Success of setting up an offshore development center often depends on a sound and well-thought strategy. The experience of our client proves this point very well. Several years ago, being a rapidly growing European company with its own product, they faced the need to expand. This is when the company started considering building a new development center. Since the company could not find a large pool of quality engineers able to work on the solution with advanced architecture, it started looking for opportunities to build a development center in a remote location. Nevertheless, it did not imagine how they could do this on an unfamiliar market, in the country with a culture and laws that differ from their own, having no experience in managing remote teams.
Having chosen Ukraine as a destination, the company referred to Agiliway as a trusted provider with strong experience on the market. Agiliway is an expert in IT outsourcing consulting and is very flexible in terms of models of cooperation so that our clients can always choose the one, which addresses their needs best. Agiliway suggested using a build-operate-transfer (BOT) cooperation model, which has eventually worked best for our client.
The core idea of the BOT model is that the cooperation has three distinct stages during which the vendor:
- Builds a permanent team for the client. This presupposes deep analysis of the company’s needs and its inshore team hierarchy and working processes, setting up the necessary infrastructure and recruiting employees, setting up communication between the client and its offshore team and facilitating knowledge transfer to kickstart the work, etc.
- Operates the team. The provider manages the projects and optimizes the team to achieve its best possible performance. This includes managing proper development and communication processes, motivating the team and organizing team building events, planning and facilitating employee development, managing compensation, tracking employee satisfaction, promoting retention, etc. This may also include firing members of the offshore team that have proved to be not a good fit for the company. This stage results in forming loyal and high-performing team for the client.
- Transfers the mature team to the client. Although transfer seems to be an integral part of the build-operate-transfer cooperation model, it is optional, as a client may choose not to overtake the responsibilities described above and have the vendor continue to operate the offshore team. Still, if the client wants to separate its development center as a legal entity, the vendor carefully plans and manages this transition.
The main processes and tasks the vendor undertakes under BOT model of cooperation are summarized in the table.
Build-operate-transfer is a good alternative to other means of setting up an offshore development center. Namely, the company may do a greenfield project, sending its employees to research a new location and start a developing center from scratch without attracting a local provider, acquire a local software development company or set up a joint venture with a local provider. Each of the options has its advantages and drawbacks. For example, greenfield ensures full control over an offshore team, but it presupposes high capital and operational expenditures and requires the biggest management efforts. For a joint venture, expenditures, risks and time to market are lower, but there is no full control over the offshore team.
This way, build-operate-transfer model suggests the followingadvantages over other variants:
- A BOT partner helps to mitigate risks related to opening a new development center
- BOT model allows initial cost savings, as a company does not have to manage the rent of the office, acquiring equipment, etc.; from the very beginning, it pays only operational expenses
- The company does not have to worry about how to communicate with all local stakeholders such as recruiters, government bodies, real estate agencies, suppliers, etc.
- High speed of opening a development center, as BOT partner already has the necessary skills, working places and knows how to avoid risks in the local market
- Being an expert in the local market, a BOT partner manages the team more effectively than a company can do from a remote location. Thus, they will be able to achieve quality results faster and continuously scale the performance characteristics
Our client company is very happy it has chosen the BOT model instead of other options, as it helped them avoid many mistakes and establish on the completely unknown market in a short term. In addition, it allowed the company to concentrate on its own staff when it started to demonstrate resistance to change when the new requirements to communicate with the remote team and coordinate work with it appeared. According to our client,
After over three years of cooperation with our client using a BOT model, we have finally come to the final stage of a transition process. The client is particularly satisfied with our operation of their development center and would prefer us not to transfer, but it is one of the requirements of investors, which cannot be violated. Therefore, Agiliway has planed the transition and manages the separation of the legal entity so that the client will soon come into full control over their development center. We are taking all the necessary measures to ensure that transfer has no impact on the performance of the remote team and are confident that it wouldn’t.
Overall, the build-operate-transfer model has a number of advantages over other means to open a development center in a remote location. At the same time, although this model of cooperation requires constant management efforts from the client, it has greater risk tolerance and provides much higher level of security than outsourcing. Thus, if you plan long-term IT outsourcing, it might me the best option to choose. If you want to discuss if this model will be best for your case or want to assess the risks, feel free to contact our IT outsourcing expert with more than 20 years of relevant experience.