Corporate tax departments face a constant stream of challenges: regulatory uncertainty, mounting data demands, new tax policy changes, ongoing digital transformation.
Whatever the specifics, every tax department must continually plan for the future. What do you need to do to comply with new regulations, such as the OECD’s Pillar Two global tax requirements? How can you find and retain top talent? How can you keep up with the technology and manage the cost to deliver the tax function? Will your tax operating model be sustainable?
Many finance functions have embarked on operating model transformation by building a shared service center (SSC) or center of excellence (COE). Tax adoption of these operating models tends to lag, for various reasons. Manual processes may create roadblocks to transferring work to SSC teams. It may be difficult to determine which aspects of tax processes to transform. And tax teams often lack the bandwidth to analyze processes or invest in recruiting and hiring to build a solid SSC.
An alternative for talent access
But tax leaders can consider a different approach: Build, Operate, Transform, Transfer (BOTT), a strategic model designed to help organizations optimize operating models, improve internal processes, and adopt new technologies while minimizing risk and limiting up-front investment.
One way to think about BOTT is as a path to establishing powerful in-house capabilities that provides rapid access to the people and technology driving transformational change.
BOTT embeds continuous improvement and transformation into the core of tax operations. It can strengthen a tax department’s operating posture by helping fill talent and technology gaps while making processes, operations, and technology adoption more efficient and sustainable. In this scenario, the distinguishing factor is that a third-party BOTT provider operates core tax functions and transforms processes and technology to benefit the company long after the contract ends.
How it works
You can think of BOTT as a multiyear service contract with a service provider that builds, operates, and transforms specific tax capabilities for the organization—with a call option for the organization to eventually take back control of those functions.
The BOTT model unfolds in four key phases:
• Build. The service provider starts by analyzing the company’s current tax operating model—who does what, where and how they perform tasks, costs, pain points—along with any upcoming technology, tax policy, or regulatory changes. This analysis helps the BOTT provider design and build the model that delivers the most value. Based on the design, the provider determines the necessary resources; hires and trains talent; and builds processes using technology to support the initial transfer of work.
• Operate. The provider then runs (“operates”) specific tax processes or functions supported by an embedded transformation program to drive automation, and incorporate emerging technology.
• Transform. Over the term of the contract, the provider adopts and integrates new technology, transforming tax processes and capabilities. The larger goal is to change how the customer organization solves problems and drives value.
• Transfer. At the end of the BOTT provider’s term, the customer can continue the partnership or bring some functions back in-house by transferring talent, office space and infrastructure, supporting functions, or third-party contracts.
BOTT applications in ERP and M&A
Two organizational scenarios show how a BOTT model can be extremely effective:
• Enterprise resource planning (ERP) migration. A tax department puts a lot on the line during an ERP migration or upgrade, tying up most of the tax department with IT, which leaves little or no time to help design or test tax processes.
Under a BOTT model, a third-party provider can take over specific tax functions during migration—creating capacity for the tax department to focus on the ERP migration while operating and transforming recurring tax processes, implementing new technologies, and integrating the enhanced ERP data. The BOTT provider ensures that data, technology, and processes help everything run smoothly and efficiently after the ERP migration.
• Mergers and acquisitions (M&A). When combining companies need to integrate their separate tax processes and data sources, they need resources to handle that integration so they don’t challenge an already overloaded tax department.
Using a BOTT model, a third-party provider can supply bandwidth and expertise to document, standardize, and integrate these critical tax processes, delivering reimagined processes fit for the newly combined enterprise. The provider may also prioritize core operations or transformation, according to the new company’s needs and areas of expertise.
A framework for moving forward
Operating model change—and in particular the adoption of shared service center models—can seem to be a challenging mountain for a tax department to climb. The flexible support of a BOTT service provider can help that organization accelerate the benefits of operating model and technology transformation, strengthening its ability to manage regulatory demands as it increases the value-add of its tax department.
To learn more about this outsourcing framework for your organization’s tax department, please contact us and visit Deloitte.com.
