the licensee), to ensure maintenance of the software. The software source code is released to the licensee if the licensor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement.

Sourcing Model
The sourcing model refers to the type and structure of outsourcing business model adopted by the buyer. It includes the offshore captive model, multi-sourcing, third-party outsourcing, and other hybrid models.

Span of Control
The number of subordinates that a manager or supervisor can directly control. This number varies with the type of work: complex, variable work reduces it to six, whereas routine, fixed work increases it to twenty or more.

Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization, was issued by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) in April 2010. SSAE 16 effectively replaced SAS 70 as the standard for reporting on service organizations. SSAE 16 was drafted and issued with the intention and purpose of updating the US service organization reporting standard so that it mirrors and complies with the new international service organization reporting standard – ISAE 3402.

Staff augmentation
Contract workers brought in by an organization to supplement efforts of the internal staff in order to contain costs and handle overflow work

Stalking horse
A competitor who never had a meaningful opportunity to win a contract. A stalking horse differs from the losing competitor because the customer intended only to use the stalking horse to generate competitive price quotations and to challenge the preferred provider (who ultimately wins the bidding), and is not compensated for this function.

Statement of Work (SoW)
Detailed description of the specific services or tasks a contractor is required to perform under a contract. SOW is usually incorporated in a contract, indirectly by reference or directly as an attachment

Steady state
That point at which a transition, such as to a service provider, has been completed and the ongoing effort of management and governance is beginning

Steering committee
A group consisting typically of executives that aligns processes, projects and goals with business requirements. It also directs the client and vendor relationship. It defines the overall strategy; establishes IT, business, HR, legal, audit and compliance support; provides funding; implements the program management office; and reports to the board

Storage Service Provider (SSP)
A third-party that manages the storage facilities for an enterprise. The storage devices can be on the customer's premises or at the SSP's site connected to the customer's machines via fiber-optic links

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

Sub-processor means a natural or legal person, public authority, agency or body other than the data subject, controller, processor and persons who, under the direct authority of the controller or processor, are authorised to carry out activities on behalf of the controller (client).

Subject Matter Expert (SME)
An indivual with a high level of expertise in performing a specialized job, task or skill

Supply Chain
The interlinked chain of contractors and subcontractors that provide components, subcomponents, and services that become part of the company’s deliverable to its customers. Typically used to refer to the chain of service providers in a manufacturing company’s operation, but is also used more generally in regard to any product or service

System Integration (SI)
In engineering, system integration is defined as the process of bringing together the component subsystems into one system and ensuring that the subsystems function together as a system. In information technology, systems integration is the process of linking together different computing systems and software applications physically or functionally, to act as a coordinated whole.