The article below introduces BOT (Build Operate Transfer); a model that benefits companies seeking to establish an offshore software development subsidiary.
This article is useful if you are:
- Considering outsourcing software development, wholly or partially, and have concerns about the impact this may have on business, in the long-term
- Or making in-house plans to set-up and operate a software development centre abroad.
If that’s you, please read on.
Introducing the BOT model
The Build Operate Transfer model (BOT) is a way to build an offshore software development team in collaboration with a local partner. The team is transferred from provider to parent entity when they are ready. Build Operate Transfer is used as an alternative to the expansion of existing in-house software teams or outsourcing to external development partners.
The characteristics of BOT that make it attractive are:
- Ability to rely on a local partner with proven experience
- Reduced risks for the parent entity
- A development team with a greater depth of understanding of the business and its culture (vs. dedicated outsourced team)
BOT: the main options
Let’s have a look at two ways to approach the Build Operate Transfer model.
In the first option, the local partner establishes a subsidiary and then, after some time, sells it to the parent entity, transferring ownership when the parent entity is ready to take over.
- Ownership of the entire subsidiary is quick to transfer in one piece, whenever the parent entity wishes.
- Ensures a seamless transition for teams, vendors, and customers.
The second option sees the subsidiary created later on, and the team on the payroll of the local provider. The subsidiary is then established at the time the parent entity wishes to transfer.
- Initial risks are reduced for the parent entity, allowing them to try-out the offshoring model.
- Less organisational work at the beginning (and, as a consequence, more at the point of transfer to the parent entity).
The 3 stages of the BOT model
The Build Operate Transfer model can be broken down into three stages, each of which moves further towards the goal of establishing a team abroad.
The BOT model Playbook
If the Build Operate Transfer approach sounds like a suitable solution for building your offshore team, the next question is likely to be “Where do I begin?’’. To help you move forward, we have listed 8 of the main topics you will need to address, preferably with support from a trusted, local BOT service provider.
- Aligning objectives and scope. The intention is to define a project framework, plus an idea of the aims and scope. Here, long term goals can be identified, along with the necessary roles and capabilities. These are the foundations for the overall running of the project.
- Defining processes, organisational structure and governance. This step establishes the structure of the project for the future, including:
- The role of the team abroad
- The size of the team in relation to the overall project
- Timeframes and milestones
- Details of the services or products you develop
- Investment and budget specifics
- Establishing the local subsidiary. There’s a degree of flexibility here as you can create your local entity while starting your BOT journey, or at the moment of transfer to the parent entity. The choice is yours.
- Office setup and back-office. Having a physical presence abroad requires compliance with local laws, so it’s wise to choose a respected local partner to set up your office and run the back-office operations (i.e. operations management, local administration and office space).
- Team recruitment and onboarding. Finding the right employees is at the heart of the operation. The choice is yours to set up a Talent Acquisition team and recruit yourself your new employees, or to engage a local recruitment agency (local agencies can allow for faster recruitment, with detailed knowledge of the local workforce and employment guidelines).
- Collaborative team operations. This is the point when operations and projects are up and running in your new office. Extra care will have been needed to ensure that processes defined earlier work properly and that team members are working according to their roles. Process and structure may need adjustments. Effective communication within your organization is essential, and the same is true in the collaboration between the parent entity, the BOT provider and the third parties (i.e. accountant, office landlord, vendors).
- Regular reporting, including audits. Operations are up and running, and the offshore team’s interim results start being visible. It’s at this point that the parent entity’s management will want feedback. Be prepared to issue reports and audits as a way to fulfill company requirements and give everyone involved a picture of the progress being made.
- And finally, transition planning and execution. Includes due diligence, preparation of paperwork and familiarity with all the operations being handled by the provider. Ensure everything is clear for the team that’s having the operation handed to them.
We’ve seen how the journey looks like, so now let’s check how long the BOT process usually takes.
Key Timeframe Considerations
The transfer of the entity’s ownership usually happens after 12-18 months, with some critical milestones taking place along the way.
During the initial 3 months, achievements such as staff recruitment and opening an office with employees take place, and the transition from the Build to the Operate stage occurs. Within the Operate stage (months 4-11), growing numbers of employees are onboarded, in alignment with the plan specifics. Months 12-18 are focussed primarily on the Transfer stage of the model, where the local entity and teams are prepared to be handed over to the parent entity.
BOT: the benefits
What can Build Operate Transfer do for you? It can allow you to get your local operations set up sooner (2-3 months vs 6+ months for organisations proceeding alone), reduce risks and build a solid foundation for the further growth of your offshore team.
The right time to use BOT
The Build Operate Transfer model can be applied in a variety of scenarios when discussing offshoring destinations. But when is it the right time to use it? Let’s use the example of Poland as a popular offshoring destination.
If within 12 months, you intend building a site with 1-100 employees, you don’t have any experience in Poland, and don’t have available bandwidth for administrative tasks, legal and integration – now is the right time.
And, more generally, you may want to consider opening a subsidiary rather than outsourcing. It helps safeguard your company culture and values, control over the process and skills, and keeping your core competency in house. If you want to learn more, take a look at this article, which explores the benefits in depth: 7 reasons why you should set up a subsidiary in Poland instead of outsourcing.
If you are looking for information about setting up your presence in Poland, download our Kraków IT Market Report 2019.
If you are interested in Build Operate Transfer model or alternatives to outsourcing, contact us at MOTIFE to learn more.
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