In recent years, we’ve witnessed a notable resurgence in the Build-Operate-Transfer (BOT) model, a strategic framework for establishing off- and near-shore centers, now often referred to as global capabilities centers. This model is gaining traction as companies seek efficient and effective ways to expand their operations globally.
What is the BOT Model?
The BOT model is a collaborative partnership where a company teams up with a local partner in the target location. This partner is responsible for setting up the necessary infrastructure—be it an office, service facility, or factory—and managing its operations until it’s mature enough to be handed over to the initiating company. This model allows companies to establish a presence in new markets with the guidance and expertise of a local partner, mitigating the challenges associated with navigating unfamiliar regulatory and cultural landscapes.
Why Did BOT Models Fall Out of Favor?
Despite its initial popularity in the early 2000s, the appeal of BOT models diminished by the 2010s. The decline was largely due to the high costs and logistical challenges of managing operations remotely. Companies found that local outsourcers could often operate more efficiently and cost-effectively within their own domain, presenting a significant challenge for firms trying to manage these ventures from afar.
The Renaissance of BOTs: Key Driving Factors
- Talent Acquisition: One of the primary factors behind the renewed interest in BOTs is the challenge of securing quality talent. Many Western companies struggle to attract and retain skilled employees. In contrast, emerging markets boast vast pools of talented individuals who are highly educated, skilled, and eager for long-term employment opportunities, making them attractive locations for global capabilities centers.
- Technological Advancements: The technological landscape has evolved dramatically since the early days of BOT models. Today, tools like document sharing, machine learning, and video conferencing have made long-distance collaboration more seamless than ever. These advancements enable companies to manage recruitment and operations from afar with unprecedented ease.
- Data Security: Growing concerns around data privacy and the desire to maintain core competencies in-house have made the BOT model more appealing. Establishing a captive center through the BOT model allows companies to enjoy the benefits of off- or near-shoring without the setup complexities and risks associated with third-party engagements.
A Shift in Demographics
Interestingly, the current wave of BOT initiatives isn’t led solely by large multinationals. In 2023, a significant portion of the new captive centers were launched by smaller companies, some with fewer than 50 employees. This shift indicates that the BOT model provides a lower barrier to entry for operating in new territories, enabling organizations of all sizes to create value, reduce costs, and drive innovation.
Not a One-Size-Fits-All Solution
It’s important to note that the BOT model isn’t suitable for every company. For some, it may serve as a trial period for assessing the viability of working with an external provider. If the partnership proves successful, they may choose to continue as initially planned.
In summary, the BOT model is experiencing a resurgence as companies recognize its potential for facilitating global expansion. With the right partner, it offers a strategic approach to tapping into new markets and leveraging international talent, all while mitigating the risks associated with direct investment in unfamiliar regions.
