To build a successful business abroad, you need to choose your business model. The most popular variants are captive operations, build-operate-transfer, joint venture and fee-for-service. Your choice will depend on the requirements for talent availability, data security, IP protection, set-up time, flexibility, etc.
There are two main cases when outsourcing can be profitable for product IT companies and become a “magic pill.” The first one is solving a short-term task that does not require constant cooperation. But in the long run, you will probably prefer to hire people with the same mindset and effectiveness. So, you may turn to the build-operate-transfer model.
Build-operate-transfer (BOT) is a commonly used model in IT offshoring. As a rule, a tech company chooses an offshore partner to establish its software development center abroad. This process implies building, operating and transferring the development office with its team. BOT in tech does not involve the public sector, but its idea remains the same: Share risks and reduce costs.
Risks Of Traditional BOT
IT service companies are potential competitors to product companies. That is why, in the traditional BOT model, confidential information and intellectual property are in danger.
As a rule, the management of your R&D team is provided indirectly via the local service provider, not you, so there is no guarantee this development team will not use your information to work with your competitors.
If you don’t want to take the risk, you’ve probably already paid attention to an improved version of the model, build-operate-transfer 2.0. Let’s look at it in detail.
The “build” part implies setting up a software R&D office offshore. The local service provider hires the team of developers for you and finds an office space. As a client, you keep control over all operations and pay monthly bills.
The “operate” stage involves operational management. You can stay focused on your product while the service provider takes care of booking, payroll, accounting and HR. You are also supported legally and get financial consultations.
The “transfer” stage is carried out when the client decides to take over operational management from the service company. There is no transfer since you are the owner of the project from the beginning. When you realize you can support your R&D office independently, don’t prolong the agreement. In contrast to the traditional BOT model, in BOT 2.0, termination is not charged and does not require additional fees.
BOT Vs. BOT 2.0
The traditional BOT model and its new version differ a lot. First, in BOT 2.0 you own the project from the very beginning. This includes a team of in-house developers, equipment, software and the final product. Simply put, your provider sets up an offshore development office from scratch according to your needs and helps you run it.
This service company does not have access to your core development, so all intellectual property rights are reserved. What is more, BOT 2.0 enables you to avoid “white labeling” (a product or service produced by one company that another rebrands to make it appear as if they had made it) because you keep control of all operations under your brand.
In contrast, the traditional model involves resources of the service company that launches the project under its name, which can complicate the recruitment process; many professionals would like to work for a product company rather than a service company.
In the updated model, you can regulate the number of services your company needs based on à la carte services. This means that as a client, you decide what your R&D office requires and order offshore services accordingly.
Another matter of concern is termination. If you decide to terminate the BOT contract, be ready to pay fees. However, with BOT 2.0, termination is free, so you can stop any time without paying charges.
In BOT 2.0, there are no transfer fees, since you are the original owner of the office.
Who Benefits From BOT 2.0?
BOT 2.0 works best for IT product companies that want to go offshore. Startups with enough funding also opt for BOT as their business solution. Generally, this model is designed for tech companies that want access to the global pool of talent but also want to secure their IP rights on the product and focus on programming.
Pitfalls To Consider
To avoid hitches in recruitment, take care of your employer brand. Talent acquisition takes some time, and with a strong tech brand, you can make it faster and easier.
Remote team management is another factor often neglected, yet it is vital for successful communication. Use best practices in team management; this helps to sustain ongoing work and keeps you closer to your offshore team.
Before getting the ball rolling, make sure you are advised about local market specifics. It is also reasonable to get legal support from the very beginning to properly employ your offshore development team.
BOT 2.0 Service Providers
It is worth mentioning that your offshore success is determined by a trusted service provider, which should be an active player in the IT market that works peculiarly with operational management in tech.
BOT 2.0 shares your risks and backs up all hiring, payroll, real estate, accounting, legal and other processes. It is not only about zero buy-out fee and free termination. It can provide you with new opportunities for doing tech business.