Companies in the private sector looking to support their software development efforts with an offshore outsourcing partner can today choose from many different cooperation models. One of them – the Build Operate Transfer – has gained a lot of traction in recent years.
If you’re thinking about outsourcing software development entirely (or partially) and want to have full control over its impact on your business over the long term, this model is a good pick for you. Another common use case for BOT is for setting up and operating a software development center abroad.
But what exactly is this model and how does it work? What are its key benefits and challenges?
This article gives you a detailed overview of the BOT model to help you understand whether it’s the right outsourcing solution for your company.
Table of contents:
- What is Build Operate Transfer in the IT industry?
- Build Operate Transfer vs. Dedicated Team – Pros & Cons
- Benefits of the Build Operate Transfer model
- When to use the Build Operate Transfer model?
- The future of Build Operate Transfer
What is Build Operate Transfer in the IT industry?
The Build Operate Transfer (BOT) is an excellent approach for building an offshore office or software development team with a partner operating in that geographical location.
The idea is to first build and operate the team and then – once everything is ready – transfer it from the provider to your business. Companies often use BOT as an alternative to expanding their existing in-house software teams, outsourcing all the work to external development partners, or engaging in public-private partnerships.
Here are a few key characteristics of BOT software development or infrastructure projects:
- Ability to take advantage of a local partner with a proven track record and experience in operating development teams.
- Lower risk when expanding at a team development team.
- Get a development team that has a greater understanding of your business and culture when compared to the traditional dedicated outsourced team.
The BOT model - two approaches
Companies can use this outsourcing model in two ways:
- In the first scenario, a local partner builds a subsidiary and, after some time, sells it to your company. The ownership is transferred once you’re ready for the takeover.
The key benefit of this approach is that it makes transferring the ownership of the entire subsidiary faster. It can happen whenever you’re ready. Also, this approach ensures a smooth transition for everyone involved – from the development team to vendors and customers.
- The second approach is based on establishing a subsidiary later on.
The idea is to keep the team on the payroll of a local provider for a longer time. Once the parent entity is ready for the transfer, a subsidiary can be established and then transferred to do it.
This approach reduces the initial risk involved in this transaction. You can first actually try this offshoring model and see whether it works for you. Another benefit of this approach is that you’re facing lower organizational overhead at the beginning of the process. But then expect to have to deal with more of it once it’s time to transfer the team.
3 stages of the Build Operate Transfer model
Stage 1: Build
This stage focuses on building the team. But it’s about more than that. The idea is to make sure that the team is ready to operate within local regulations and take advantage of its own back-office support in areas like finance to HR.
This is also when both parties agree on the terms and scope of the collaboration. The companies analyze the requirements in detail to understand which skills and competencies are required for the new team.
This is when your project company can start the process of acquiring the right technologies, team members, office space, and equipment - all depending on the requirements of your project.
Stage 2: Operate
In this stage, the provider focuses on managing the offshore team in cooperation with you. Your partner also provides support locally and ensures that the team is well integrated and fully aligned with your business goals.
By dedicating a lot of time to operations, the provider can work with the team and guarantee that all the key processes are well aligned. This is also when you allocate time and resources for training the team – this can be a series of workshops followed by 1-on-1 meetings with individual team members.
Stage 3: Transfer
This is the stage when the transfer of ownership takes place. Whenever you’re ready, the provider transfers the team to you with all of its expertise and skills acquired during the operations stage.
You get to transfer all of the resources into your organizational structure within the specified timeframe. Ideally, the transfer follows a procedure that is already defined in the initial partnership contract.
How long does it take to implement a BOT model?
Most of the time, the transfer of ownership happens after 12-18 months. But over that time, several important milestones take place:
- For example, the initial three months are expected to result in staff recruitment and opening an office with employees. This is when the transition from the build to operate stage happens.
- The operate stage may last from 4 to 11 months. The idea is to increase the number of employees on board and align them with your processes and culture.
- Then it’s time for the transfer. This usually happens between the 12th and 18th months of the start of the BOT project. The local provider and teams use this time to prepare for the handover.
Build Operate Transfer vs. Dedicated Team – Pros & Cons
How does the BOT model compare to the dedicated team setup?
On the surface, the two might not look so different. After all, a dedicated team is a group of people who work exclusively on your project but within the organizational structures of your project company. In both models, you have a team that works exclusively on your project but isn’t actually part of your company.
But there are some critical differences between BOT and dedicated teams – the most important one related to the matter of intellectual property:
- In the dedicated team model, once your collaboration with the external service provider comes to an end, all of the expertise and resources gained during the project are gone. You don’t get to keep the intellectual property. If you’d like to rebuild this level of expertise in your business, you’d need a lot of time, skills, and patience.
- In the Build Operate Transfer model, you keep the intellectual property after transferring the team into your structure. This transfer of knowledge and expertise is one of the key benefits of the BOT model over the dedicated team.
But this is just the tip of the iceberg. Let’s take a look at other benefits of BOT projects that makes it such an attractive option for companies looking to outsource software development.
Benefits of the Build Operate Transfer model
1. Lower cost and risk
This is likely the most important factor for companies choosing this model. Building your own subsidiary in a foreign country is both time- and budget-consuming. This is especially true for early-stage enterprises that might need extra support when building the structure from the ground up.
With BOT, you can outsource the process and then transfer the ready-made subsidiary once it’s ready. When partnering with a technology company locally, you know that they have the skills and experience to do it faster.
They’ve been part of the market for some time and know-how to do things in the most efficient and cost-effective ways. That’s why this model is often cheaper and comes with lower business risk than typical outsourcing.
2. High level of alignment with your company culture
One of the problems companies run into when outsourcing is keeping their way of working and company culture. BOT offers a great solution. The model actually requires you to share how you work first with the provider.
You need to show your best practices, values, and communication frameworks right from the start. This is important for setting up the transfer stage successfully. You won’t have to spend any extra time familiarizing the team members with how your company operates. They’ll be prepared to enter the ranks of your employees.
3. Full control over processes and operational structure
Another great benefit of BOT is that you can easily use your existing project management processes with the outsourced team. All it takes is agreeing with your business partner on what your operational structure and processes should look like, and you won’t have to worry about things being done in a different way. Once the transfer phase is over, you will get a team that is perfectly aligned with your business processes.
4. Greater agility
The Covid-19 pandemic proved that companies need to stay agile and respond to the changing circumstances immediately if they want to survive on the market. This is again where BOT can help you.
The approach offers a lot of flexibility since you can transfer the team and resources faster than the agreed time if needed. Alternatively, you can also prolong the process and keep the outsourcing corporation model.
5. Local knowledge and insight
Knowing the local marketplace inside and out is critical for succeeding in becoming a truly global company. It might be different professional culture or communication styles – you’re bound to run into these issues when working with external teams in an offshore model.
That’s why it’s smart to partner with a provider that can support you locally and show you how to adapt some parts of your business operations to regional specifics. That’s why BOT is so helpful for companies that are taking their first step into building an international business.
When to use the Build Operate Transfer model?
BOT comes in handy in many different use cases in outsourcing software development:
- If your company is looking to open an office in another country and quickly build a site with up to 100 employees without any experience in that country, your administrative overhead will be incredibly high. BOT takes care of all that – plus the legal or integration matters.
- If you’re planning to open a subsidiary rather than outsourcing work, BOT is also a good choice. By using this model, you can secure your company’s culture and values, keeping full control over the process and skills management. All the core competencies will always stay in-house.
The future of Build Operate Transfer
BOT is a great alternative to other outsourcing models. It retains their flexibility in scalability, all the while ensuring that intellectual property and expertise gets transferred to your company seamlessly.
When picking your technology partner in the local market, take into account their reliability, security, and business values. Ideally, you should collaborate with companies that share your methodologies and approaches for an easier transfer.
Do you have any questions about the BOT model? Get in touch with us. We have experience in setting up offshore locations for clients from all over the world and will be happy to help you make the most of the Polish software development talents.