Glossary
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Glossary
Glossary of software outsourcing terms
Each glossary entry defines one term a buyer meets when scoping, contracting or running an outsourced software project. It gives a concise definition, why the term matters, an example in context and the common misreadings, then names the decisions the term affects and links the guide that covers each decision in depth.
Updated 26 Oct 2026
A data processing agreement, also called a data processing addendum and often shortened to DPA, is the contract that binds a processor to a controller's instructions when the processor handles personal data on the controller's behalf, as Article 28 of the EU General Data Protection Regulation requires.
Discovery phase
The discovery phase is the time-boxed first stage of a software project, run before any build work is committed, in which a team settles scope, users, risks and architecture options into a plan: a brief, a backlog, an estimate range, or a decision to stop.
Enterprise resource planning
Enterprise resource planning, or ERP, is one system of shared records that runs a business's core operations together: finance, purchasing, stock, sales, production and people, each module reading and writing the same underlying data instead of five disconnected tools that disagree with each other.
Legacy system
A legacy system is a system the business still depends on that has become hard or risky to change: its platform may be out of vendor support, few people may understand it, and its tests or documentation may be missing. Age alone does not make a system legacy; dependence plus the cost of change does.
User acceptance testing
User acceptance testing, or UAT, is the activity in which the buyer's own users check a release against agreed acceptance criteria, in an environment close to production, before the buyer accepts it. It comes after the supplier's own testing and answers a different question: does this work for us, not does it run without crashing.
Data migration
Data migration is the one-time move of records from a source system to a target system, including selecting what moves, transforming it to fit the new model, and proving on evidence that the move was accurate and complete, so the source can finally be retired.
E-invoicing
E-invoicing is the issuing, sending and receiving of an invoice in a structured data format that software can read and process automatically, rather than as a PDF or paper document that a person has to open and key in by hand; many markets now require it for some or all business transactions.
A headless CMS is a content management system that stores and organises content through an administrative back end but has no built-in front end of its own; instead it hands content to whichever websites, apps or other channels request it through an API, leaving presentation entirely to separate front-end code.
Nearshoring
Nearshoring is outsourcing work to a supplier in a country close enough that the buyer's and supplier's working days overlap for most or all of a normal business day, and that travel between the two is practical, rather than a fixed distance in kilometres.
Outsourcing
Outsourcing is the practice of contracting a supplier to carry out a defined piece of work that a company could otherwise do itself, so that the supplier, not the buyer's own managers, owns running it and delivering the agreed result.
Proof of concept
A proof of concept, often shortened to PoC, is a small, narrowly scoped piece of work built to show that a specific idea or technical approach can actually work before a team commits real budget to building it properly, with no intention of running the result in production as it stands.
Fine-tuning
Fine-tuning is the process of taking a model that was already trained on a broad task and training it further on a narrower, labelled set of examples, so it adapts its behaviour — tone, format or task-following — to a specific use without learning new facts from scratch.
Minimum viable product
A minimum viable product, or MVP, is the smallest version of a new product that still lets real early customers use it and give feedback, built to test whether an idea works before a team invests in every feature a fuller version would eventually need.
Technical due diligence
Technical due diligence is the structured review of a software system's assets, architecture, security, delivery practice and people, carried out before an acquisition, investment or vendor decision, that rates what was found by its effect on the decision rather than by how tidy the code looks.
Vector embeddings are lists of numbers that a model produces to represent a piece of text, an image or a record, placed so that items with similar meaning sit close together in that numeric space; comparing the lists, rather than the original words, is what lets software find meaning instead of exact matches.
Web-to-print
Web-to-print is the software pattern that lets a customer choose a printable product's options, upload or design the artwork online, and place an order that reaches a print shop's production floor as a job, rather than as a file emailed back and forth outside the system.
Change request
A change request is a written document that asks for an adjustment to a software project's agreed scope, raised by either side once work is under way, and it has to be classified, sized and approved by a named person before anyone builds against it.
Headless commerce
Headless commerce is a store architecture in which the commerce back end, the part that owns catalogue, cart and checkout, is separated from the front end a shopper sees, and the two communicate only through an API, so the front end can be rebuilt or multiplied without touching the commerce logic behind it.
Service level agreement
A service level agreement (SLA) is the part of a continuing operations contract that names the measurable commitments a provider makes on a running system — availability, how fast it responds to an incident and how fast it resolves one — and what happens when a commitment is missed.
Staff augmentation
Staff augmentation is an engagement model in which a supplier's engineers join a buyer's own team and take day-to-day direction from the buyer's managers, rather than the supplier owning a defined result; the buyer keeps delivery risk and the responsibility for managing the work.
Statement of work
A statement of work (SOW) is the contract document that narrates what a supplier will deliver on a software project: the activities, the deliverables, the timeline and the standard the client will use to accept each one, so that everything left out of that narrative sits outside the supplier's obligation.
Fixed-scope contract
A fixed-scope contract is a software agreement that fixes what will be built and the acceptance tests for it before work starts, so both sides agree in advance what counts as finished and what happens if the brief changes partway through.
Model Context Protocol (MCP)
The Model Context Protocol (MCP) is an open standard that lets an AI assistant connect to external tools and data sources, such as a database or a calendar, through one consistent interface instead of a separate custom integration for every system it needs to reach.
Offshore development centre
An offshore development centre is a dedicated software team based in another country that works as a long-running extension of a company's own engineering function, under one accountable delivery owner, rather than a group of contractors assembled for a single project.
Retrieval-augmented generation (RAG) is a technique that gives an AI model your own documents to read before it answers, so that its response is grounded in current, specific information from those documents instead of only the general knowledge it learned during training.
