_Build-Operate-Transfer: a strategic business model for software development

The Build-Operate-Transfer (BOT) model has become a popular approach for companies looking to expand their software development capabilities while retaining strategic control. As organisations face increasing challenges in talent acquisition and cost management, the BOT model offers a balanced solution that combines the benefits of outsourcing with the control of in-house operations. According to ManpowerGroup’s 2024 Global Talent Shortage report, three-quarters of employers struggle to fill technology roles, with IT and data skills the most difficult to find across all global talent pool. This article explores the BOT model, its implementation phases, ideal customer profiles and the many benefits it brings to businesses navigating the software development landscape.

What is the Build-Operate-Transfer model

The Build-Operate-Transfer model is defined as “a contractual relationship in which an organisation hires a service provider to set up, optimise and run an IT or business process service delivery operation with the contractually stipulated intent of transferring the operation to the organisation as a captive centre”. In software development, BOT means a partnership between two business partners where one (the service provider) builds, sets up and runs a development team that will eventually be transferred to the client company’s organisational structure. In this business model, the outsourcing team plays a key role in ensuring project quality, meeting milestones and integrating their expertise to achieve success.

The BOT model has the following key elements:

1. Strategic intent: unlike traditional outsourcing model, the BOT model starts with the express intention of eventual ownership transfer.
2. Hybrid approach: BOT combines elements of both insourcing (captive centre) and outsourcing, benefits of both while mitigating many of the associated risks.
3. Phased implementation: the model follows a structured three-phase process with clear milestones and transition points.
4. Collaborative partnership: success depends on close alignment between the client and outsourcing partner, shared goals and transparent operations.
5. Knowledge transfer: throughout the process there is deliberate focus on transferring knowledge, processes and culture from the service provider to the client’s team.

Companies often choose the BOT model as an alternative to expanding existing in-house teams or traditional outsourcing arrangements, particularly when facing talent shortages in their local market.

The three phases of BOT

Build phase

The Build phase sets up the foundation of the BOT model, typically takes 1-3 months depending on team size. For teams under 5 members, this phase might take 1 month, for teams of 50+ members it can take 2-3 months.

Key activities during the Build phase are:

• Aligning project scope, duration, capacity and team composition (roles and skillset requirements).
• Determining team location and addressing logistical and security boundaries.
• Defining responsibilities, KPIs, management structures and identifying key stakeholders.
• Negotiating financial conditions (rate cards and billing models).
• Finalising the master service agreement and initial statements of work.
• Creating a staffing plan, onboarding process and communication channels.
• Preparing the working environment, including access to resources, hardware and infrastructure.
• Recruiting and hiring as needed.
• Ensuring thorough planning to maximise productivity, quality and cost reduction throughout the Build phase.

During this phase the service provider does all the heavy lifting, from securing office space to setting up legal frameworks and IT infrastructure. This allows the client to focus on their core business while their offshore team is being set up.

Operate phase

The Operate phase is the longest phase in the BOT model, typically takes 2+ years. During this phase the service provider manages day-to-day operations while gradually preparing for eventual transfer. Effective day to day management by a project manager is critical during the operate stage as it ensures smooth coordination, planning and oversight of all activities.

Key activities during the operate phase are:

• Essential learning and familiarisation with project scope, development tools and processes.
• Entering the project rhythm (often based on Scrum methodology).
• Addressing potential blockers and impediments to progress.
• Monitoring project conditions and feedback, measuring established KPIs.
• Setting up recurring governance meetings between provider and client management.
• Escalating issues with root cause analysis and implementing improvements.
• Filling knowledge gaps and implementing best practices.

The governance structure during this phase is typically a three-tiered approach, with the project manager at the center, where the project manager is at the top and the service provider is at the bottom.

1. Executive committee (bi-yearly meetings) focusing on strategic initiatives and business alignment.
2. Steering committee (monthly meetings) reviewing overall progress, KPIs and handling escalations.
3. Ramp up progress review (weekly meetings) following up on schedule, risks and managing impediments.

The service provider usually assigns a dedicated Delivery Manager often free of charge, with a guaranteed availability threshold for the team. This phase allows the client to validate their offshore strategy while benefiting from the provider’s expertise in managing distributed teams.

Transfer phase

The transfer phase, also known as the transfer stage in the BOT model, is the final stage and typically takes 3-6 months. During this phase ownership transfers from the service provider to the client, including personnel, intellectual property and operational business processes.

The transfer can happen in one of two ways:

1. Transferring all employees and supporting functions to an existing customer entity.
2. Transferring all employees, supporting functions, fixed assets and infrastructure to a newly formed legal entity.

Important considerations during the transfer phase (transfer stage) are:

• Legal and contractual obligations, including employee contracts.
• Knowledge transfer and documentation.
• Continuity planning to ensure smooth operations during transition.
• Financial arrangements for the transfer (typically 5x monthly rates/revenue, with additional costs for setting up a new entity).
• Post-transfer support arrangements (often in Staff Augmentation model after transfer).

From a legal perspective several things are important:

• For new hires, agreements should include provisions about possible transfer and non-competition clauses.
• For existing employees, voluntary annexes with transfer possibilities should be secured.
• Transferred employees should maintain at least the same conditions (base salary) they had before transfer.

Typical customers for the BOT model

The BOT model is suitable for specific types of companies:

Growth-stage technology companies

These are typically startups or scale-ups in Series B or C funding rounds, with at least 6 months of VC financing secured and a steady stream of revenue from early customers. Their main product is often software (especially SaaS) and founders are usually based in the US, Canada, Israel or Western Europe.Such companies need to scale R&D fast to support growth but lack the internal expertise or resources to build and manage a large offshore or nearshore development center. Growth-stage companies often have limited resources and must prioritize business growth to stay competitive. The BOT model allows them to leverage an experienced partner to set up and run operations, then transfer ownership once the team is mature and processes are established. This way they minimize upfront capital expenditure and operational risk and can scale agilely without distracting from core business objectives

Large manufacturing enterprises

These are established companies with €300M+ in revenue, multi-site operations and a strategic vision for digital transformation. They often operate as Original Brand Manufacturers (OBM) in sectors like automotive, medical devices, high-tech, defense, industrial equipment, FMCG/CPG, pharma, chemicals or semiconductors.

For these companies software is increasingly important for business success but building and managing a dedicated software development subsidiary can be costly and complex. Efficient business operations are key in their decision to use the BOT model. The BOT model allows them to establish a robust R&D presence (often in cost-effective locations), access specialized talent and align with their digital strategy—without the overhead and risk of setting up a new entity from scratch

Software producers and vendors

These are companies with established SaaS offerings, employees primarily in the US, Canada, Israel or Western Europe and no existing R&D presence in Poland or other Central/Eastern European countries. They may be in scale-up phase or already have a strong market position.

Such companies often want to expand R&D capabilities to new regions for talent diversification, cost optimization or to accelerate product development. The BOT model lets them build and test a new R&D organization with a trusted partner, then take full control once the operation is proven, ensuring IP security and process alignment

Decision-makers who typically champion BOT initiatives are C-suite executives (CEO, CTO, COO), founders, VP of Technology or Engineering, Directors of Product Development and R&D leaders.

Benefits and advantages for customers

The BOT model offers many benefits that can be categorized into strategic, operational, financial and risk management advantages:

Strategic benefits

• Access to global talent: the Transition Technologies PSC and its BOT model provides access to Poland’s vast talent pool of skilled IT professionals, helping to address tech talent shortage.
• Focus on core competencies: outsourcing the build phase and initial operation allows companies to reallocate resources to their core business areas.
• Cost savings: outsourcing software development with the BOT model can save development costs by leveraging external expertise and resources.
• Faster time-to-market: according to a 2022 study by the World Bank, BOT projects can be 20% faster than traditional projects, product delivery. The BOT model allows companies to outsource a complete project, from ideation to scaling, with streamlined processes and clear deliverables.
• Strategic scaling: the model provides a fast track for scaling R&D capabilities with the right focus for strategic initiatives.
• Market testing: companies can build and test a new R&D organization and transfer it back if successful.

Operational benefits

• SDLC & DevOps expertise: clients get expertise in Software Development Life Cycle and DevOps practices.
• Infrastructure & tooling provided: the service provider takes care of all infrastructure and tooling needs.
• Process optimization: clients can follow proven processes and practices established by experienced service providers. This includes strong focus on quality assurance, with rigorous functional testing and performance testing to ensure the software meets quality and performance standards before deployment.
• Talent diversification: the model allows for talent diversification, reducing dependency on any single market.
• Flexible scaling: companies can scale R&D flexibly according to current demand and business needs.

Financial benefits

• Reduced capital expenditure: the BOT model allows companies to bypass traditional funding hurdles for expansion.
• Cost efficiency: the model distributes investment over the build and operate phases, no big upfront capital expenditures. Outsourced software development further saves costs by allowing companies to leverage external expertise and resources without significant internal investment.
• Cost-to-quality ratio: the model provides excellent cost-to-quality ratio.
• Low overhead costs: companies have lower overhead compared to setting up their own operations.
• Cost savings: the model can save up to 60% of the usual cost since the project and team are managed by an offshore group. Outsourced software development plays a big role in these savings by reducing labor and infrastructure expenses.

Risk management benefits

• Risk mitigation: by partnering with an experienced provider, BOT allows companies to reduce the risks and costs associated with setting up a new subsidiary or offshore team. The service provider handles recruitment, infrastructure and legal compliance, leveraging their local expertise to speed up setup and minimize costly mistakes. Active management and clear communication throughout the outsourcing project is key to successful outcomes and oversight.
• Intellectual property security: the BOT model ensures proper IP protection with clear transfer provisions. Once the team is transferred, the client has full ownership and control, benefiting from the provider’s initial investment and operational expertise.
• Image protection: companies can scale down operations without negative publicity.
• Controlled growth: the phased approach allows for controlled, sustainable growth rather than rapid expansion.
• Minimized implementation risks: the service provider’s expertise helps minimize common risks in setting up offshore operations.

How to implement a successful BOT partnership

Implementing a Build-Operate-Transfer (BOT) partnership in software development outsourcing is a multi-phase process that requires careful planning, transparent communication and strong alignment between the client and the service provider. Based on industry sources and the attached presentation, here are the best practices to follow for a successful BOT engagement:

Choose the right BOT partner

• Proven track record: select a software development services provider with experience in BOT implementations and relevant industry expertise. When evaluating outsourcing companies and outsourcing partners, review their portfolio of successful projects and client testimonials to ensure they can meet your needs.
• Cultural and strategic fit: ensure the partner’s company culture, communication style and business values align with yours. This reduces friction and ensures smoother integration
• Local knowledge: for offshore or nearshore centers, choose a partner with local market knowledge, legal expertise and established infrastructure.
• Industry experience: prioritize a reliable software development company with outsourcing strategy and deep experience in your industry, as this means they understand your specific challenges and requirements.

Planning and risk management

• Pre-implementation assessment: conduct a thorough analysis of your current IT landscape, identify gaps and align the BOT initiative with your strategic roadmap.
• Realistic timelines: develop a detailed project plan with clear milestones, resource allocation and risk mitigation strategies. Account for recruitment, onboarding and technology integration lead times.
• Legal and financial framework: get robust legal agreements in place to cover intellectual property, transfer conditions and financial settlements in advance, for example three-tier contractual approach:

1.      Non-disclosure agreement (NDA) to share confidential information.

2.      Master service agreement (MSA) to define services and transfer phase aspects.

3.      Statements of work (SoW) to outline specific work, deliverables, timelines and acceptance criteria.

Invest in relationship and communication management

• Regular communication: set up daily or weekly status meetings, progress reviews and escalation protocols to maintain transparency and address issues promptly.
• Collaborative governance: implement a multi-tiered governance structure — Executive Committee (strategic), Steering Committee (monthly oversight), and Ramp-up Progress Review (weekly operations) — to ensure ongoing support and decision-making.
• Stakeholder engagement: involve key stakeholders from both sides early and throughout the process to get buy-in and address concerns.

Talent acquisition, onboarding and retention

• Use partner’s recruitment channels: use the provider’s recruitment processes to speed up hiring skilled professionals and access a broader talent pool.
• Comprehensive onboarding: ensure new hires are thoroughly onboarded, trained and familiarized with project goals, tools and processes. Workshops and one-on-one meetings recommended.
• Retention strategies: implement incentives and clear career paths to retain talent through and after the transfer phase.

Knowledge transfer and documentation

• Plan for knowledge transfer from day one: start building a knowledge base early, including process documentation, best practices and system diagrams.
• Continuous training: offer regular workshops, training sessions and role rotations to ensure knowledge is shared and retained within the team.
• Structured handover: develop a detailed transition plan for the transfer phase, including documentation, training and support arrangements to ensure business continuity.

Technology and infrastructure alignment

• Choose the right tech stack: collaborate on the technology stack, cloud platforms, DevOps tools and security solutions that fit your needs and future scalability. The BOT model is especially relevant for infrastructure projects, such as highway construction and other large-scale development initiatives.
• Security and compliance: implement robust cybersecurity and quality assurance to ensure all operations comply with relevant legal and regulatory requirements. Finding a local partner is key as they provide local expertise and help navigate legal and compliance issues.

Transfer phase preparation

• Early transition planning: start planning the transfer phase well in advance, including legal, operational and HR considerations.
• Gradual handover: handover responsibilities in stages to minimize disruption and ensure the client team is fully prepared to take over.
• Post-transfer support: consider arrangements for support after transfer to ensure continuity and address any issues that arise during the transition.

Flexibility and scalability

• Adapt to business needs: ensure the BOT model is flexible enough to scale up or down based on changing requirements, market conditions or strategic pivots. This flexibility makes the BOT model especially suitable for complex projects and software development projects where adapting to evolving needs and managing specialized resources is critical.
• Partial transfers: consider phased or partial transfers of completed teams or functions as needed rather than all at once.

Conclusion

The Build-Operate-Transfer model is a strategic approach for software development companies looking to expand their capabilities, access global talent and maintain control over their operations. As the global tech talent shortage continues and companies are under pressure to innovate fast, the BOT model offers a balanced solution that combines the benefits of outsourcing with the control of in-house development.

By understanding the different phases of the BOT model, choosing the right partner and implementing best practices for governance and transition planning, companies can leverage this model to achieve their strategic objectives while minimizing risks. The model is particularly useful for growth-stage technology companies, manufacturing companies looking to enhance their digital capabilities and software vendors looking to set up R&D centers in talent-rich regions like Central and Eastern Europe.

When done correctly, the BOT model gives companies a competitive advantage through access to cutting edge technology, skilled developers, cost savings and faster time-to-market for their software products and services. The BOT approach delivers actual software that meets the client’s expectations as each phase is designed to meet the client’s needs and goals throughout the partnership. As businesses continue to navigate the challenges of digital transformation and talent acquisition, the BOT model is a strategic solution that delivers short-term benefits and long-term value.