What Is Build-Operate-Transfer (BOT) In IT Outsourcing and How does It Work?

It is not surprising that in most Western and high-income regions, the salaries of software developers are astronomical. There is a vast shortage of skilled development professionals worldwide. All companies are increasingly rushing to any offshore or nearshore software outsourcing centre they can locate.

Table of Contents

According to Statista, the worldwide IT outsourcing business was valued at $375 billion in 2017 and has been steadily increasing since then. The 2019 Computer Economics survey also indicated that in 2019, 56% of organizations chose to outsource their IT solution to cut expenses and improve internal capabilities.

While outsourcing software development is not a new trend, many businesses don’t fully grasp the benefits that IT outsourcing could bring. They believe their options are limited to more well-known engagement models, such as dedicated delivery or staff augmentation. Even though these engagement models remain ideal for many businesses, some companies may have difficulty implementing them in accordance with the strict security policies, intellectual property protection, and the reliability of company products.

This raises the question: what can these businesses gain from IT outsourcing while keeping the operations in control?

In some cases, especially those companies with large and long-term software development projects, it is best to adopt the Build-Operate-Transfer (BOT) model – an IT outsourcing engagement model. This model lets you set up a nearshore or an offshore team software development (subsidiary) within your business to assist the local IT outsourcing company.

In this article, let’s delve right into the definition of the Build-Operate-Transfer engagement model’s concept, understand how this works, why it is important, and what problem it can solve!

What Does Build-Operate-Transfer Engagement Model Mean?

Gartner defined BOT as a contractual relationship in which an organization hires a service provider to build, optimize, and operate a certain service delivery operation with a team responsible for completing the tasks. And the ultimate goal of transferring the operation to the organization. BOT is a hybrid model that combines the buy and builds options.

Simply put, the Build-Operate-Transfer software development arrangement duplicates the relationship between you and your foreign subsidiary, notwithstanding the involvement of an external IT supplier. A software outsourcing partner can set up your offshore or onshore workforce, train them to be fully operational, and then legally transfer the subsidiary to you after a set period. This model offers the cost and efficiency of traditional IT outsourcing while giving you complete control over your intellectual property and technologies.

How Does the BOT Engagement Model How Does It Work?

Typically, it takes approximately three years for BOT providers to finish the transfer and setup of fully-operated IT companies offshore or onshore. The process comprises three primary steps:

Build Phase

During this stage, the BOT service provider begins by conducting an extensive analysis of your requirements. The software outsourcing partners are expected to know the most detail possible about your company’s goals and projects, your technical requirements and your company culture. Once they clearly understand your company’s mission and what you require precisely, your outsourcing company will identify and secure the talents, office space equipment, and technologies needed to implement your software development plan. Generally, this phase is completed in between 2 and 3 months.

Operate Phase

In this phase, the IT outsourcing company will handle all the daily tasks related to the project, per your project’s needs and objectives. The company will keep you informed on progress with daily, weekly, monthly, and quarterly updates and other reports that relate to the project. This phase typically lasts up to two years to build a solid and functional development team.

Transfer Phase

The transfer stage is now complete. Your fully functioning development team is now legally transferred to an affiliate of your company. The outsourcing partner has to transfer the entire operation, including intellectual property employees, knowledge base and other assets.

In essence, your IT outsourcing provider must:

Prepare and procure office space and necessary equipment.

Legal business registration in a foreign country.
Recruit, hire, and train employees.
Establish communication and technology infrastructure.
Make sure compliance with the selected methods for the project.
Plan for the future transfer.
Cooperate between different offices or geographical areas.

Benefits of the BOT Model

Because the BOT engagement model is made to build a fully functional development centre that will be legally transferred to your organization after a certain time. This means you have the legal right to use the knowledge base, intellectual property, infrastructure, and all other assets. You will also get a well-coordinated group of professionals who have already shown they can help your project and business. This can save you from finding, training, hiring, and onboarding the whole team yourself.

This is what makes the BOT and Dedicated Team Engagement Model different. After the project is done, you probably won’t keep the software development team you hired from outside. But if this was your first goal, a dedicated team engagement model is what you need. Most IT outsourcing companies of dedicated teams are unable or unwilling to aid you in registering foreign subsidiaries because of the lack of knowledge or inability to let their skills go.

The Build-Operate-Transfer engagement model lets your team get close to your business and build a strong relationship with it. This is good for turnover, increases productivity, and improves the quality of work. You will be able to train these people and help them figure out how to move up in your company.

In general, there are six clear benefits to the BOT engagement model:

Cost And Risk Reductions

This is most likely the most important factor in selecting this operating model. Building your subsidiary can be time- and money-consuming, especially for early-stage businesses that require extra assistance when constructing their structure from the bottom up. BOT enables you to delegate or transfer the establishment of necessary procedures and teams to someone else, your trusted technology partner. They know how to accomplish it in the most efficient and cost-effective method because they’ve been on the market for a while. To put it simply, utilizing a BOT model is less expensive and more secure in terms of business risk than outsourcing.

Assignment To Completely Align Your Company’s Culture

As we mentioned, one of your main concerns is that you might be unable to maintain your work style and the company’s culture if you outsource a portion you run to the business partner. It’s not the situation with BOT because the model requires you to share your most effective practices, procedures, and communication strategies with the team you are outsourcing from the beginning. This simplifies the transfer process since you don’t have to spend much time educating employees on how your company functions and how information is shared between the employees.

Full Control Over Operational Structure And Processes

With the outsourced team, you can share your existing project management process, Agile methodology and processes. You simply need to agree on what you want the operational structure and processes to be within your partner’s organization, so there won’t be any concerns about things not being done the usual way once you go into the Transfer phase of the BOT model.

Increased Responsiveness To Any Business Changes

You’ve probably heard that the Covid-19 epidemic and the associated crisis confirm that you must be flexible and react to whatever is happening outside your organization as quickly as possible. That’s why the Build-Operate-Transfer model provides you with enough flexibility to allow you to either transfer the team and resources much quicker than the agreed period or prolong it within the outsourcing cooperation model if needed.

Local Knowledge

This is an important aspect when you plan to relocate your business abroad. The laws, culture, languages, and government agencies and corporations differ from one country to the next. This is why using local experts as IT partners is among the most effective ways to begin your business in a different country. Before taking on the entire responsibility for your overseas subsidiary on your own, you’ll have the chance to slowly collect all the data you require in a safe and safe method.

The Team Will Become A Part Of Your Company After An Agreed Period

That’s all. When you need to expand your existing teams, you don’t have to worry about acquiring new team members. Once the development and run stages of the process are complete, the team you’ve supplied with insights and training on your company’s culture and intellectual property can be seamlessly integrated with your internal teams for a fraction of the cost.

Conclusion

Hopefully, this article has helped you understand the Build-Operate-Transfer model and addressed some of your concerns around this type of engagement.

BOT is an engagement model that should be considered seriously by any organization looking to build a long-term software development team nearshore or offshore. This model is for those who have to control strict data, intellectual property, etc.

Bestarion is one of the most reputable software development firms in Vietnam with more than 15 years of experience offering outsourcing software in Vietnam. Contact us to speak with our company experts if you’d like more details regarding our IT services.