It’s no wonder that with sky-high software developer salaries and a severe lack of qualified development resources across most Western and other high-income geographies, businesses of all sizes are increasingly flocking to whatever nearshore or offshore software development options they can find. In fact, the global IT outsourcing market is estimated by Statista to have been worth 375 billion USD in 2017 and has kept growing ever since. By 2019, the number of businesses opting for IT outsourcing as a means of curbing their costs or augmenting their in-house capabilities has, according to the 2019 Computer Economics survey, reached a formidable 56% globally.
Despite this monumental shift towards nearshore and offshore outsourcing in recent years, many businesses are not aware of the full spectrum of possibilities IT outsourcing can offer. They tend to believe their options are limited to the more widely known client engagement models, such as the dedicated delivery or staff augmentation models. While these arrangements are a great fit for many businesses, some may find them difficult to adopt due to strict corporate regulations related to security, intellectual property protection, and product reliability levels.
So, how can these types of businesses reap the benefit of IT outsourcing while maintaining the level of operational control required? In several instances (especially in the case of large-scale and long-term software development projects), this can be best accomplished with the Build-Operate-Transfer, or BOT IT outsourcing engagement model. This model allows you to set up a nearshore or offshore subsidiary of your organization with the full support of a local IT outsourcing partner.
Intrigued? Let’s dive in a little deeper. What is BOT? How does it work? What problems does it solve? And would it be a good fit for your organization?
Devised to allow greater operational control and further overseas expansion, BOT has been 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. B-O-T, as a hybrid model, combines elements of the “build” option (that is, “insourcing” or captive center) and the “buy” option (that is, outsourcing; see also “captive centers”).”
In plain language, although it involves an external IT provider, a BOT-based software development arrangement emulates the relationship you would have with an overseas subsidiary of your own. The outsourcing partner sets up your nearshore or offshore team, brings it to a fully operational level, and then legally transfers the subsidiary to your company after a set amount of time. This model gives you the cost and efficiency of traditional IT outsourcing while allowing you to maintain full control of your intellectual property and proprietary technologies.
Generally, it takes a BOT service provider around three years to complete the set-up and transfer of your fully operational nearshore or offshore IT subsidiary. The process is comprised of three main phases:
In summary, your BOT outsourcing partner’s support will include the following activities:
There are several major differences between the BOT model and other types of IT outsourcing engagements, including the dedicated team, or DDC model. It’s important to understand these distinctions to help determine and measure the relevance of the BOT model for your project and unique business goals.
The BOT model is designed to create a fully operational development center that will be legally transferred to your organization after the period stipulated in your contract with the outsourcing provider. This means you are legally entitled to the knowledge base, intellectual property, infrastructure, and all other related assets.
Most importantly, you will also inherit a well-coordinated team of experts who have already proven their worth as it relates to your project and business needs. This helps you avoid the hassles of having to source, train, and onboard an entire team on your own.
On the flip side, with the dedicated team model, you will likely not be able to retain your outsourced development team upon completion of your project, if that is your intention. Most providers of dedicated teams are not able or willing to assist with helping you register your foreign subsidiary due to a lack of knowledge, capabilities, or not being willing to let go of their talent.
In many cases, the BOT model also allows your team to become more fully aligned with and feel a stronger connection to your business, which can help reduce turnover, increase productivity, and improve quality of work. You’ll have the opportunity to nurture these employees and provide them with a clear career path within your company.
Although they have some important differences, both the BOT and dedicated team models can be highly effective forms of IT outsourcing. However, if your project is big enough (say, 10 developers or more) and is estimated to last for many years (generally, more than 3 years), it probably makes good sense to choose the BOT model from the start.
The build-operate-transfer engagement model offers a host of clear-cut advantages that can provide tremendous value to your business.
In conclusion, BOT is an IT outsourcing engagement model that should be seriously considered by any company looking to establish a long-term IT and software development team in a nearshore or offshore location. This model is also particularly suited to companies with strict data, intellectual property, and other regulatory and compliance requirements that are best protected in-house. BOT enables enhanced control over your remote resources and assets while allowing you to avoid significant upfront costs associated with establishing a nearshore or offshore IT and software development facility on your own.
TEAM International has over 25 years of experience providing customized IT and software development solutions, including BOT engagement models, to leading companies in the U.S. and Europe. Contact us today if you’d like more information about BOT or have questions about how to determine the right IT engagement model for your business.