Building the Future: Understanding the Build-Operate-Transfer (BOT) Model in Shared Services

The corporate world is continuously evolving and so are the strategies that companies use to manage their business processes. One such strategy that has gained significant traction is the Build-Operate-Transfer (BOT) model, especially in the realm of shared services. This model offers a structured approach for companies looking to outsource certain functions, reduce costs and eventually take control of their operations. In this post, we will explore the BOT model in detail, understand its significance in Shared Services and look at real-time use cases to see how it has been successfully implemented.

What is the Build-Operate-Transfer (BOT) Model?

The Build-Operate-Transfer model is a business arrangement where a company (the client) engages a service provider to build a specific function, operate it for a defined period, and eventually transfer the ownership and operations back to the client. This model is typically used in situations where the client wants to establish a new function or service in a cost-effective and low-risk manner. The BOT model is divided into three distinct phases:

1. Build: In this phase, the service provider sets up the infrastructure, recruits and trains staff and develops the necessary processes and systems. This phase involves significant investment and effort, with the goal of creating a fully functional operation.
2. Operate: Once the infrastructure is in place, the service provider takes responsibility for running the operation. This includes managing day-to-day activities, optimising processes and ensuring that the operation meets predefined performance metrics. The operation phase allows the client to focus on its core business while the service provider ensures the shared service is running efficiently.
3. Transfer: After a certain period, usually defined in the contract, the operation is transferred to the client. The transfer includes handing over the management of the operation, along with the trained staff, systems and processes. The client now takes full control of the shared service, with the ability to operate it independently.

Significance of BOT in Shared Services

Shared services refer to the consolidation of business operations that are used by multiple parts of the same organization. These services are typically standardized and delivered from a central location, resulting in increased efficiency and reduced costs. The BOT model aligns perfectly with the shared services framework because:

• Risk Mitigation: The client can reduce the risk associated with setting up and running a new operation by leveraging the expertise of the service provider during the build and operate phases.
• Cost Efficiency: Since the service provider is responsible for the initial investment and operational management, the client can spread the cost over the contract period, making it more financially manageable.
• Expertise and Speed: The service provider brings specialized knowledge and experience, which accelerates the setup and operational phases. This allows the client to benefit from a fully functional service without the delays associated with building it from scratch.
• Scalability: The BOT model allows for scalable operations, where the service can be expanded or modified as per the client’s future needs before the transfer phase.

Real-Time Use Case: BOT in Action

To better understand the practical application of the BOT model in shared services, let’s look at a real-time use case:

Case Study: Multinational Corporation Establishes an HR Shared Services Center

A multinational corporation (MNC) decided to establish a Human Resources (HR) Shared Services center to centralize its HR functions, such as payroll processing, employee benefits administration and recruitment support. The goal was to streamline operations, reduce costs and improve service quality across its global branches. However, the company lacked the internal expertise to set up and manage such a complex and large-scale operation, especially in a region where it had limited presence.

Build Phase:

The MNC partnered with a leading service provider specializing in HR shared services. The service provider was responsible for setting up the entire HR shared services center, including selecting the location, building the infrastructure and recruiting a skilled workforce. They also developed and implemented HR systems and processes tailored to the MNC’s specific needs.

Operate Phase:

Once the center was operational, the service provider managed all aspects of HR operations. This included payroll processing, employee data management, recruitment support, and benefits administration. During this phase, the service provider focused on optimizing the processes, ensuring compliance with local and international regulations and meeting the service level agreements (SLAs) set by the MNC. This allowed the MNC to focus on its core business while the HR shared services ran smoothly.

Transfer Phase:

After two years of successful operation and continuous performance improvement, the MNC was ready to take over the HR shared services center. The service provider facilitated the transfer by handing over the management of the center, including the trained staff, established systems and all operational processes. The MNC took full control of the HR shared services center, with the confidence to operate it independently and the flexibility to scale the operations as needed.

Outcome:

By adopting the BOT model, the MNC was able to establish a highly efficient HR shared services center without the risks and challenges of setting it up on its own. The service provider’s expertise ensured a smooth transition and the MNC now benefits from centralised HR operations that deliver consistent and high-quality services to its global workforce.

Conclusion

The Build-Operate-Transfer model offers a robust framework for companies looking to establish shared services with minimal risk and maximum efficiency. By leveraging the expertise of service providers during the build and operate phases, companies can focus on their core business while ensuring that their shared services are set up and run effectively. The eventual transfer of operations allows companies to gain full control, making the BOT model a win-win strategy in today’s competitive business landscape. If your organisation is considering setting up a shared service center or expanding existing operations, the BOT model might be the perfect approach to achieve your objectives with confidence and success.