Comparing the BOT (Build-Operate-Transfer) Model vs. Traditional IT Outsourcing: Essential Aspects and Use Cases

The global IT outsourcing market is expected to reach US$812.7 billion by 2029, which illustrates that the demand for remote specialists keeps growing steadily. The Build-Operate-Transfer (BOT) model and traditional IT outsourcing are two principal approaches in modern IT outsourcing. Both ways help you get the right talent remotely for particular IT projects or tasks, but they are quite different in terms of some fundamental features and ideal use cases. 

What are the main differences between the BOT model and traditional outsourcing approaches and what are common use cases for both? In this article, we will compare BOT vs. traditional IT outsourcing and present the use cases for both methods.

Let’s start with an overview of BOT and traditional IT outsourcing. While being, basically, an outsourcing model itself, BOT is often viewed as a standalone approach. The point is, primarily, in some principal differences from such traditional outsourcing models as dedicated team, time and material, and project-based.  

In the build-operate-transfer (BOT) model, you hire remote software engineering teams that can work as a division of your organization under your full ownership, including the option of buying the employees’ contracts out after the fixed cooperation term. Before the transfer stage, the vendor handles operational tasks, including the establishment of workplace infrastructure, legal matters, and employee registration. In this case, the team you hire literally becomes a part of your own company. The BOT approach is built upon the build-operate-transfer sequence. The image below shows how we approach these stages in Leobit. 

BOT is a very common choice for companies that decide to establish teams or development centers in other countries. The vendor handles team and infrastructure setup, registers new employees, and deals with location-specific legal aspects, saving you from many time-consuming and potentially complicated processes that come with operating in a new country. Meanwhile, you may be required to take particular obligations before the vendor, such as predefined minimum cooperation terms, salary review requirements, etc. 

Traditional IT outsourcing models, like dedicated team, project-based, and time and material, might be quite similar to BOT because they also involve handling projects or tasks with remote specialists provided by the vendor. However, contrary to the BOT model, traditional IT outsourcing doesn’t permit the transfer of ownership over the team. The employees provided to you in traditional IT outsourcing still remain part of the vendor’s team, just assigned to your project or task. The aspects of team and infrastructure setup, as well as legal assistance, are even less relevant to you compared to the build-operate transfer model, because the vendor company handles most of these tasks before starting to work with you. In the traditional IT outsourcing approach, you retain oversight; however, much of the control over day-to-day administrative operations is transferred to the outsourcing provider. Your involvement may vary depending on the model.

The traditional IT outsourcing might be a rather broad concept but there are different models to distinguish, namely dedicated team, project-based cooperation, and time and material model.

Ultimately, the table below outlines the main differences between the BOT model compared to the three most common models in traditional IT outsourcing. 

Let’s take a closer look at the core differences between the build operate transfer model and traditional IT outsourcing.

The BOT model offers you a high level of team and product ownership, while you gain complete team ownership after buying your team members’ contracts out. De-facto, you hire particular employees as members of your own team. The vendor proposes particular specialists to hire. After you choose the right members for your team, the vendor takes control of the legal matters, employee registration, and workplace setup. Meanwhile, the control over team members, their salaries, tasks they complete, and their continuous development becomes your responsibility. In addition, you take complete responsibility for the project and its results.

On the contrary, traditional IT outsourcing does not involve a transfer of ownership. While it might be high if you choose a dedicated team approach, your control will be much less significant in the time and material model and low while dealing with a project-based cooperation. Generally, traditional IT outsourcing allows businesses to compensate for the lack of expertise by transferring partial or complete ownership over the project, as well as the responsibility for the technical solution, to the vendor. 

Opting for the BOT model is a very strategic decision. It fosters long-term projects involving a complete integration of a team, skilled employees, or an offshore development center (ODC) into your company. You also get all your legal, administrative, and office issues handled by the vendor. The BOT model is great in terms of knowledge continuity and helps you to scale your company up with new units, projects, and lasting products.

Meanwhile, in traditional IT outsourcing, the extent of strategic focus fully depends on the model you choose. In particular, cooperation with a dedicated team can be pretty strategic because it offers you great knowledge continuity and flexibility. Meanwhile, the time and material model is a better fit for cases where full-time commitment is not necessary, for example, you need to hire a subject-matter expert for implementing a particular feature or technology. Therefore, this format is not associated with strategic focus. The project-based model is also aimed at fixed scopes of work and might not be the optimal option in terms of long-term business strategies.

The key difference between the BOT model and traditional IT outsourcing models is that in BOT, you have control and complete visibility over the salaries and pay administration fees to cover the cost of such vendor tasks as establishing the workplace infrastructure and handling the legal side. Ultimately the table below illustrates Leobit’s average cost of software developers in the BOT model. 

Besides, in BOT, you have the option to buy out your remote team upon a particular term for a price specified in the contract. 

In traditional IT outsourcing, you have less control and visibility over the specialists’ salaries than in BOT and you don’t have an option to buy out a provided team. Meanwhile, similarly to the BOT model, the cost of such a project will depend on the project scope, team composition, and project duration. The model you choose will be also decisive for your final project cost. In particular, the dedicated team model, which is usually associated with long-term partnerships, typically has lower fees than the ones in the time and material model. In most cases, the project-based cooperation model is the most expensive among the traditional IT outsourcing options. 

The BOT model is aimed at long-term commitment, typically lasting for more than two years. The point is that the BOT vendors build to transfer, and such a project must go through the Build and Operate phases before it can be transferred to the client. It is a process that typically extends for years, depending on the project’s duration. The model is designed for long-term engagement where ownership eventually shifts to the client.

Traditional IT outsourcing approaches can be applied to projects with very diverse timeframes. When comparing them with the BOT model, traditional outsourcing approaches, especially the dedicated team model, are more often applied for projects that require great flexibility and dynamic changes in scope. Overall, traditional outsourcing models can fit the projects that last from several months to several years. The latter is especially relevant to the dedicated team model. Much depends on the cooperation format. For example, the dedicated team model is typically chosen for corporations that last for 1 year or more, while the project-based and time and material formats are often applied for short-term cooperations.  

The BOT model requires you to commit to a particular cooperation terms and a specified amount of FTEs. As for the flexibility in processes, you gain full control over processes, their customization, and project shifts after the Transfer phase of the cooperation, which means that the flexibility of the project depends on you. 

As for traditional IT outsourcing, the extent of flexibility may be very diverse. Much depends on the project scope, requirements, and a chosen model. In particular, the project-based approach might be less suitable for projects where flexibility is essential because all project changes will require additional negotiations with a vendor, as well as additional costs. Meanwhile, the dedicated team model creates a base for flexible cooperation and allows you to either take full ownership over the development process or delegate it to the owner. 

It is impossible to state that either the BOT model or traditional IT outsourcing is the best choice for all situations. Everything depends on the use cases. Let’s start with ideal build-operate-transfer model use cases that highlight BOT meaning in business.

ODCs become increasingly popular, and the BOT model proves to be a great choice for setting up such centers. The build-operate-transfer approach enables swift offshore development center setup with no upfront investment and reduced risk. You can rely on a vendor to provide you with the most fitting specialists, set up the infrastructure for your offshore development center, and handle all challenges associated with local regulations and legal specifics. Once the ODC is fully established and optimized, you can take this center over, ensuring long-term control and scalability.

The BOT model is perfect for scaling a startup remotely by enabling rapid team expansion with much responsibility delegated to your vendor during the initial stages. Once the startup is fully operational, you can buy it out and continue managing such a team according to the conditions defined in the contract. This might increase the overall valuation of your company and enhance your organization with the right talent that is completely under your ownership. Such a feature contrasts the traditional IT outsourcing where the contract agreement typically prevents you from buying out vendor’s employees. 

There are particular cases when you can go with either the BOT model or a traditional IT outsourcing approach (typically, the dedicated team model). However, there are still differences between the models that will affect your final decision. 

The BOT model is oriented on providing you with a remote development team that works under your full ownership on a long-term basis. Meanwhile, you can establish a long-term remote team with a dedicated team model as well. There are some important factors to consider while choosing between the BOT and the dedicated team model. For example, your potential intentions to gain complete ownership over the team.

Generally, both BOT and a dedicated team allow you to quickly establish the software development process with low initial costs and risks with the help of a vendor. The BOT approach allows you to choose specialists that fit you and take ownership over the product and the entire team post-transfer, while a vendor handles most organizational issues, sets up the infrastructure, and provides you with a team that can work as an integral part of your company in the long run. 

With both the BOT and dedicated team models, you can get skilled remote specialists for specific positions working as a part of your team. Whether you hire an experienced industry expert or a promising specialist who can grow into the role, BOT and dedicated team models allow you to have particular positions in your company taken by remote employees working exclusively for you on a long-term basis. Once again, choosing between the two models may come down to your willingness to take over team members by buying out their contracts.

Now, let’s outline the most common use cases for traditional IT outsourcing models.

Traditional IT outsourcing models, especially the dedicated team model, fit you if you lack expertise in handling technical projects. While working with a dedicated team, you can transfer complete ownership over the project, especially its technical side, to the vendor possessing the necessary experience and skill. In this case, you can compensate for your lack of expertise in handling IT projects or just focus on your core business operations while having the technical part handled by a team or remote specialists.

The dedicated team model, which is one of the most popular traditional IT outsourcing models, brings you greater flexibility, which is especially important for less predictable projects. In particular, you can start a project with a team consisting of two specialists and later expand it to 10 specialists on demand. While the BOT model typically focuses on more predictable projects where you commit to long-term cooperation with a defined team composition, the dedicated team model allows you to change team composition, as well as some vital cooperation parameters, such as your level of involvement in the project, project scope, and milestones. 

In such cases, the time and material model proves to be a perfect choice. This approach aids when you need specialized expertise for particular tasks. In this case, you are only charged for the actual time and resources used. The time and material model allows for adjustments in project scope or requirements as they evolve, ensuring that technical tasks are completed efficiently. It provides transparency in costs and enables you to access specialized skills without committing to long-term contracts.

Overall, both BOT and traditional IT outsourcing models have their strengths and ideal use cases. Everything depends on your needs. The BOT model is an excellent choice for setting up offshore development centers or scaling startups remotely with an option of purchasing them over time. Both the BOT model and the dedicated team model, which is one of the traditional IT outsourcing approaches, allow you to build long-term development teams working as a part of your company or extend your team with top-notch remote specialists. Meanwhile, traditional IT outsourcing models are better fits for cases when you need to obtain necessary expertise for a particular project. The dedicated team model, and the time and material model, which are traditional IT outsourcing approaches, fit cases where you need to embrace flexibility for projects with less-defined scopes, and goals. The time and material model fits situations when you need to get particular project tasks handled by remote specialists. 

Whether you choose BOT, dedicated team, project-based cooperation, or the time and material model,  you can count on Leobit. We are a company with solid expertise in providing BOT services, and we have an extensive portfolio of successful projects handled with traditional IT outsourcing approaches. You can also rely on our mature approach, proven by Leobit’s ISO 9001, 27001, and ISTQB Gold certification, as well as the status of the Microsoft Solutions Partner for Digital App and Innovation. Contact us to achieve your goals with a cooperation model that fits you best!