Outsourcing: a glossary of commonly used terms in the industry – 2

Outsourcing is more than a sector; it is a rich and constantly evolving universe. If your company plans to outsource one or more services, here is a glossary to master the most commonly used terms in outsourcing, from Grid computing to Wide area network (WAN).

(Source : https://onlinelibrary.wiley.com/doi/pdf/10.1002/9781119201205.glossonlinelibrary.wiley.com)

Grid computing

See calculation on demand. The grid concept comes from the electricity industry. The power grid is a network of infrastructure components that generate, transport and distribute electricity. Analogically speaking, by tapping a switch, you can have outsourced business services routed directly and instantly to your office.


This concept groups remote workers, whether they act as employees (insourcing) or independent contractors (outsourcing).


Method of transfer of legal responsibility from one party to another by contract.


The transfer of an outsourced function to an internal department of the customer, which will be fully managed by the employees.


Private computer network, accessible only to authorized persons.


The legal obligation resulting from a failure to honour its legal liability to another party, for example in contract or tort.

Local area network (LAN)

A group of computers and associated devices that share a common communication line and typically share the resources of a single processor or server in a small geographic area (for example, in an office building). Usually, the server has applications and data storage capacities that are shared jointly by several computer users.

Managed security services (MSS)

Services that provide in-depth analysis to detect intrusion threats and respond to security vulnerabilities. MSS contains elements such as real-time web security information, best practice policies, in-depth monitoring, backup management capabilities, robust incident response and IT investigation services.

Massive outsourcing

Refers to the process in which the majority of business support processes are outsourced in a single transaction or a small number of related transactions. The purpose of mass outsourcing is to generate shareholder value by shifting operational responsibility for critical operations that do not provide a comparative advantage, or in which the company chooses not to invest due to relatively low returns on investment.

Near shore

Offshore outsourcing within a nearby territory, and accessible by short trips or by phone in the same or a neighbouring time zone.


Offsourcing refers to the restructuring of a supply chain in which a company relies on its supplier for functions that were previously performed in-house. The outsourced functional unit is capable of generating greater value in the supplier’s business than in the customer’s. What makes outsourcing so powerful is that improving how offshored employees work in the new environment tightens the supply chain.

On-demand computing

A form of outsourcing agreement, sometimes referred to as utility computing, grid computing, or on-demand computing, that is based on variable payments for varying volumes of varying types of services over a long term that includes at least one refresh cycle for some, if not all, of the underlying technology. Aimed at enterprise customers, the key element is the scalability of IT resources (licenses, computers, networks, systems, storage, telecommunications and asset management) that the customer can purchase as part of the program. Customer engagement is equivalent to a requirement subscription or purchase agreement, but payment alternatives can cover the full range of a customer’s purchase, lease, or “for use” payment. This does not make the service provider a virtual CTO. Typically, the concept is designed to allow the customer to acquire the technology in the way that suits their individual needs.


Transfer (or delegation) to an external provider of the operation and day-to-day management of a business process. The customer receives a service that performs a separate business function that integrates into the customer’s overall business operations. Sometimes the process is one that has historically been run by a vertically integrated company, such as data processing. More recently, outsourcing defines the service sector for services that were not part of the vertically integrated enterprise, such as telecommunications, website hosting, transportation services, logistics and professional services of regulated professionals.

Service Quality

Concept used to differentiate one supplier from another. As a general rule, the subcontractor customer seeks to improve its own quality of service by obtaining the quality of service from its subcontractor suppliers.


Process of evolution of an existing outsourcing agreement. This process is facilitated by effective design and implementation of contract management processes from the outset of the outsourcing relationship.

Request for information (RFI)

A document that asks potential service providers to provide general information about capabilities and their overall business.

Request for proposal (RFP)

A document that asks potential service providers to propose terms, conditions and other elements of an agreement to provide specified services.


Identifies what is available for procurement from external service providers.

Service level agreement (SLA)

Specifications of the services to be provided. SLAs define the type, value and conditions of outsourcing services to be provided. SLAs define the overall relationship by establishing quality of service parameters.


A euphemism to express the fundamental challenge of outsourcing as a management technique.

Stalking horse

A competitor who never had the opportunity to get a contract. A stalking horse differs from the losing competitor, as the customer intended to only use the stalking horse to generate competitive quotes and challenge the preferred vendor (who ultimately wins the auction), and is not paid for this function.

Statement of work

Document that sets out the work to be performed.

Storage area network (SAN)

A high-speed special purpose network that interconnects different types of data storage devices with associated data servers on behalf of a larger network of users. Typically, a storage network is part of an organisation’s overall network of IT resources.


Service provider directly responsible to the general contractor and may not have a contractual relationship with the subcontractor customer.

Supply chain management

An integrated process to manage all levels of information flow from a company to its suppliers and customers, including its own internal manufacturing resources.

Transfer of undertakings (TUPE)

A law implementing the legal rights of employees to continue in the same work if the business unit is transferred.

Utility computing

See on-demand computing. IBM attempted to dominate this market by naming its market offering-Next Utility. Purchasing information technology is supposed to be as simple as flipping a switch.

Virtual private network

Network established using telephone lines and/or the Internet to transmit digital information between defined receiving and transmitting stations, such as telephones, computers, and data routing equipment.

Wide area network (WAN)

A geographically dispersed telecommunications network. The term distinguishes a broader telecommunication structure from a local area network (LAN). A WAN can be privately owned or leased, but the term usually refers to the inclusion of public networks (shared users).

Part 1

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