For tech consulting companies, service providers, agencies, and so on, deciding to go down the path of IT software outsourcing is a strategy geared towards saving costs but not compromising quality. Unfortunately, there is still a caveat as finding a reliable, adaptable, and flexible outsourcing partner – one that fits pre-existing processes without overlapping – is a huge challenge.
As a result, some companies look towards implementing an efficient and simple BOT (Build, Operate, Transfer) model in software outsourcing. This enables partners to manage and build an outsourced unit.
Build Operate Transfer Model In Software Outsourcing
The software outsourcing build operate transfer (BOT) model is defined by Gartner* as “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 (that is, “insourcing” or captive center) and the “buy” option (that is, outsourcing).”
The build operate transfer model in software outsourcing or simply BOT, is often associated with financing projects, private-public partnerships, as well as infrastructure. However, in this case, we will focus mainly on its being an outsourcing model. There are more common outsourcing models, such as co-sourcing or staff leasing, comprehensive sourcing, and facilities outsourcing, which are often starting points when diving into operating the offshore operations. As soon as the company is ready to take over and fully operate the entity that was once being managed by the outsourcing partner, then they may do so at any time they have formulated the decision. When that time comes, the entire operation under the outsourcing partner will be then transferred from partner to the owner company.
For the companies that prefer to proceed with the build operate transfer model in software outsourcing, they often have a vision or a plan to operate and own its own organization, which is often in a foreign country. However, this means that they would want to strengthen its capabilities first and tackle or mitigate the oft found risks that newbies have during the start-up stage. Thus, there is a need for such a company to undertake a contract with a possible outsourcing company to help aid in building a shared services or offshore delivery organization which it can operate for a set period.
Often, the software outsourcing build operate transfer model aids until the team is adapted to the company’s methodologies, processes, as well as tools before taking full control of the team.
Phases of The BOT Model
The build operate transfer model in software outsourcing follows main phases: build, operate, and transfer. These phases are done as the unit evolves and grows, and prepares for the company take over.
In this phase, there is much activity concerning the setting up of the operation unit. This encompasses everything ranging from selecting the buildings, setting up and installing infrastructures such as IT devices, Internet, computers, among other things. This is also the phase where staff employment happens, as well as setting up the legal framework, and putting together administration.
By this time, the company should have already specified the desired offshore country, among other things.
During the operate phase, this is where management of the project occurs. This includes development of the projects or products, management, enhancements, maintenance, as well as product support.
In addition, there is much team coaching and personnel development that happens until the ideal level of business maturity and technical capacity of the team has been reached. More often than not, there is always a stipulated length of time which this phase encompasses.
During the transfer phase, the final transfer of project ownership is done from outsourcing partner to the client. However, this happens only when the client has declared that it is ready to fully take control of the project, or when the contract has expired. When this happens, the client acquires a new offshore subsidiary, a transfer of assets, and some handover operation.
The transfer phase may sometimes come earlier than the contractual period, which is when the company decides that it is ready, and thus buys the entire operation. However, there are also some instances where the phase occurs later due to several possible reasons.
Build-Operate-Transfer Software Outsourcing: Reasons To Consider
With the many options that customers have when it comes to outsourcing, here are a few reasons why going for the build operate transfer model in software outsourcing is ideal
1/ Saves money and time
As entrepreneurs, time is money. Sometimes you forget to value your own time, which means that every hour put into work holds value, and that is worth money. To put it simply, it might take you 8 hours to understand and figure out how things work, while someone else can be paid to complete the job in just an hour. By doing so, you are actually saving money since the time you have not spent trying to figure things out can be put into your business and do something worthwhile.
It might be a switch in thinking, but it is important to understand that. The build operate transfer model is a rather smart way of outsourcing, which effectively saves time and money by providing more short term and long term cost saving. This, in turn, helps minimize the cost over a period of time.
2/ No man is alone
Despite the fact that the hashtag #superCEO sounds cool, it really is not possible. The truth is, CEOs cannot do everything. It is simply impossible to be at many places all at once, and do everything for everyone, at every time.
Perhaps it is still possible to take on a lot, but at the end of the day there are some things that even the superCEO wants to put off or does not like to do. When it comes to that, then it would be best to outsource it. When outsourcing the work, it helps in saving time which opens up more time to do income generating things, or the other “everything” stuff that needs to be done.
3/ Lowers stress levels
Admittedly, there are a lot of things that entrepreneurs or CEOs need to do for the business. This, in turn, increases stress levels. Which hints back at point #2 that even the most superCEOs do need some help.
Through the software outsourcing build operate transfer model, entrepreneurs or CEOs get to have a little bit of magic for their business. This helps in decreasing stress levels as a helping hand is provided for the business. That way, business targets are hit on time and often on budget.
Although outsourcing can still be a bit stressful at the start, once a rhythm or habit is adapted, then the stress levels go down.
4 Experienced partners
A lot of the companies or entrepreneurs prefer to go into the software outsourcing build operate transfer model since it helps reap several benefits of having on hand an experienced outsourcing partner. These experienced partners are able to manage, set up, and administer operations for them at the same time minimizes risks – especially when venturing into a new country or testing out a new market. Clearly, it is a win-win arrangement.
BOT Model Benefits
A well followed software outsourcing build operate transfer model has a number of benefits. This goes without saying that there are still some points to consider, but for most, the benefits are more important than the challenges.
1/ Helps put the product on the market faster
This is a common benefit of the BOT model as it means having resources in a different time zone or location. The model helps in bringing the product to the market faster since it would seem to have an almost 24/7 process cycle – that depends on the difference as well. However, it does ensure that development is continuous, and not much time in the day is wasted.
2/ Cost saving and profitable
Businesses are all about saving money than spending it. This is why the software outsourcing build operate transfer model often emphasizes hugely on the fact that it helps cutting costs in any way it possibly can.
In most cases, the model helps as save cost as much as 60% of the usual cost since the project and the team is owned, managed, and operated by an offshore group. The money saved can then be used to help aid in enriching and developing the company’s employees. It could also be used as investment or for employing more talented resources.
3/ Minimizing risks
Among the other benefits of the software outsourcing BOT model is in minimizing risks. Sure, there are always risks and since each country does have problems at some point or another, BOT model helps lower the risk of being in a different country by potentially diversifying investment for its investors.
Risk is also minimized since, more often than not, the outsourcing partner already understands the conditions of the country which it operates on. As a result, they are already often prepared for possible problems that could happen during the time it is employed to set up the team.
The entrepreneur is able to create a subsidiary without worrying about the logistical planning as well as the set up of the offshore office. This includes the team of employees are all under the control of the outsourcing partner. All of this comes at minimal effort as well as a small fee in terms of upfront investments.
In addition, local geographical knowledge is also leveraged through the partner. This is immensely helpful when establishing a presence as an offshore subsidiary. More often than not, the outsourcing partners already have knowledge and relationships that other companies do not have internally. Through their partners, companies need not spend so much time learning the local intricacies especially when it comes to hiring, finding office space, and other things.
5/ Ready resources
Once transfer is started, the team of resources are already trained and adapted. They are ready to go. The company can simply time the resources as well as the eventual transfer once the resources are ready – often based on goals being met as well as quality metrics.
6/ Rapid scaling
Through the BOT model, companies can have rapid scaling of operations through an expanded array of service offerings, which in turn fills up gaps in the business model. This is mainly due to the free time that the company acquires as the outsource partner takes care of other matters, leaving more room to brainstorm for rapid scaling.
7/ New technologies
Having an already knowledgeable team enables companies to easily ramp up or ramp down quickly, as well as introduce newer technologies. Having new technologies to play with is also an added perk that often engages and retains the team members in the group.
With the added input of experienced resources, there is a bigger idea pool that can help boost development into the right direction, without having the CEO or company to have to manually explore and learn about the new things. Instead, they can simply receive feedback or ideas, or let the team grow as needed – if they are given enough freedom to do so.
With all that being said, some companies still have a challenge in promoting the idea of having corporate subsidiaries somewhere else – outside its corporate office. However, the build operate transfer model is designed to allow these companies to reach out to outsourcing vendors and enable them to establish an offshore team as well as environment. Over time, they are able to assume control plus ownership of the set up.
It is through this scenario that companies are able to get full value of its outsourcing partners. At the same time, they have a plan that keeps the business operations and knowledge in house as if it is part of the same company. Being given more time, the company can then focus on developing and enhancing their core business. The outsourcing partner can oversee development and the offshore operation and gets things done before transfer of ownership.
With 8 years working with Build Operate Transfer (BOT), Saigon Technology is definitely an expert on the model.