The Build-Operate-Transfer Model: Having The Cake & Eating it Too !!!

With  advancements in  communications  technology having made high bandwidth connectivity  ubiquitous and cheap, multi-locational sourcing  of IT & Business Process services  is fast becoming mainstream. From being a decision towards achieving cost-differentiation against competition, offshore sourcing has become a hygiene factor in most industries in the high-cost, developed economies.

However, the two extremes of complete captive sourcing and total offshore outsourcing have their own challenges and risks. The Build-Operate-Transfer (BOT) model offers a middle path to help organizations enjoy the benefit from offshore services while mitigating the risks involved, with the flexibility of going captive at any time.

The BOT (Build-Operate-Transfer) model is designed for clients who foresee the need to own an offshore development center but do not have the time, bandwidth, or expertise to go offshore and establish their own development center. It offers a middle path to those organizations that want to set up a captive but wouldn't want to manage the complexities and risks of setting up the same. In this model, an external service provider builds, operates and manages the facility to deliver a set of outsourced services exclusively to the outsourcing organization in an arrangement that defines certain transfer triggers at which the client organization can execute transfer of ownership of the facility to itself. The client organization pays for the services just like a normal outsourced relationship till it executes the transfer option and at the transfer stage, takes over ownership of the facility including the infrastructure, resources & IP with payment of a pre-decided transfer fee. Arguably, this is the safest way to start offshoring, akin to testing waters before taking the plunge. The staged process allows an organization to evaluate the effectiveness and benefits of owning an ODC before undertaking the risks associated with starting and running it.

Advantages of the BOT Model
One of the main long-standing benefits of this model is its significant low costs as compared to typical outsourcing pricing models while building a valuable strategic asset for the company. The BOT model mitigates the clients' risks and minimizes their upfront investment.

Better transparency and control

• Full or partial engagement in operations from the outset (the company can assign employees to the project early, while using the expertise of a local ESP to build the offshore facility)
• More control over processes (the option of assuming control early minimizes risk and exposure, compared with traditional outsourcing to an ESP)

Lower Costs

• Better economies of scale
• Centralize / consolidate processes in the offshore location
• Technology leverage for cost savings

Greater speed & flexibility

• Faster process turnaround (less-intense learning curve associated with gaining process and industry knowledge) compared with traditional outsourcing
• The ability to diversify into different processes over time

Lower risk

• Increased awareness of, and preparation to deal with, local issues such as permits, licenses, construction, legal matters and recruitment
• Initial capital costs covered by the service provider
• Better security process knowledge remains secure and supervised in-house

Access to global best practices in offshoring

• Service provider's staff with extensive expertise and experience in offshoring is able to deliver better results than in-house staff experimenting with the concept
• Service provider has access to their own global delivery infrastructure and proven processes for faster and more reliable transfer of the operations offshore and further optimization
• Learning from work done with other clients can be leveraged by service provider for better results

When entering a BOT relationship, a company needs a long-term strategy that can address two possible outcomes:

Within a specified time, the company will take over the service provider's work and run the operations, or it will hand over all work to the service provider

Although the company and the service provider must be prepared for either scenario, the ultimate goal of the BOT model should be for the client to facilitate the move toward an outsourcing engagement. Although the client may wish to retain control, it is important to align to the reasons initially sought for an outsourcing relationship through the BOT model. Culmination into a full outsourcing relationship will enable the company to gain optimum value, cost benefits and high quality outputs and services from the BOT model.

The BOT Model truly lets you have the cake and eat it too !

Comments

[Sheela Jain]

There are disadvantages as well.

1. BOT model looks easy to say but difficult to implement, especially if both the parties are new to the domain

2. It also has the risk of loosing the billability for the model builder, if the client does not take over within the specified period. The risk increases if the provider company's interests need strategically to maintain the relationship in long term

Any thoughts on ways to make it win-win model?

[T-Rex]

Also, if you give you business card or sizzle card to a stranger and they look your business up online, the first thing they will do is type in the main domain (www. xyzbusiness. com) without your ID just out of curiosity. Don’ t lose sales and your credibility because of this– register a domain name and have it forwarded to your replicated company website.