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BOT - Operate

Feb. 22nd, 2006 | 04:29 pm

The BOT model where only 'Operate' is involved is not really a BOT situation. It is *the* simple outsourcing model that is being practiced for ages.

For example, My business is in the US and I have a new software or a web project to execute. Working out the costs, we find that it makes sense to get the job done in India or China or Nigeria. My arithmetic tells me that we could finish the project faster with little overhead and almost no cost overruns if an Indian or a Chinese company got around to doing it for us. Plus I get to know a few more people and about their culture and get to see the Taj Mahal when I visit India soon. Up to this point, our partners in exotic lands could do our project on an 'as is where is' basis implying thereby that whether they worked from a bamboo hut or wherever, did not matter.

Under the BOT model , however, I do this much better and lay down some more ground rules defining the environment that I want people working on my project are provided including what they could or could not wear to work and if beer and chips are ok for breakfast every day. On the more serious side, we define the work practices and standards and the vendor follows us through the tunnel to completion.

Net benefit: We get our project done cheaper, our customers are happy, we have made millions of dollars in profit and made sure that the vendor worked in the same way if we had done the project in my workshop in my country.

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BOT Contract - A Client-Vendor Relationship

Feb. 21st, 2006 | 06:13 pm

A BOT contract is a client-vendor relationship. Within this arrangement, the client retains the right to assume control of the project at a pre-defined stage or time. It is likely that the 'build' and 'operate' stages of the project span over 1-2 years (or even longer) or in some cases in a shorter span of time due to various business related reasons. In certain projects, the 2 stages may also pass quite swiftly depending upon the execution by the vendor and responsiveness of the client to the new business environment.

The BOT Model takes on different execution forms that are adopted in keeping with the client's requirements. Typically, we know of the following most-practiced models:

- Operate
- Build and Deliver
- Build and Operate
- Build, Operate and Transfer

In either of these applications, the client's requirements define the execution process.

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Build-Operate-Transfer Model

Feb. 21st, 2006 | 04:21 pm

Recent applications of the BOT (Build-Operate-Transfer) model to outsource the early stages of a project to domain specialists in a far away land have been largely very successful due to a number of advantages for the principal firm.

In this model, the domain specialists pick up the initial threads of the project and get past the local legal-commercial framework ('Build') and the resultant gestation to commission the actual implementation ('Operate'). Over the ensuing 'short' period, the principal firm is able to understand the local logistics and the teething issues and armed with their better knowledge assumes control of project from the specialists ('Transfer').

The BOT model has seen success in the infrastructure sector for quite some time. Recently, it has seen an enthusiastic application in the IT sector and has been characterized as a 'growth engine' in countries like India, China etc.

The fact that this model is a staged implmentation, it helps the outsourcing company to evaluate the accompanying risks and rewards during the various stages, prepares it to plan the investments before jumping right in to the project at the 'transfer' stage.

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