Articles | July 9, 2020
Build-Operate-Transfer in IT outsourcing
The Build Operate Transfer (BOT) model is a complex approach in IT project delivery. In contrast to traditional models, it consists of setting up independent and operational subsidiaries of the company in remote locations. If you are considering setting up a company in Poland, read more about the decisive factors, the advantages of this model and its phases.
Build-Operate-Transfer – more than outsourcing?
Companies decide on IT outsourcing to expedite software development, lower their costs and complement their internal teams with unique competences, as well as expand their operations onto new markets. So far, many providers have delivered the services of single specialists or entire teams in either Agile, fixed or hybrid methodology. Nowadays there are more client engagement models which address companies’ strategies for developing their own scalable IT centers. The BOT model allows clients to set up an operational subsidiary of their company in a remote location with the support of a local provider. The estimated time taken to set up such an office of course depends on mutual agreements in the contract. Once the project reaches a satisfactory level of maturity within a specified time, the service provider transfers ownership to the client.
What is the BOT model?
“Build-operate-transfer (BOT) is a contractual relationship in which an organization hires a service provider to set up, optimize and run an IT or business process service delivery operation with the contractually stipulated intent of transferring the operation to the organization as a captive center. BOT, as a hybrid model, combines elements of the “build” option (i.e. “insourcing” or captive center) and the “buy” option (i.e. outsourcing; see also “captive centers”).
Before deciding on the BOT model:
If you are considering setting up a subsidiary of your organization elsewhere, you should consider the important factors listed below. This will help you to determine whether the BOT model will be a good option, as it addresses the following issues:
- Do you have access to competences and the necessary IT talents for your project?
- What is the size and complexity of the project?
- How important is risk sharing for your organization?
- What is your desired location? Do you prefer an offshoring or a nearshoring model?
- Which outsourcing model will ensure better data security and GDPR compliance?
- What about intellectual property protection in the desired location?
- What is your expected set-up time?
- Does flexibility matter to your organization?
- What are the estimated initial and final costs of your project?
- Would you like to maintain your corporate culture in the remote location?
1) Build – the service provider sets up your office in a remote location. They equip the office and take care of IT infrastructure in accordance with security standards. Also, they recruit developers and establish the project team. At this stage, the knowledge transfer process takes place. This is also the right time to establish the legal regulations of contracts, take care of HR-related processes and aspects related to risk management.
2) Operate – this stage includes
operational management of your project. While you develop the core of your
business, your IT partner takes care of issues related to project delivery (KPI
& SLA, reporting, quality checking and so on). This is the right time to
introduce best practices and optimize project management processes.
3) Transfer – at the final stage, the client takes over the project. At this stage, the provider hands over the management of the office and processes to the client. The client can still take advantage of the support of the provider, and the cooperation can be continued under a new engagement model, if necessary.
Advantages of the Build-Operate-Transfer model
- Know-how – you gain access to the technological stack of the service provider and take advantage of the newest technologies in your project.
- Shared risk – the contractual agreement determines the extent to which each side takes responsibility for particular aspects of the project.
- Time to market – the BOT model expedites product delivery and thereby has an impact on time to market. The operational subsidiary of your company can even be set up in less than a year with minimal effort from your side.
- Minimizing initial costs – thanks to BOT, you can lower the initial costs of the project related to the recruitment process and setting up the office.
- Scalability –you can easily scale up teams and specialists at each stage and therefore significantly minimize costs.
- Sense of bond with a company – employees feel a stronger bond with the company and identify more with its core values, as in BOT the project is carried out under the company’s brand.
- Corporate culture – employees hired in your remote center follow processes you are familiar with and work in the same corporate culture.
- New market – the BOT model is the right choice if you plan to enter new markets, and it is easier to do so if you start with a development center.
With this engagement model, clients are able to develop faster, deliver their products quicker and benefit from outsourcing possibilities at the same time. As we can see, risk sharing and time to market are becoming increasingly important. The BOT model addresses the needs of companies which are willing to develop operational centers within a reasonable time and budget.