Strategic Outsourcing at Bharti Airtel

Summary:
Bharti was founded by Sunil Mittal in 1995
Advantage of Bhartis model is the liberalization of Indian telecom market
Largest player in growing wireless segment with a quarter of the market share
Fast growing with a revenue increase of 100% over 2003
Highly competitive market with focus on volumes against margins
Anticipated full coverage in India by 2005

ITM 395 - Meghana Bhushan

Problem Analysis

IT Challenges:
IT network scalability to match the size of the organization
IT design not Bhartis core competency
Incompatibility in existing and inherited IT systems
High end of life cost
To face huge up-front investments for getting right architecture

Network Challenges:
Industry practice to purchase 30% excess capacity
Increased costs of purchasing and installation at more sites, staff and maintenance
HR issues:
Difficult to retain best and the brightest employees

ITM 395 - Meghana Bhushan

Alternative Solutions

Bharti should consider outsourcing

It can use its resources and expertise to its core areas
Company do not have to keep investing in maintaining excess capacity of 3040%
Improvement of overall industry profitability by reducing conflict between network equipment vendor
and telecom company
Rapid growth is possible
Cost reduction for Bharti

Bharti should not consider outsourcing

More the outsourcing core business - more dependency on vendors
Limitation of Bharti to use creative new application
Inertia from existing employees to transfer
Transfer of network assets built by Bharti

ITM 395 - Meghana Bhushan

Recommended Course of Action

Bharti should go ahead with the proposed outsourcing agreement:

Fully capitalize on Indias amazing growth
No need to pay the vendors before their service
For IT services they will always get the updated services
Can fully concentrate on providing service to customers
Can avoid the problem of hunting for new resources
End to end management service for IT operations

ITM 395 - Meghana Bhushan

Conclusion

Bharti should outsource to a vendor:

Huge capital expenditure needed to help growing customer base
Rapidly changing trends in telecom industry leads to quicker obsolescence of equipment
Keep the IT applications that are used to tackle competition in-house
Risk diversified by involving three vendors instead of one
Proper governing mechanism should be set in place

ITM 395 - Meghana Bhushan