Strategic sourcing can take many forms – from offshoring and captive centers to nearshoring, insourcing, and even hybrid models – depending on the particular needs of an organization. In some circumstances, however, none of these models apply – especially in situations in which political considerations trump economic ones.
Whether restricted by a Board of Directors in the private sector, or limited by political barriers in a governmental or regulated-industry setting, some organizations need a creative alternative to today’s most common sourcing models. One such alternative is the Build-Operate-Transfer (BOT) model. It was developed early in the history of outsourcing and, under specific circumstances, still offers advantages worth considering.
The BOT sourcing model provides a framework for an organization facing a large transformational project to enlist an expert service provider to help it design and implement optimal service delivery while it prepares to insource the services after a period of time.
A company that needs specific domain expertise, for example, might look to the BOT model as a means to hire a third-party provider focused on developing a certain aspect of its product or service. The provider will seed this project with contract employees who have domain expertise and grow the capabilities of the outsourced operations by recruiting new employees until a stable and functional operating state is achieved. The subsidiary operation will perform the necessary functions for some number of months, establish performance that meets the agreed-upon service levels, and then transfer the services back to the client company.
One advantage of this model is that it has the potential to lower upfront costs as the client company builds ongoing operations in this domain. BOT transactions succeed most often when the client company plans carefully by breaking down the three phases—Build, Operate and Transfer—into sub-phases, each with clear roles and responsibilities for the client and the provider. Pricing also should be phased separately so that the client can align its financial risk with provider responsibility.
ISG helps companies select providers that have the right capabilities and experience for their needs, especially when implementing BOT models. To learn more, contact us.
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