This comprehensive outsourcing glossary is your go-to reference for understanding key outsourcing terms across BPO, IT services, customer support, legal process outsourcing, and AI-driven solutions.
Whether you’re a business owner, operations manager, or startup founder, this glossary demystifies complex outsourcing terminology and improves communication between internal teams and external partners. With clear, concise definitions of more than 100 industry terms, the outsourcing glossary equips you to make informed decisions and drive smarter strategies at every stage of your outsourcing journey.
A to D
Agent Utilization – A performance metric indicating how efficiently agents use their available time for productive tasks.
Application Outsourcing (AO) – The delegation of software development, implementation, or maintenance to a third-party vendor.
Back Office Outsourcing – Contracting internal, non-customer-facing functions like accounting, HR, and data processing.
Benchmarking – The practice of comparing service quality, cost, and performance against industry standards or competitors.
BPO (Business Process Outsourcing) – The outsourcing of business functions such as finance, customer service, or HR to external providers.
Build-Operate-Transfer (BOT) – A model where a provider builds and operates a service before transferring ownership to the client.
Captive Center – An offshore facility owned and managed by the parent company to perform outsourced operations in-house.
Change Management – The structured process of managing changes in workflows, personnel, or systems during outsourcing transitions.
Cloud Outsourcing – Utilizing third-party cloud service providers for infrastructure, platforms, or software solutions.
Co-Sourcing – Collaborative outsourcing where internal and external teams share responsibilities and goals.
Customer Support Outsourcing – Entrusting customer-facing support activities to a third-party provider.
Data Entry Outsourcing – Outsourcing repetitive data processing tasks like digitization, input, and validation.
Dedicated Team Model – Hiring a remote team that works solely for the client under a long-term agreement.
E to H
EOR (Employer of Record) – A company that legally employs workers on behalf of another, managing compliance and payroll.
FTE (Full-Time Equivalent) – A staffing metric that standardizes workloads across part-time and full-time employees.
Front Office Outsourcing – Contracting external providers for client-facing services such as sales or marketing.
Global Delivery Model – Distributing service operations across multiple countries to optimize costs, redundancy, and availability.
Help Desk Outsourcing – Assigning IT support and troubleshooting to an external provider.
Hybrid Outsourcing – Combining offshore, onshore, and nearshore resources to balance cost and efficiency.
I to M
Inbound Services – Call center services where agents receive incoming calls or inquiries.
IT Outsourcing (ITO) – Subcontracting IT services like network administration, cybersecurity, or software development.
KPO (Knowledge Process Outsourcing) – Outsourcing knowledge-intensive processes such as legal research, analytics, or R&D.
LPO (Legal Process Outsourcing) – Outsourcing legal functions including contract drafting, litigation support, and compliance.
Managed Services – The delivery of defined business services by a vendor under a service-level agreement (SLA).
Milestone-Based Pricing – A pricing model where payment is tied to achieving defined project milestones.
Multisourcing – Engaging multiple vendors to reduce risk and enhance service quality.
N to R
Nearshore Outsohttps://outsource-philippines.com/what-is-nearshore-outsourcing/urcing – Outsourcing to geographically close countries for time zone alignment and cultural compatibility.
Offshore Outsourcing – Delegating services to distant countries with lower labor costs.
Onshore Outsourcing – Hiring service providers within the same country for regulatory or logistical reasons.
Outsourcing Agreement – A formal contract that defines the terms, scope, and expectations between client and vendor.
Outstaffing – Hiring remote workers through a third-party agency while managing them directly.
Payroll Outsourcing – Entrusting payroll processing and compliance to a third-party firm.
Process Automation – Using software (e.g., RPA) to streamline and automate repetitive tasks.
Quality Assurance (QA) – Processes and checkpoints to ensure consistent, high-quality service delivery.
Request for Proposal (RFP) – A formal document used to solicit proposals from vendors for a project or service.
S to Z
Scope of Work (SOW) – A detailed document outlining deliverables, timelines, and responsibilities in an outsourcing deal.
Service-Level Agreement (SLA) – A contractual commitment to specific performance standards and penalties for non-compliance.
Shared Services Center (SSC) – A centralized facility delivering common services (e.g., finance or HR) across business units.
Staff Augmentation – Supplementing an internal team with external experts without long-term commitments.
Third-Party Vendor – An independent provider contracted to deliver outsourced services.
Time and Materials Contract – Billing based on actual time spent and materials used, offering flexibility.
Transition Management – Planning and executing the transfer of services, assets, and teams during outsourcing.
Virtual Assistant (VA) – A remote professional providing administrative or specialized support online.
Emerging and Strategic Terms
AI-Driven Outsourcing – Integrating artificial intelligence into outsourcing workflows to boost efficiency and accuracy.
CX (Customer Experience) Outsourcing – Contracting providers to manage customer journeys and satisfaction touchpoints.
GEO (Generative Engine Optimization) – Optimizing content for generative AI platforms and answer engines like ChatGPT.
Outsourcing Marketplace – Online platforms that connect businesses with outsourcing vendors (e.g., Clutch, Fiverr, Upwork).
Vertical BPO – Outsourcing services customized for specific industries such as healthcare, banking, or logistics.
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