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.

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.

  • Build:

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.

  • Operate:

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.

  • Transfer:

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.

Is Build-Operate-Transfer (BOT) the right Product Development model for you ?

Reality is, software product development is a long, repetitive and expensive endeavor. A significant amount of capital planning and provision of multiple funding rounds is required if the desired product has any chance of getting to the market. Then there is the ongoing costs of sustaining engineering, product support and release management. Maintaining multiple version of the software, supporting customers on each of the versions, ensuring all supported version continue to run on hardware(s) and other dependent software or operating systems, etc. can quickly become a drain on the core product engineering or development team.

Building and managing a product development team and a core sustaining engineering team brings in other fixed overheads that divert financial resources away from the investment in the product.

One option is to use an Outsourced Development partner who will take your product direction and build the product to its desired specification. They can also provide the necessary ongoing support for the install base accounts. This solution is good for small and concise projects. It does not work cost effectively where R&D, ongoing technology uplift, etc. are needed.

The right solution is to get into a Build-Operate-Transfer (BOT) engagement with a partner that has the core understanding and processes to help you build and operate your desired development team. Technically this can still be termed as an outsourced software product development or outsourced sustaining engineering but, what matters is the structure of the BOT contract that gives you the required flexibility, cost efficiency and direct control that is much required in a product development initiative.

Checklist before choosing the right BOT partner:

  • Can the BOT partner help me build the desired team as fast as possible?
  • What processes do they have for shortlisting and assessing the candidates?
  • How efficiently are they tracking the Time to Hire(TtH) which has a direct impact on the Time to Market (TtM)
  • Does the BOT product demonstrate the ability to burden as little non-product related costs and overhead?
  • You own the product IP
  • You own and control the design and architecture
  • You own and manage and control the software release cycle
  • You determine the technology platform, supported OS, development tools, hardware dependencies, etc.
  • What are the conditions for the “Transfer” part of the BOT contract?
  • Does the partner have the ability to build a dual-shore team?
Cyret offers a unique model for outsourced product development and outsourced sustaining engineering Build-Operate-Transfer (BOT) services to varied set of customers. We have extended our BOT offering to even non-technical or non-software needs like building and managing Business Development and Market Research teams.
 
A right BOT partner will also be able to help you reduce your ongoing product support, customer support and Quality Assurance costs.

Case Study

Customer: Energy Efficiency & Consulting Services

Industry: Energy

Business Focus: Customer business is to offer consulting & execution of energy efficiency to companies particularly those that operate large facilities, warehouses, factories, electric vehicle fleets, etc.

Management Goal: Management had key performance goals for each of the departments:

  • Sales & Marketing:
    • keep burn rate very low
    • Sales & Marketing maintain a low cost of demand generation
    • Marketing acquires prospect customer data at high pace & low cost
    • Sales has ready target customer research for suitability, spend capability, decision timelines
    • A demonstrable low cost of customer acquisition
  • Finance:
    • Reduce invoicing delays
    • Improve the collections & lower Days of Sales Outstanding (DSO)
    • Contract Compliance for maximizing revenue opportunities
  • Product Engineering:
    • Improve Engineering support for Sales
    • Reduce product defects
    • Improve customer experience with rapid issue resolution
    • Reduce sustaining engineering costs
    • On-Demand resource ramp up & ramp down for special projects
To achieve management’s goal our customer considered different options including setting up its own offshore center to execute these functions. After careful examination of the setup costs, management needs, infrastructure costs & overheads, statutory compliance needs, overhead staff and more, the benefits of working with a credible & experience Technology BOT (Build-Operate-Transfer) partner like Cyret clearly outweighed the effort & cost of an independent setup. In addition, the customer also realized the bandwidth it would save critical management bandwidth at HQ  steering such a offshore center.

Solution:

 After careful assessment, customer narrowed down to Cyret Technologies & its Build-Operate-Transfer (BOT) at their most effective option. The setup process worked seamlessly.
It is 6+ months now since the first Sales Enablement team was on boarded. Since then the customer has doubled the team, added Finance, Project Management & Data Analyst functions to the team. Customer looks at quickly doubling the size of the team & adding new functional areas like Human Capital Management & Customer Success.
Using Cyret's BOT Services, Customer has :
1 %
saved more than

on people costs, improved sales productivity, improved on the collections & DSO.

1 %
Reduced More Than

of Customer Acquisition costs

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