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 11 names in this directory beginning with the letter V.
The benefit to the organisation resulting from the sourcing engagement.

Value added outsourcing
An aspect of strategic sourcing or multisourcing, in which some functional area is turned over to a service provider. The presumption is that the service provider can add value to the activity that wouldn't be cost-effective if provided by internal staff  

Value audit
The process in which an organization investigates whether the cost reductions and/or revenue enhancements suggested in an outsourcing business case have actually been captured

Value leakage
Value leakage typically refers to the difference in value of what is expected ant the time of contracting and what is actually delivered over the course of an outsourced services engagement. Value leakage is seen in the following main areas.

Value identification
• A fundamental reason for sub-optimal value realization is misalignment between the intended outsourcing business case, the agreed solution, and the negotiated contract. This value loss happens in the life cycle phases strategy and solutions definition, and contracting.

Value capture
• Even well desinged outsourcing contracts experience value leakage post contract signing. Buyers frequently target the low-hanging fruit of billing rate negotiation to reduce costs, but focussing on other sources can significantly amplify cost reduction. Other areas to focus on: Inefficient productivity norms, oversized governance teams, ineffective onshore / offshore mix, unmanageable contract.

Value creation
• Problems in the sourcing process as well as ineffective governance not only impede as-is realization but also further value creation (new business / innovation) via evaluation of the outsourcing relationship.

Value leakage can be either contract or business related. Here are some examples.

Contract value leakage
• Invoicing errors and inaccuracies
• Quality and delivery failures
• Unrealized discounts
• Earnbacks

Business value leakage
• Poor user / customer experience
• Business disruption
• Rogue workarounds
• Negative brand impact
• Unrealized performance gains
• Unrealized efficiency gains

Value management
The process of making explicit the benefits of the engagement and continuous efforts to realizing the anticipated benefits. Value management should focus on function and value for money over the whole of the life of the engagement rather than on reducing cost – although this can be a by-product.

Value 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 value obligation or service obligation is a type of obligation that defines the outcomes of the agreement to be delivered by the service provider. Value obligations clearly relate to the business objectives and deliver value to the outsourcing company.

Value-Led is Leadmark’s proprietary framework that addresses the post-contracting governance of service provider relationships. It is a system of well-knit strategies, interconnecting value and risk management, that focuses on maximizing the value from sourced services arrangements.

Basic attributes of Value-led are:
• it’s focused on value creation and risk-based thinking
• it’s independent of the types of services being sourced (e.g. IT, BPO, Facility Management)
• it’s applicable for both single sourcing and multi sourcing engagements
• it’s independent of organisation structures
• it’s aligned to the client’s and service provider’s internal management and control systems
• it’s facilitates collaboration, trust and partnership
• it’s flexible to adapt to particular circumstances

Variable Pricing Model
A pricing model featuring variable charges for all services. Variable charges may be structured with either an ARC/RRC approach or a pure transaction approach (price * quantity)

Service provider or third-party used to provide services or part of services

Vertical-specific BPO
BPO offerings that require a high degree of vertical-specific knowledge and that are not easily replicable across industries such as claims processing for the insurance industry and credit card collections for the credit services industry

A broad term that refers to the abstraction of computer resources. Virtualization is performed on a given hardware platform by "host" software (a control program), which creates a simulated computer environment (a virtual machine) for its "guest" software. The "guest" software runs just as if it were installed on a stand-alone hardware platform. Typically, many such virtual machines are simulated on a given physical machine