Build-operate-transfer in outsourcing: How does it work?
If you want to set up a company abroad with relative ease and security, then you should learn about the nitty-gritty of the build-operate-transfer model.
With salaries rising significantly across industries, many companies worldwide have begun looking for opportunities offshore, only to find out that setting up a business abroad can be a little bit challenging and somewhat intimidating.
But the globalized world of business has already established working models that allow companies to expand offshore with minimal risks. One of the most effective models is the Build-Operate-Transfer (BOT) Engagement Model.
BOT, in a nutshell, is a contractual relationship where a company hires a third-party provider to build and manage operations for a limited period before transferring it to the company when all requirements have been fulfilled.
Building your business and office
When you set out to a different country to set up your business, the first challenging part is fulfilling documentary and compliance requirements under a very different and unfamiliar system. This is the part where outsourcing providers can help in a big way.
Seasoned outsourcing providers would have a good grasp of the whole compliance process in the country where you want to set your business up. They often have well-established connections with specific agencies to make the entire process quicker and easier.
When you have fulfilled all the documentary requirements, it will be time to begin setting up your offshore office. A detailed discussion with your provider about the cost and type of workspace you need, including the size and seats, is crucial.
You would also have to be specific with the equipment and support you need, including connectivity and security requirements, equipment for your staff, the communications system within the office, and all the other particulars that will help your team work efficiently.
When looking for office space, always take note of its accessibility to public transportation, residential-commercial hubs, and government agencies. You don’t want your staff travelling miles from home just to go to the office and be unproductive because of travel fatigue.
Building your offshore team
Once your office is ready for operation, the next thing you need to do is to start building your team. In this stage, you would need to work more closely with your outsourcing provider, especially in providing the specific job descriptions and roles.
Competition is usually tight in top outsourcing destinations, such as the Philippines, so you may want to be very particular in the skills, experience, proficiencies, and attitude you need from your employees to target the ones that will best fit your organization.
You would also want your provider to help you familiarize yourself with the talent market of the country, including salary trends and the level of competition, which would be helpful in multiple decision points during the recruitment process, such as the screening and interview phases.
Once you get the people you need, your outsourcing partner will begin the onboarding process and proceed with the required training before they can start. The third-party provider will provide all the support needed, such as HR, admin, IT, and payroll.
Markets in top outsourcing destinations can be highly competitive, so make sure that you are always available for candidate interviews. Delays in any part of the recruitment process can result in competition snatching away a prized candidate.
The “operate” stage
The outsourcing provider will continue to operate the business for a specified period. Depending on the terms of your agreement, the provider will manage operations for a period. It can be as short as three years or as long as five years.
During this stage, the provider is expected to meet the target metrics in multiple aspects of the operations as discussed. Employees are also expected to improve the skills and knowledge needed from them by the company.
Many companies see the “operate” stage of the BOT model as the best time to introduce best practices and to continue to develop management processes for your offshore team. Learnings from this phase are crucial when the company takes over operations
Transfer of operations to the company
When the project reaches maturation as stipulated in the agreement, the company takes over the whole business operations, including the people, offices, tools and equipment, and processes. Now that the contract is fulfilled, the company will also fully own the offshore operations.
By this time, you would have complete knowledge and experience of running operations offshore after a period of doing this through an outsourcing provider. You can retain and improve on the things that worked during the first two stages and scrap those that didn’t work.
If the first two stages of the BOT model ran smoothly, then the transfer of the operations to you should be easy, quick, and uncomplicated. It is expected that you are ready to go on your own when the project is transferred to you.
There is an option, though, for companies to continue availing the outsourcing provider’s support for their offshore team in a new engagement contract. Most companies would take advantage of the service provider’s support because of its cost-efficiency.
Pros and cons of BOT
Like all business solution models, BOT has its advantage and disadvantages. But ultimately, what would dictate if BOT were the suitable model to solve your pain points is your goals. What works with another company would not necessarily work with you.
You get huge savings by managing a team and maintaining an office in top outsourcing destinations because labour costs in these regions are significantly lower.
Short setup time
Having an outsourcing provider with familiarity and expertise in the industry will allow you to set up offshore operations faster than doing it alone.
Access to talent
BOT allows you to access a global pool of talent that can put you at a highly competitive level in the market, especially now in a time of worldwide talent shortage.
Shared knowledge and resources
By adopting the BOT model, you can take advantage of the knowledge and resources of your outsourcing provider, especially during the first two stages of the process.
Besides shared resources, you also share risks with your outsourcing provider, minimizing any risk in the offshore operating business.
Solid company culture
BOT places a strong emphasis on maturation time, which means when the provider hands over the operations to you, you will already have a team with solid company culture and support.
New market to conquer
Setting up operations abroad will allow you to explore and conquer new markets, making you more competitive than your rivals onshore.
Dealing with employees from different regions can be pretty challenging because of cultural differences. But it can be remedied by initiating barrier-breaking programs with the help of your provider.
Operational retention risks
When it is time to take over the operations, complying with the country’s documentation requirements falls under your responsibility – something that takes time, effort, and expertise in local regulation.
High transfer rates
Transfer rates can be high, depending on the scale of the project and the provider you choose. But there must be an emphasis on the fact that BOT is not a cure-all pill but an investment that takes time to grow.
If you want to start looking for BOT opportunities, you may want to first look at top outsourcing destinations, such as the Philippines. Find an outsourcing provider with a solid track record that will listen to your pain points and deliver solutions specifically for your business.