Jul 20, 2023
about 8 min read
Build Operate Transfer (BOT): Definition, Model, Benefits & Limitations
Understand the definition, model, and discover the benefits and limitations of the Build Operate Transfer (BOT) model, especially in software development.
The Build Operate Transfer (BOT) model has emerged as a prominent approach in infrastructure development and public-private partnerships. It has extended its reach beyond traditional infrastructure projects and has found application in the realm of IT outsourcing.
The BOT model has proven successful in many infrastructure projects worldwide, ranging from transportation systems and energy facilities to public utilities and social infrastructure. By leveraging the strengths of both the public and private sectors, the BOT model offers a collaborative and innovative approach to infrastructure development, driving economic growth and improving the quality of life for communities.
This blog provides an overview of the BOT model, highlighting its key characteristics and benefits.
What Is Build Operate Transfer?
Build-Operate-Transfer (B.O.T) is a contract-based relationship between a customer and a service provider, where the provider offers to transfer ownership of a fully developed or customized business process, including operational units, setups, and expertise, to the client organization. Instead of starting from scratch, the client chooses to outsource the construction phase by engaging a third party.
This allows the client to save resources invested in building the process. Once a sufficient number of operational units are delivered, ownership is transferred to the client. The Build-Operate-Transfer model combines the advantages of outsourcing and internal infrastructure development while minimizing the drawbacks of these traditional models.
The Build-Operate-Transfer (B.O.T) model is not a new concept in the field of IT outsourcing and has primarily been associated with infrastructure development projects. However, in recent years, there has been an increased interest in adapting the B.O.T model to IT outsourcing, particularly in cases where clients want to outsource the development, operation, and maintenance of IT systems or applications.
What Is Build Operate Transfer?
Build Operate Transfer Model: 3 Main Stages
Stage 1: Build
During the initial phase, the service provider assumes the tasks of researching, financing, designing, constructing, and executing the essential operational units or facilities. In the case of infrastructure projects, this might entail acquiring funds through loans to address project expenses, establishing milestones, determining project requirements and specifications, and efficiently allocating resources.
Additionally, the build stage encompasses the development process, which involves searching for necessary resources, recruiting skilled professionals, and conducting thorough testing procedures to guarantee optimal quality.
Stage 2: Operate
During the operating stage, tasks related to checkups, maintenance, and ongoing follow-ups are implemented to manage and ensure quality before the process is delivered to the client. Throughout this phase, the client has the right to access and update the progress, closely monitoring the tasks to determine if they meet the customized requirements through performance reporting.
The duration of the operating stage in the BOT Build Operate Transfer model can vary depending on several factors. For infrastructure projects, this phase can sometimes extend over 20 years due to long-term concessions. In the case of IT outsourcing, the stage may be shorter to adequately fulfill the client's needs.
Stage 3: Transfer
The transfer stage represents the final phase where ownership is handed over to the client. During this process, the client and service provider collaborate to design an appropriate transition plan that aligns with the specific domain characteristics.
The transferred assets include tangible units such as resources and infrastructure, as well as intangible units such as knowledge, standardized legal frameworks, and optimized processes. In larger-scale projects, this transfer may occur for a nominal fee or without any cost, but with intangible benefits, depending on the agreement's terms.
How Does A Build Operate Transfer Model Work In IT Outsourcing?
As previously said, the process of IT outsourcing is divided into three stages. The outsourcing provider builds the IT infrastructure based on the client's needs in the first phase of the Build Operate Transfer model. The outsourcing agency's standardized framework is used to recruit and train developers. In this stage, the provider is responsible for establishing the essential infrastructure for excellent developer training, such as workspace, facilities, equipment, and perks.
After constructing the IT infrastructure or software solution, the outsourcing provider operates and administers it on the client's behalf. This covers system maintenance, monitoring, troubleshooting, security management, and user assistance. During this phase, the outsourcing provider assures the seamless operation and performance of the IT environment or software solution.
Ownership and management of the IT infrastructure or software solution are transferred from the outsourcing provider to the customer after a predetermined period or upon satisfying specific requirements. The contractual agreement specifies the details of the transfer phase. This phase comprises the customer receiving complete ownership and administration of all assets, documents, expertise, and operational duties.
BOT Contract In IT: Benefits & Limitations
Tap into the global talent pool
The BOT approach enables businesses to have indirect access to a worldwide talent pool via a third-party supplier involved in the Build Operate Transfer collaboration. The third-party supplier frequently has access to a varied pool of talent and may have a global presence, allowing them to bring in professionals from other locations or use their existing multinational teams.
Companies can profit from a third-party provider's network and expertise in attracting and hiring competent workers from across the world by cooperating with a third-party provider under the Build Operate Transfer agreement. This can provide access to a larger talent pool with a variety of skill sets and specific experience.
Resource savings
The third-party supplier often invests in the infrastructure and technology required for software development and operation under the BOT model. This might result in resource savings for the organization because it does not need to dedicate capital or continuing expenditures for infrastructure construction and maintenance.
Furthermore, the third-party supplier takes on operational and administrative duties. This involves maintenance of infrastructure, software upgrades, and day-to-day administration. This might result in resource savings for the organization because employees and effort are not required to manage certain operational components.
Cost savings
For certain businesses in developed countries, the cost of outsourcing domestic resources is considerably high due to quality standards and market factors. Meanwhile, in regions like Southeast Asia or India, the cost of hiring resources is lower while still meeting the requirements of businesses.
Moreover, during the operating phase of the Build Operate Transfer model, the company is not directly responsible for operational costs. The third-party provider operating the software solution covers ongoing expenses such as infrastructure maintenance, staffing, and software updates, resulting in additional operational cost savings.
For long-term projects, this model proves more advantageous than traditional offshoring as clients only incur costs once during the transfer stage, avoiding accumulated service fees paid to external providers, infrastructure costs, licensing fees, and any additional expenses associated with managing the outsourced tasks or services.
Risk mitigation
The risks associated with software development are shared between the corporation and the third-party supplier under the BOT model. The supplier is responsible for project execution, deadline adherence, and quality standards compliance. This reduces risks associated with technological issues, resource management, and software delivery, allowing the organization to concentrate on its primary business objectives.
The IT outsourced external provider, on the other hand, undertakes particular obligations and risks involved with delivering the outsourced services. The corporation retains overall responsibility for the software solution or IT infrastructure's success, which is riskier than the Build Operate Transfer option.
Limitations Of B.O.T Model
Limited Control
While the BOT model often includes performance requirements and service level agreements, the corporation may have minimal influence over the third-party provider's quality and standards of service throughout the operational phase. The organization relies on the third-party supplier to offer the desired quality of service and satisfy the performance goals.
Transfer Risks
In the Build Operate Transfer model, control transfer entails adhering to regulatory frameworks, legal criteria, and transfer protocols. Delays or complexities in transferring control can occur as a result of legislative changes, bureaucratic procedures, or ownership transfer conflicts, all of which can impair the seamless transition of control.
Furthermore, the adopting government or public body may have different performance criteria, aims, or priorities than the private developer. There is a danger that the quality of operations and service supply would deteriorate throughout the transition, thereby affecting user or stakeholder experience.
Build Operate Transfer (BOT) vs. Other Agreement
BOT (Build Operate Transfer) vs. ODC (Offshore Development Center)
An Offshore Development Center (ODC) is a specialized development facility or team formed by a corporation in a separate geographic area, generally in a lower-cost locale. It is focused on software development or related services and acts as an extension of the company's in-house development capabilities.
It might be difficult to establish efficient communication and collaboration between the ODC and the company's in-house staff. Time zone differences, language obstacles, and cultural idiosyncrasies can all impede smooth communication and collaboration, affecting project success and productivity.
Companies that use the BOT model can employ the private developer's knowledge and resources to alleviate some of the restrictions associated with administering an ODC. They can assist the organization and the offshore workforce negotiate cultural gaps and establish efficient communication. The private developer's grasp of both the company's culture and the culture of the offshore site can improve understanding and bridge the cultural divide.
BOT (Build Operate Transfer) vs. PPP (Public Private Partnership)
Public Private Partnership (PPP) is a collaboration agreement between the public sector (usually the government or a public body) and the private sector for jointly conducting and managing projects or services that are generally the province of the public sector. PPPs seek to harness both sectors' capabilities and resources to provide infrastructure, services, or public projects more efficiently and effectively.
In general, PPPs include greater collaborative decision-making and continued collaboration between the public and private sectors. The BOT model may have a clear transfer of ownership and a more defined schedule, perhaps reducing certain administrative issues.
Golden Owl Consulting has years of experience in IT outsourcing and a team of seasoned individuals with extensive subject knowledge and technical competence. Their consultants have completed several BOT projects in Southeast Asia, gaining a thorough grasp of the regional business landscape and regulatory needs.
Golden Owl Consulting provides complete assistance throughout the whole BOT lifespan. They begin by working closely with customers to determine project requirements and provide a bespoke solution that meets their business objectives. Golden Owl Consulting guarantees a smooth and effective procedure at every stage, from original construction through flawless operation and final handover.
Golden Owl Consulting has a significant presence in Southeast Asia and serves customers from all around the region. Their local skills and awareness of the cultural intricacies and regulatory frameworks in several Southeast Asian nations position them as reliable partners for firms wishing to capitalize on the benefits of IT outsourcing. Choose Golden Owl Consulting for all of your BOT Service requirements.
Conclusion
Finally, in IT outsourcing, the Build Operate Transfer (BOT) model provides an organized and strategic approach to leveraging external skills, resources, and assistance in the creation and management of IT infrastructure or software solutions.
Businesses may benefit from specialized expertise, decreased operating duties, and a smooth transition to full ownership and management of their IT assets by following the construct, run, and transfer phases. In IT outsourcing, the BOT model provides a means to maximize IT capabilities, increase efficiency, and drive business development.
