In brief
- The BOT model provides companies with a method to access and develop skilled personnel by hiring a partner to build and manage their information technology (IT) or business operations, with ownership transferred back to the client upon completion of the project.
- This model includes five phases: pre-build, build, operate, transfer preparation, and transfer, with different approaches for resource management like secondment, rebadging and legal entity takeover.
- Successful BOT partnerships require thorough planning, comprehensive onboarding and selecting the right key performance indicators (KPIs) to measure performance and ensure smooth integration.
The first wave of popularity of the build-operate-transfer model (1990s-early 2010s) was all about facilitating market entry and reducing costs. Today, however, the second wave of BOT projects is driven by another need: the need for access to tech talent.
According to ManpowerGroup’s 2024 Global Talent Shortage report, three-quarters of employers struggle to fill technology roles, and the figure has changed little since 2022. Relevant IT and data skills remain the most challenging to find, no matter the industry or region. Deloitte’s survey of tech industry leaders also showed that the talent gap is quite wide: almost 90% of respondents called recruiting technology talent a major or moderate challenge.
The build-operate-transfer (BOT) model has reemerged as the response to the tech talent shortage. Here is how you can leverage it to gain access to global tech talent.
What is the build-operate-transfer (BOT) model?
The BOT model is a project delivery method in which a company (the client) hires an external partner (the BOT partner) to deliver a product or set up a subsidiary or facility, such as a technology service center (TSC). The partner subsequently transfers the product, subsidiary, or facility to the client after the project scope is complete.
Commonly used as a business model for public-private partnerships in infrastructure projects (e.g., highway construction), the BOT model found its application in the tech industry as a project management technique.
Here, in a nutshell, is how build-operate-transfer works:
- The client hires a BOT partner to set up specific IT or business process operations
- The partner builds out the new capacity (e.g., hires a software development team and administrative staff)
- The partner also manages day-to-day operations for a specified duration
- Once that period is over, the partner transfers the ownership of the product or facility back to the client. Ownership involves all the personnel and intellectual property
Stages of a BOT partnership
From the client’s perspective, a BOT project consists of five key phases: pre-build, build, operate, transfer preparation and transfer.
Pre-build
Before the build phase of the build-operate-transfer project can begin, the client and the BOT partner may need to agree on how the latter can take over the client’s resources for the duration of the build and operate phases.
Note: taking over the client’s resources is only relevant for more complex engagements. If you wish to hire a software development team and set up its operations under the BOT model, this step is usually unnecessary.
There are three resource takeover approaches on the table:
- Resource secondment. The partner seconds the headcount from the client and charges it for managing the resources and other support, infrastructure and HR (human resources) services. It’s the simplest and fastest form of transfer as it doesn’t require changing individual contracts. However, it may lead to complications in resource management. So, IT and HR input in preparing for a build-operate-transfer partnership is needed to prevent those
- Rebadging. The client temporarily rebadges its entity/entities to the build-operate-transfer partner with the contract outlining the transfer scenario. It allows the approach and processes for all resources to be harmonized in one deal and is more straightforward commercially. However, it does entail certain HR risks as labor contracts must be terminated and signed again
- Legal entity takeover. The build-operate-transfer partner purchases the client’s legal entity/entities and sells them back during the transfer phase. It’s a more transactional approach, but with a clear mechanism. However, it requires more substantial risk management to limit exposure, which takes both time and resources
Build
The build phase of the build-operate-transfer model revolves around creating the new product or subsidiary as quickly as possible. The partner is responsible for hiring the personnel required for creating the product or enabling the subsidiary’s operations as per the client’s needs.
In more complex arrangements, the BOT partner can also take on the responsibility for:
- Registering the subsidiary
- Leasing the office space
- Purchasing or leasing the equipment
Let us take the example of a build-operate-transfer partnership for setting up a technology service center (TSC). In this case, the BOT partner establishes the recruitment process, best practices and organizational structure for the center. To meet the client’s personnel demands, the partner then hires dedicated recruiters from the market and onboards and trains them.
Operate
During the operate phase, the partner develops the new product or subsidiary into a fully functional entity. By the end of the operate stage, the product team or subsidiary typically must complete training and start bringing value as part of the client’s operations. Some clients may also want the BOT team to become self-sufficient in its operations by the end of this stage.
In the case of a BOT project concerning a TSC, the operate stage involves putting the recruitment of the TSC personnel in motion based on the outlined organizational structure and recruitment procedures. During the operate phase, the candidates can be hired from the market or seeded by the partner.
The operate stage involves a close collaboration between the TSC recruiters and the partner’s team to ensure all the necessary standards and best practices are followed.
Prepare to transfer
Once the product or subsidiary is operating at full capacity, as outlined in the contract, the build-operate-transfer partner starts preparing it to be transferred back to the client. While it can be considered a part of the transfer stage, we prefer to divide the preparation from the transfer itself.
In our example with the TSC setup, the TSC is ready for the transfer stage when the BOT team has fully covered the client’s demands and is efficient in its day-to-day operations. During the preparation to transfer, the partner team ensures that the TSC personnel delivers results according to the market standards and follows established business process standards, procedures and best practices.
Transfer
The transfer stage means the build-operate-transfer partner returns the full ownership of the product or subsidiary back to the client. That includes personnel and any intellectual property.
The transfer phase is only conducted when the recruited team can operate completely on its own, without the BOT partner’s intervention. At the same time, business processes and recruitment standards must be proven to be scalable and reliable.
Build-operate-transfer model vs. other models
The build-operate-transfer model may not be the only model on the table for your organization. Here are the three others you may want to consider:
- Build-own-operate-transfer (BOOT) model. This model comes with an extra stage, own. During it, the hired partner retains ownership of the product or subsidiary for a specific duration to recoup the costs of the build phase. It is a common model for public-private partnerships
- Build-lease-transfer (BLT) model. Once the partner creates the product or subsidiary, it leases those back to the client for a specific duration before transferring ownership. This model is also common in a public-private partnership involving construction
- Outsourcing model. Under this model, an outsourcing partner is hired to fill a particular role or deliver a product. The partner is ultimately responsible for the deliverables and their quality; the day-to-day management is up to the company. Only the deliverables are transferred to the client at the end of the outsourcing project, without any impact on the client’s capabilities or resources
6 tips for a successful BOT partnership
To ensure your build-operate-transfer project leads to the increased capability you expect it to, please take into account the following six ingredients for success.
Be ready to attract and retain the right talent
Whether or not you leverage the build-operate-transfer model to overcome the talent gap challenge, hiring the right people is key. To that end, you and your build-operate-transfer partner must be prepared to:
- Properly define job profiles
- Be transparent about compensation during recruitment
- Offer a competitive salary for the market
- Speed up the hiring process, up to making a job offer in a day
- Offer hybrid working opportunities
Retaining the hired talent should also be a continuous effort. This can involve:
- Transferring the project/product ownership to the new subsidiary instead of delegating tasks
- Fostering a fun, engaging workplace
- Encouraging networking
- Boosting creativity via innovation sprints
Ensure onboarding is comprehensive
To turn your new employees into productive team members as quickly as possible, onboarding must combine the introduction to your business, processes, culture and technology.
Here’s how we onboard new hires under the build-operate-transfer model at Luxoft, for example:
- Processes. We introduce the new hire to key internal processes and people, discuss the goals and tasks for the probationary period, and provide a tool overview. The new hire must pass mandatory training
- Business. We provide the new employee with domain training, if necessary, and bring them up to speed on the client’s reference architecture, application landscape, custom algorithms and processes, and best practices
- Culture. We help the new employee assimilate into the client’s culture and catch them up on communication and collaboration practices and expectations
- Technical onboarding. We introduce the new employee to the client’s architecture and infrastructure, workflows and standards. Our technical onboarding also involves a complex code study
Build the right culture
As the transfer stage of the BOT model means the new personnel will officially join your headcount, those employees must be ready to integrate into your corporate culture. Therefore, you and your partner must ensure the new hires match your culture in communication, collaboration and more.
Also, the new team must have a sense of identity, values, vision, and mission that will connect them to your brand. All of these elements must be proactively developed and continuously reinforced during and after the build-operate-transfer project.
Think about knowledge transfer from the get-go
To make the transfer stage under the BOT model go smoothly, you and your partner have to ensure knowledge transfer takes place both before and during the operate stage.
To bring your new employees up to speed with your internal processes, your existing knowledge base has to be comprehensive and accurate. Your build-operate-transfer partner can help you validate and/or complete it with any missing artifacts before the build phase.
After the operate stage, your build-operate-transfer partner should ensure the knowledge base has been expanded with new knowledge created during the build and operate phases (if applicable).
Overall, knowledge transfer can come in the following forms, both under the BOT model and beyond:
- Workshops and training
- Organized community
- Visualized flows and diagrams
- Documentation, including for best practices
- Joint product demos
- Role rotation
- Checklists and plans
Select the right key performance indicators (KPIs)
To ensure your new capabilities perform on par with your expectations, you need to establish a set of KPIs to measure performance. Which metrics are best depends on the project and your organization’s specific requirements.
For example, if you plan to leverage the build-operate-transfer model to expand your software development capabilities with a TSC for your digital transformation efforts, you can track the following productivity metrics:
- Output: velocity/stories delivered, pull requests per sprint
- Quality: the number of defects discovered in each lifecycle phase, capacity allocated to new functionality vs. capacity allocated to bug fixing
- Automation: automated and unit test coverage
- Team stability: employee motivation index, attrition
- Production stability: site reliability, engineering service-level objectives/indicators, mean time to failure/repair
- Predictability: actual vs. estimated effort, average delivery cycle time
- Complexity: codebase size, coding style violations
Prepare your corporate structure for the BOT partnership
To ensure you can work seamlessly with the team hired under the build-operate-transfer partnership, you must conduct several key preparations:
- Secure corporate sponsorship for the build-operate-transfer project
- Plan and communicate new product work to the new location
- Align your touchpoints with the new way of working under the BOT model
3 factors to consider when selecting your BOT partner
Deloitte put it best: “[Your partner’s] people will be your people.” That is why selecting the right partner can make or break your build-operate-transfer project.
Here are the three key factors you should consider when selecting a partner for cooperation under the build-operate-transfer model.
Cultural fit
Your build-operate-transfer partner must be a good match for your culture; otherwise, its staff may struggle to identify the right candidates for your BOT team. To zero in on the cultural fit, pay attention to the partner’s approach to communication and collaboration.
Location
If you are looking for a local partner to assist you in entering a new market or creating a presence in a new region, local expertise is crucial. Your local partner must be able to navigate the relevant legal and compliance aspects of your project and ensure there’s minimum cultural friction between your new personnel and existing teams.
Approach to the partnership
Under the BOT model, your partner should help you build new capabilities, not just recruit more engineers in another location. Therefore, it is essential that they do not approach the project as a recruitment agency would: the engineers’ purpose is to build a self-sustaining facility.
Your partnership under the BOT model should also involve close collaboration to establish quality guardrails and transfer protocols.
Luxoft’s experience with the BOT model
We’ve collaborated with a number of clients under the BOT model. For example, we help our clients leverage the build-operate-transfer model to build new technology service centers in offshore and nearshore locations with zero disruptions to the business and to existing operations.
To ensure our partnership under the build-operate-transfer model meets our client’s expectations, we:
- Thoroughly analyze the client’s environment, requirements, and constraints
- Suggest the most suitable takeover and transfer options (e.g., setting up a special-purpose vehicle company)
- Prepare a detailed proposal and value proposition
- Hire, train, and onboard recruiters, engineers, and administrative staff
- Ensure the recruited personnel are a good fit for the client’s culture
- Conduct comprehensive training and onboarding for new hires
- Ensure the BOT team is fully efficient and can independently meet the client’s demands
- Continuously monitor key productivity metrics
- Ensure that the established business processes and recruitment standards follow the client’s standards and best practices
Are you considering a build-operate-transfer partnership to ramp up your software development capabilities and drive your digital transformation? Get in touch with us to discuss how Luxoft’s expertise can be of service.
Alexey Zagorodniy
Alex leads complex pre-sales initiatives and client engagements for tier-one financial firms, applying his depth of industry experience and hands-on knowledge of IT market specifics in different countries. Now based in London, Alex has an international background, having lived, worked and studied across Europe.
