The Build Operate Transfer (BOT) IT outsourcing model is an evolving approach, allowing you to outsource projects with a new horizon. It includes partnering with a service provider who manages the initial setup, operational phases, and transfer control to the vendor. In this blog, we will discuss Build Operate Transfer IT outsourcing, its significance for the IT sector, how the BOT model works in outsourcing, the challenges, and what comes after the transfer stage.
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What is the Build Operate Transfer Model?
Build Operate Transfer (BOT) is a contractual delivery model in which two entities- an organization and an outsourcing partner company – establish, maintain, and optimize the product or service. The service provider sets up and runs specific business or IT process service delivery and transfers the operation to the company with full ownership.
Initially, it was implemented for the private and public sectors, where private companies develop, manage, and operate that product or service. Once done, it was transferred to the government with full ownership.
The BOT model is ideal for long-term projects where the companies aim for services with market expertise, minimum financial risk, and customization per their requirements. However, the concept skyrocketed to stardom, and several industries, including the IT sector, embraced this successful concept. Likewise, the BOT model enables you to develop an outsourced IT infrastructure, run it optimally, and legally transfer it after a selected period.
In the BOT model for IT services, you get the advantage of an efficient outsourced IT solution with cost-effectiveness and total control over technologies and technologically advanced properties.
Factors to Ensure While Contracting BOT Model for Your IT Services:
✅ Duration: A build-operate-transfer model always comes up with a specific duration or tenure. The vendor needs to assign a specific tenure to transfer the ownership of the product or services.
✅ Ownership rights: One of the crucial factors to ensure while signing an agreement for the BOT model in the IT industry is determining ownership rights. As both vendor and service provider have ownership, it is essential to determine the time till when who can take up the ownership.
✅ Termination clauses: Another vital aspect to consider is mutually agreeing on the termination clause. If the vendor is unhappy with the service provider’s work, the vendor has the right to terminate the contract.
✅ Financial consideration: In the contract, you must mention the financial consideration between the two parties. The services or product could have ups and downs because it is a long-term project. However, financial conditions should be clearly outlined to prevent future rucksacks.
Phases of Build Operate Transfer IT Outsourcing Model
Let’s understand how the BOT model works for outsourcing in the IT sector with a step-by-step guide:
Build is the initial planning stage, where you require deep knowledge about the market and the client’s requirements. With insightful research, you need to plan the team, product or service description, technologies, and techniques to be used; in a nutshell, you must have a clear picture of what you want to do.
In this phase, both the client and service provider discuss what and how they want the project to be. Both discuss objectives, limitations, expectations, and desirable goals. The BOT model for outsourcing in IT usually takes three to five years.
In the operating stage, your outsourcing team starts the work and operates that product or service for a while (per the agreement). The IT outsourcing partner ensures that the service is standardized and operations are followed as per the requirements.
This phase includes project development, operation reviews, management, and assessment of potential refinement to the project. In the operation phase, the goal is to achieve consistent and secure operations while streamlining the internal process and matching the set objectives.
In the last phase, your IT outsourcing partner is ready to transfer the product or services legally. The service provider has to ensure that it has ticked off all the requirements requested by the client and is functioning correctly.
The service provider is no longer responsible once it is given to the vendor. The service provider must share all essential information, such as how it functions, technologies used, necessary updates, and legal compliance.
Difference Between Traditional Outsourcing vs BOT Model Outsourcing
One of the most common queries regarding the BOT model in IT outsourcing is that business owners consider it the same as traditional outsourcing.
However, IT outsourcing is not limited to staff augmentation and customer services. Let’s break the most confusing bubble of outsourcing. The traditional and BOT models are about outsourcing developers and services, but the technique differs.
|BOT model IT Outsourcing
|The outsourcing company maintains ownership of assets and services
|The outsourcing company has full ownership till it needs to transfer to vendor
|Can be used for small and long-term projects
|Only applicable for long-term projects with particular requirements
|Contractual work is not mandatory
|Mandatory to sign a contract to get work done
|Restricted to knowledge transfer
|Emphasizes knowledge transfer due to ownership
|Limited flexibility to customize project after signing the contract
|High flexibility to customization and adaptability for enhancing project
Advantages of BOT IT Outsourcing
The build operate transfer IT outsourcing is increasing and being adopted by several multinational companies. Let’s find out the advantages that numerous companies embrace in their work:
Implementing the BOT model in the IT sector helps you reduce uncertain risks. The IT outsourcing company would be an expert in their field and have proficient knowledge of technologies and techniques. Hence, it decreases the risk of major or minor problems in the operation.
It also indicates to be cost-effective as there will be fewer trials and more successful experiments. And you can enter new markets quickly and efficiently.
Flexibility and Scalability
As a business owner, you understand the value of flexibility and scalability in your project. The BOT model provides an efficient solution that changes your queries according to the market demand. Also, it allows you to meet business requirements to streamline operations.
As a result, despite slight adjustments or significant shifts to the project, the BOT model ensures the sync market model accordingly.
Access to the Local Market
Expanding your business into a new market can be tricky and feels like entering a foreign land. However, with the build operate transfer IT outsourcing, you can quickly access the local market by collaborating with an outsourcing company.
For instance, your service provider would like a local guide who has in-depth knowledge about the market and brings invaluable insights, ensuring that you perform the right strategic moves.
Efficiency is the element that empowers business success. The BOT model allows you to focus on specialized skills and follow best practices in your operations. Hence, it helps to smooth processes, streamline workflows, and reduce technical issues.
As a business owner, you maximize productivity and better resource allocation, resulting in more profitability. Also, the BOT model delivers minimum risk with cost-effectiveness, enhancing efficiency in the project.
Practicing legal and regulatory compliance is challenging, especially in foreign markets. The BOT model in IT outsourcing makes it manageable and ensures that your operations fully comply with local regulations and laws.
As a result, you can prevent the legal complexity, evading expensive pitfalls and potential legal traps. The service provider will handle all legal activities and secure your project efficiently.
Wide Range of Expertise
By adopting the BOT model, you expand your market and access to specialized knowledge and skills. In the BOT model, you acquire diverse talent and expertise in technologies, industry-specific insights, and valuable insights.
With this expertise, you can empower your business to adapt, excel, and innovate in an evolving market, giving you a distinct competitive edge in the comprehensive market.
Minimize Operational Cost
As a business owner, you understand the importance and value of managing costs. The setup cost of the BOT model is relatively high initially, but the long-term operational costs are significantly lower and beneficial for the long-run business. Also, the service provider delivers efficient processes and expertise to the project.
In addition, it ensures sustainable cost-effectiveness, protecting your profitability in the business future. With the lower operating costs, your team can focus on essential business prospects.
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Challenges to Consider While Choosing BOT for IT Outsourcing
Despite various benefits, a few challenges must be addressed when choosing a Build Operate Transfer IT outsource model.
Even though you both have mutually agreed on one thing, there is a high chance of miscommunication because of different working techniques. Also, the product or service might have to be put on hold, and the result would not be favorable.
In addition, if you outsource from a different country, there will be a language barrier, which can also be the reason for communication challenges. However, if we follow agile methodology, there won’t be any issues, and the workflow will be streamlined.
Partnering Right Provider
The BOT model is effective, but choosing the wrong partner will be time-consuming and expensive. As the project is for the long term, a small mistake in the past or present will cost you a lot of money in the long run.
Also, you are investing your time and money to outsource an entire project or service, so it is crucial to choose the right provider. Initially, it will be a challenge to pick the right provider to partner with, as there are numerous options. You must choose which fulfills all your needs and develop it as your choice.
Loss of Control
In the BOT model, you are only fully responsible as the owner of that project till it is assigned. So, you cannot customize or make your project during the process. It will be entirely under your ownership, as mentioned in the contract. Hence, you lose control as you can only interfere with or upgrade your project once handed over.
As mentioned above, you might face work differences if you outsource from a different country. Every company has different techniques, and sometimes that gets tricky to work with. For instance, if your outsourcing for the IT industry is from Japan and you are a business owner from the USA, the time and work schedule would be different.
They might rely on human resources, where you prefer technologies more. Thus, in the build phase, you must discuss your expectations to avoid future problems and keep both companies on the same page.
How to Choose the Right BOT Model for Your Business?
Choosing the right BOT model for your business is crucial to ensure your project matches your goals and needs. Following are the tips you must verify before adapting the BOT model to your business:
- Select which type of BOT model you want for your business, whether a rule-based BOT model or an AI-powered one.
- Consider your objective and goal before assigning your project or operation to the BOT model company.
- Ensure that BOT is seamlessly integrated with the existing platform and system for better enhancement.
- Before deploying the BOT, comprehensively test it to ensure it operates as expected with your in-house team or experts.
- Choose a BOT platform or solution with powerful analytics and reporting abilities.
The Build Operate Transfer IT outsourcing model provides a strategic method for businesses to extend their operation while minimizing risks and maximizing productivity. By partnering with an experienced outsourcing service, you can leverage IT expertise and develop cost-effective operations.
However, you must consider an outsourcing company that aligns with your goal and objective. It should offer an exclusive suite of services, vital support, and insights to ensure your project soars to the next level.
Bacancy, a leading outsourcing company, can help you unlock the potential of software development outsourcing to deliver exceptional results and transform your project into a successful example.
Frequently Asked Questions (FAQs)
Build-Operate and Transfer model is a contractual agreement between two companies to develop and run specific operations for a particular time.
Yes, the BOT model in the IT industry is successful because of its dynamic approach, cost-efficiency, and maximum productivity.
Yes, the famous IT company Infosys partners with Procter & Gamble (P&G) to run an operation for a specific time. It is an example of a successful BOT model for outsourcing in the IT industry.
The BOT model helps businesses mitigate risks, allowing them to establish and enter new markets with less cost risk.