Build Operate Transfer (Bot) Models Overview


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The following presentation was presented to an international software vendor that expressed its interest in setting up an offshore software development activity in a BOT model.

Ignite presented its own BOT model that seeks existing offshore center that meet the customer's requested profile, acquire it and operate it exclusively for the customer until transition period.

The BOT model in offshore software development is becoming more popular these days in the wake of the financial crisis.

Build Operate Transfer (Bot) Models Overview

  1. 1. BOT Models – Pros and Cons Aviram Eisenberg
  2. 2. Standard BOT Model <ul><li>Build </li></ul><ul><ul><li>Locate a qualified Outsourcing Vendor </li></ul></ul><ul><ul><li>Negotiate prices during operation phase </li></ul></ul><ul><ul><li>Negotiate length of operation phase </li></ul></ul><ul><ul><li>Negotiate formula for acquisition (Transfer phase): </li></ul></ul><ul><ul><ul><li>Total number of paid man years during operation phase </li></ul></ul></ul><ul><ul><ul><li>Team profiles (roles, years of experience, skill sets) </li></ul></ul></ul><ul><li>Operate </li></ul><ul><ul><li>Start with a pilot and increase the team steadily until reaching a minimum of 40 people (at least) for transfer phase </li></ul></ul><ul><li>Transfer </li></ul><ul><ul><li>Setup operation (facility, administration) </li></ul></ul><ul><ul><li>Legal </li></ul></ul>
  3. 3. Standard BOT Model - Pros <ul><li>Short setup time </li></ul><ul><li>Low risk during build time: </li></ul><ul><ul><li>No setup fee involved </li></ul></ul><ul><ul><li>Pay as you grow model </li></ul></ul><ul><li>Low risk during operate time </li></ul><ul><ul><li>The vendor will be obligated to agreed upon KPIs </li></ul></ul><ul><ul><li>No risks of operations in a foreign country – you have the time to prepare for it </li></ul></ul>
  4. 4. Standard BOT - Cons <ul><li>Not all good vendors will agree to BOT - minimize the selection </li></ul><ul><li>It is a provider that has a different agenda then the customer </li></ul><ul><li>Price tag for the transfer phase will be high </li></ul><ul><ul><li>The vendor looses its “golden eggs chicken” </li></ul></ul><ul><li>High risk during Transfer phase </li></ul><ul><ul><li>HR retention risk </li></ul></ul><ul><ul><li>Operational risk – facility, administration, legal </li></ul></ul>
  5. 5. Accelerated BOT <ul><li>This is a unique model offered exclusively by Ignite </li></ul><ul><li>Build </li></ul><ul><ul><li>Locate a high-tech company that meets the customer’s profile and is in financial difficulty </li></ul></ul><ul><ul><li>Ignite negotiate acquisition price and proposes to the customer team profiles, operational price, minimal length of operation phase and transfer price </li></ul></ul><ul><ul><li>Ignite acquires the company against customer’s commitment to agreed upon operational price, minimal length of operation phase and price tag/formula for transfer phase </li></ul></ul><ul><li>Operation </li></ul><ul><ul><li>Ignite assumes full responsibility during operation phase </li></ul></ul><ul><ul><ul><li>HR retention </li></ul></ul></ul><ul><ul><ul><li>On site (Israel) management </li></ul></ul></ul><ul><ul><ul><li>Offshore management </li></ul></ul></ul><ul><ul><ul><li>Building processes and methodologies including for the customer’s Israeli staff </li></ul></ul></ul><ul><ul><ul><li>Identifying the right segments of the product that can be offshored with minimal risk </li></ul></ul></ul><ul><ul><ul><li>Commitment to safe guard the customer’s IP </li></ul></ul></ul><ul><ul><ul><li>Maintain the customer’s corporate identity </li></ul></ul></ul><ul><ul><ul><li>The customer is able to disengage even before the end of the operation period if Ignite fails to meet agreed upon KPIs </li></ul></ul></ul><ul><li>Transfer </li></ul><ul><ul><li>After the minimal length of operational phase, the customer may decide to extend operational phase, disengage or perform the transfer </li></ul></ul><ul><ul><li>If transfer occurs, the entire facility, infrastructure and HR are transferred as-is </li></ul></ul><ul><ul><li>Only legal effort is required </li></ul></ul>
  6. 6. Accelerated BOT - Pros <ul><li>Low risk during build time </li></ul><ul><ul><li>No setup fee involved – Ignite finances the acquisition </li></ul></ul><ul><li>Low risk during operate time </li></ul><ul><ul><li>Ignite will be obligated to agreed upon KPIs </li></ul></ul><ul><ul><li>No risks of operations in a foreign country – customer has the time to prepare for it </li></ul></ul><ul><li>Lower prices during operation phase </li></ul><ul><ul><li>No need for sales and marketing – only lean management </li></ul></ul><ul><li>Low risk during transfer time </li></ul><ul><ul><li>HR retention is safer – all employees already know and feel the customer’s corporate identity from day one </li></ul></ul><ul><ul><li>No need to find a new facility </li></ul></ul><ul><ul><li>Local management already exist </li></ul></ul><ul><ul><li>Low legal risk - M&A is with an Israeli company based on agreed upon formula </li></ul></ul>
  7. 7. Accelerated BOT - Cons <ul><li>Longer setup time </li></ul><ul><li>Commitment for a large team (40 people minimum) right from the start </li></ul>
  8. 8. Q&A <ul><li>Aviram Eisenberg </li></ul><ul><li>CEO </li></ul><ul><li>IGNITE </li></ul><ul><li> </li></ul><ul><li>[email_address] </li></ul>