Outsourcing is a practical way for organisations to scale, strengthen capability and manage cost strategically. But with so many models and terms, it’s easy to lose clarity on what each one means and when it applies. This glossary gives leaders clear, useful definitions that support better decisions, whether you’re comparing delivery models, evaluating partners or planning operational change.
Application Outsourcing (AO)
Outsourcing the development, enhancement or maintenance of software applications to an external provider helps organisations scale technical capability without expanding internal teams. For instance, a company might outsource ongoing maintenance of a legacy ERP system instead of hiring full-time specialists. Unlike broader IT outsourcing, AO focuses specifically on software and applications, whereas IT outsourcing may include infrastructure, networks or help desk services.
Back Office Outsourcing
Transferring non-customer-facing tasks like finance, HR and admin to expert teams for scalability and cost control. A common example (there are many!) is outsourcing payroll administration instead of managing it in-house.
BPO (Business Process Outsourcing)
This model involves outsourcing entire business processes (not just individual tasks) to a specialist provider that takes full responsibility for delivery, performance and continuous improvement. Think of it as handing over an entire function, such as finance operations or customer support, so the provider manages outcomes end-to-end. For example, instead of hiring and managing a team for claims processing, a business can engage a BPO partner who owns the process, technology and KPIs. Unlike staff augmentation, where you retain operational control, BPO shifts that responsibility to the provider, freeing your internal teams to focus on strategy and growth.
Build-Operate-Transfer (BOT)
This phased model allows a third party to establish and run operations before handing them back to the client, making it ideal for leaders who want eventual control without the upfront complexity. A business might, for example, partner with a provider to build a data operations team in Manila, operate it for a set period and then integrate it internally once processes are stable.
Captive Centre
A captive centre is an offshore delivery hub fully owned and managed by the parent company. This model provides complete control over processes, culture and compliance while still delivering cost advantages. Unlike outsourcing, where work is handled by an external provider, a captive centre keeps expertise within the organisation but in a different location. It’s a strong choice for companies that prioritise governance, security and alignment because it combines operational oversight with the benefits of offshore talent.
Cloud Outsourcing
Engaging external cloud providers to manage infrastructure, applications or data environments allows businesses to scale without heavy investment in physical hardware. Instead of maintaining on-premise servers, organisations can migrate workloads to platforms like AWS or Azure, gaining flexibility, resilience and cost efficiency while freeing internal teams to focus on innovation rather than maintenance.
CX Outsourcing
CX outsourcing involves delegating customer experience functions like live chat, help desk and social media support to specialists. Commonly used to improve service availability, response times and customer outcomes. For example, a retail brand might delegate 24/7 chat to specialists, ensuring service continuity beyond local business hours and enhancing customer satisfaction.
This model blends human expertise with AI-driven automation to boost efficiency and scalability. Imagine service agents supported by AI-generated response suggestions and automated routing, creating faster resolutions without losing the human touch.
EOR (Employer of Record)
An Employer of Record legally employs staff on behalf of a company, managing compliance and payroll so the organisation can hire globally without creating a local entity. Unlike outsourcing, you retain day-to-day control of tasks and performance while the EOR handles employment obligations, making international expansion simpler and less risky. The distinction from managed services is in scope and responsibility, EOR is limited to being the legal employer and ensuring compliance, whereas managed services involves delivering a defined function under agreed service levels.
Extended Workforce
Integrating freelancers, contractors and outsourced teams into your business for agility and innovation. A brand launching a new product might bring in freelance designers temporarily, avoiding long-term headcount commitments while accelerating delivery.
Front Office Outsourcing
Engaging external specialists to manage client-facing functions such as sales, marketing and customer engagement enables organisations to scale faster while maintaining quality interactions. This approach is particularly valuable for sales teams because it removes time-consuming administrative tasks that can dilute focus. For example, outsourcing appointment-setting and lead qualification allows internal sales professionals to concentrate on high-value activities like building relationships and closing deals, rather than spending hours prospecting or scheduling. By freeing up capacity for strategic work, front office outsourcing helps businesses accelerate growth without compromising customer experience.
Global Delivery Model
Distributing work across multiple geographies is a well-established approach for organisations seeking cost efficiency and operational continuity. A typical model keeps strategy onshore while placing delivery functions in offshore hubs such as the Philippines to ensure scalability and round-the-clock support. This setup is a widely adopted model for businesses that want to balance control with cost savings, leveraging offshore talent for execution while retaining strategic oversight locally.
Global In-House Centre (GIC)
A GIC acts as an internal service hub offshore, offering scale and deep process alignment. Banks often use this model for compliance and risk management, ensuring sensitive work stays under direct control.
Combining onshore oversight with offshore execution balances cost efficiency and quality. A marketing team might keep strategy local while outsourcing campaign execution overseas, maintaining control without inflating budgets.
KPO (Knowledge Process Outsourcing)
Outsourcing high-value, knowledge-driven tasks like analytics, research and insurance services to specialised experts. Unlike BPO, which focuses on execution, KPO delivers insight and strategic value. For example, a company might outsource market research for a new product launch to accelerate planning and decision-making.
Managed services is a delivery model where the provider takes full responsibility for achieving defined outcomes under strict service level agreements (SLAs). Unlike other outsourcing models, which focus on supplying talent or completing tasks, managed services are outcome-driven. The provider owns the process, technology and performance end-to-end, giving organisations confidence that critical functions are delivered to agreed standards without the burden of day-to-day oversight.
This is Sourcewiser’s approach. We don’t just fill roles, we manage delivery, compliance and continuous improvement so clients can focus on strategy and growth.
Nearshoring
Outsourcing to a nearby country offers cultural alignment and time-zone convenience. Australian firms often choose Philippines or Malaysia, while US businesses look to Mexico or Colombia for similar benefits.
Building teams in another country provides access to specialised skills and cost savings without compromising quality. Many organisations create finance teams in the Philippines through offshore staffing partners to achieve these goals.
Outcome-Based Outsourcing
This model ties payment to results rather than hours, aligning incentives for continuous improvement. Businesses might pay based on customer satisfaction scores or cost-to-serve reductions, ensuring value beyond simple labour metrics.
Engaging an external provider to deliver services or perform business functions that would otherwise be handled in-house enables organisations to focus on strategy while reducing operational complexity. Payroll processing is a common example, where outsourcing ensures compliance and accuracy without adding internal overhead.
The Philippines has established itself as a global hub for outsourcing across diverse functions including customer experience, finance operations, IT services, digital marketing and creative work. Its strong English proficiency, cultural alignment and highly skilled workforce make it a preferred destination for businesses seeking scalability and quality. Organisations leverage Philippine-based teams not only for 24/7 customer support but also for specialised roles in accounting, software development, content creation and analytics. This combination of talent, adaptability and service orientation enables companies to reduce costs while maintaining high standards of delivery.
Shared Services vs Outsourcing
Shared Services consolidate work internally into a centralised unit for consistency and control, while outsourcing transfers responsibility to an external partner for efficiency and scalability. For instance, a company might centralise HR internally but outsource payroll to a specialist provider to reduce risk and improve compliance.
Understanding the language of outsourcing is only the first step. The real impact comes when you choose the right partner to turn strategy into results. Before you make that decision, ensure you’re asking the questions that matter most.
Explore our expert guide today. This resource will help you uncover blind spots, challenge assumptions and build partnerships that deliver lasting value.
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