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Outsourcing Fundamentals

Independent guide to Outsourcing: BPO strategy, Service Provider selection, contracting and implementation projects. Assessing and improving your current service.

What is BPO? > Definitions


Additional Resource Charge: As part of a pricing agreement, the rate charged for volumes above a baseline.
At Risk Amount
The amount, normally defined as a percentage of monthly charges, that a service provider has put at risk for poor performance penalties.
Business Process Outsourcing: use of a commercial service to undertake a business process otherwise undertaken internally.
Critical Performance Indicator: a performance indicator that has an associated financial penalty.
Delivery Model
See Service Delivery Model
The reduction in the number of candidate service providers
Earn Back
A process whereby a service provider can avoid paying Service Credit (penalty) by providing superior performance for a defined period.
Finance and Accounting Outsourcing - BPO of F&A activities
Management activities associated with the delivery of a service
General Performance Indicator: a performance indicator measured, but having no consequences if not met.
Human Resources Outsourcing - HR BPO
Intelectual propery:
Key Performance Indicator: a performance indicator that is measured and that may be promoted to being a CPI.
Knowledge Processing Outsourcing; provides domain based processes, advanced analytical skills and business expertise rather than just process expertise
Lift & Shift
Outsourcing by taking over activities without making improvements to the process
Master Services Agreement: The main body of a legal contract
The transfer of business or IT processes to other countries, typically where ther is a cost advantage
Operational Level Agreement: An obligation for the client to perform specific activities to a standard or to specific deliverables.
Pool Percentage
A multiplying factor allowing the sum of At Risk Amount allocated to CPIs to be greater than 100%
Request for Proposal, a requirements document sent to potential suppliers for their response.
Reduced Resource Credit: As part of a pricing agreement, the rate at which charges are credited for volumes below a baseline
Service Credits
An amount credited against service provider charges for service level defaults.
Service Delivery Model
a holistic description of a service, including what is delivery by whom, from where and how.
Service Level Framework
The way in which service performance is measured and motivated.
Service Level Agreement: The performance commitment for the service delivered by the provider/
Sourcing Strategy
Decision about who organisationally should execute a business process and where from. For example internally distributed, captives shared services or outsourced
Statement of Work: description of the activities and deliverables that are the purpose of the service.
Shared Service Centre
Change to the way in which processes are executed.
When related to BPO, the move of activities to the provider unchanged unless there is also transformation.