How to set up an IT company in Eastern Europe Via BOT Model
Eastern Europe has increasingly become a region of choice to build dedicated software teams or even set up a tech company. According to SkillValue, Slovakia, Poland, Hungary, Ukraine, and the Czech Republic are among the top 6 countries in the world with the best developers. Despite this, it costs less to build a development team in these areas as professionals charge less than other nearby regions. It’s little wonder why tech giants like IBM, Dell, and Microsoft all outsource to the region.
However, expanding into an overseas market can be cost and time-intensive. Unlike these IT industry leaders, your resources may not be as substantial. Or your requirements may need a more structured approach to entering the market. That’s where the BOT model comes in. It provides you the means to set up your company through a third party while retaining more control, reducing costs, and subsequently taking ownership. In this article, we’ll walk you through how to build your IT company in Eastern Europe via the BOT model. But first, what does it mean?
What is the Build Operate Transfer (BOT) Model?
The BOT model is an IT engagement outsourcing model where a company contracts an offshore service provider to set up and manage business operations overseas, and then transfer ownership of the assets to the organization after certain requirements are met. This model combines some parts of insourcing and outsourcing. A team is recruited, hired, and trained by a service provider following processes or requirements outlined by a client. At the expiration of the contract, the team is then transferred to the client.
Setting Up a Tech Company in Eastern Europe Using the BOT Model
This stage begins with requirements discovery and analysis. The offshore service provider will seek to understand your business goals, organizational culture, project specification, staffing needs, and other pertinent details. Insights gained from this activity would enable them to undertake the following essential steps:
Depending on your budget or objectives, the service provider may lease or rent an office space for operations. After this, the office equipment, technologies, and branded materials (if any) follow.
Although some protocols such as the GDPR compliance are the same across European countries, other legal requirements may differ. This includes employee salaries, legally required benefits, insurance, and taxation. Whichever Eastern European country you choose, a legal expert or your local service partner can help you manage any contract or requirements needed.
Create the Standard Operating Procedures
As the ultimate owner of the business, outlining the work processes is your responsibility. Communicate the policies and guidelines that will govern your company’s various activities. A rule of thumb is to start from repetitive work such as daily task routine, quality control, or even onboarding. This will help reduce errors and ensure consistency in your processes.
Build a Development Team
One of the most defining factors to the success of a company is human resources. Ideally, every business requires competent employees that would support the company but getting the talents—especially as an entrant with no defined workplace reputation—may be hard. Luckily, your staffing partner can scale this process easily. With your requirements in mind, the agency can recruit, hire, and onboard a highly skilled software development team.
In this stage, the management of all processes kicks in. The structures that were set in place in the initial phase will be closely monitored and adjusted accordingly. Also, the Service-level Agreement (SLA) between your company and the offshore service is set in motion. Activities under this phase include:
One of the advantages of the BOT model is its try-before-you-buy approach. The test run starts from the project. Your service partner provides the necessary tools and assigns the right team to ensure the project is completed within the stated time frame, budget, and scope. Any productivity obstacle is identified and addressed here. The partner may also provide employee training, technical coaching, general office management, and team expansion services to meet the goals of your project.
The BOT model allows you to gain control over your team during the trial period. This is facilitated through periodic reporting and full visibility into the operations. The service partner will provide daily, weekly, or monthly updates on the progress of the project. With this, you can spot and correct deviations or red flags earlier on.
At the end of the trial, it is critical to assess the performance of the team beyond the day-to-day activities. Do their skills match current or future projects? Has the team adapted to your company processes and methodology? Are there any conflicts within the team? Do you need to train or hire more talents instead to fill any existing skill gap? Did they meet up with the key deliverables? These are some of the questions to consider before moving on to the next phase.
Once the trial period is successful, the next step is to transfer operations over to you. This usually occurs at the expiration of the contract or when certain requirements have been met. The transfer process may include:
This is the process of gathering, collecting, and documenting a company’s intellectual assets so they can be shared or reused. Most offshore service partners may offer this service. The first step is to identify the key personnel or project manager to capture knowledge from. The impact of the information on your operations is then assessed and captured using the technology of choice. This is a proactive way to collect existing information that may scale your team’s performance and operations later on.
Transfer of Operations
As you’re legally entitled to the company assets, the transition process should be smooth. The service provider will assist with any legal requirements or documents needed for the transfer. After this, the equipment, facilities, and intellectual property is handed over to you. The dedicated software teams are also transferred—usually as full-time employees— to your payroll. In some cases, the service agency may continue to support your operations under a different model.
Benefits of the BOT Model
Lower Operation Costs
Running a business requires substantial funds. Labor-related costs alone in tech companies stand at 60% of total costs. For a new company in an unfamiliar overseas market, minimizing costs could be the right step towards giving your business a surviving chance. With the BOT model, your offshore service partner can leverage their resources and network to ensure that recruitment, employee salaries, office setup are carried out at minimal costs. This could be through sourcing talents through cost-effective means or procuring an office space at an ideal location within your budget. For example, the average hourly rate of developers in some Eastern European countries is as low
as $28. This is far lower than nearby regions like the Western area that charge from $52-$93/hr.
Access to the Right-fit Tech Talents
Successfully going through the recruitment process is one thing. Performing up to expectations is another. In some cases, a talented developer may not meet your specific requirements or fit into your company culture and work processes. Through the trial-before-buying concept of the BOT model, there are fewer chances of hiring ill-matched or incompetent tech talents. You only employ the development team once their skills and methods have been put to test. This saves you the time and resources of coping with less suited developers.
Reduced Operation Risk
Getting familiar with the intricacies of setting up an IT company overseas can be a headache. This coupled with a highly competitive industry such as the tech sector increases the risk of taking steps that may sabotage your new business. With a local partner, this risk is significantly reduced. They know the regulations, market conditions, and industry standards within the country. You can rely on their knowledge until you gradually understand the local market.
The tech industry is fast-paced. Getting a quality product to the market at a reduced time may give you a competitive edge. Luckily, the BOT model provides you with ready-made resources. The knowledge and assets transferred are already optimized for your internal process. For example, your IT team has adapted to your development process, quality control, and working environment. As such, they can build your product faster without going through the onboarding, training, and adaptation process.
Setting up your IT company in Eastern Europe using the BOT model gives you more visibility over your operations at lower costs. It may also give you the time you need to focus on other areas of your business that impact its growth. However, keep in mind that the most important step is finding an offshore BOT partner that can successfully build your greatest asset—your development team.