You need a certain amount of skill points to get actual upgrade points. The exact number depends on what tier your android is.

For Tier 3s, you need 850 points to get one upgrade point.
For reference, one I-500 skill server generates 20 points per hour (in-game) and allows you to store 200 points in total. So in 10 hours, you should have 200 points available to spend. This obviously isn't enough for a Tier 3 android, so you would have to install five I-500 skill servers to raise your maximum point amount to 1000. You can then spend one upgrade point every 10 hours.

Obviously starting from lower tier androids is a good idea since you can easily transfer their consciousnesses from one android to another. With tier 5 androids, the cost is crazy high.

I'm not too sure on how the system works with surrogate androids. I would guess you have to level up their hosts, who also has to be an android.