Bharti Airtel Group6 SCM-B

8/3/2019 Bharti Airtel Group6 SCM-B

1/21

Group 6

y Aparajita Tripathi - 266

y Gaurav Patil - 272

y Jatin Bhagat - 275

y Vardhan Singh - 311

y Vipul Mehta - 314


2/21

y Liberalization led private telecom firms to operate in India

y 4.2 mn in 1989 telephone subscribers to 54 million in 2003.

y Indian telecom revenue was growing at 17% per annum.

y Till 2003 only 2G technologies were adopted by mobile

operators.

y Scenario was changing and 3G technologies were emphasized.

y Value added services including data transmission , shortmessage service(SMS) , games ring tones and ring back tones

were already prevailing in market


3/21

y Started in 1995 by Mr. Sunil Mittal

y Won the Government tender for Delhi circle and started GSMservice

y In 1998 became Indias first private player to turn a profit

y In 2002 went public in NSE, BSE and DSE

y

Obtained mobile licenses for 15 and fixed line licenses for 6circles in India

y By 2003 reached 91% of Indias mobile users


4/21

Offerings: postpaid,prepaid, Blackberryservice, conferencing,fax & data transmission,

jokes, games, news,astrology etc.

Offerings: postpaid,prepaid, Blackberryservice, conferencing,fax & data transmission,

jokes, games, news,astrology etc.

Offerings: broadband,long-distance, video-conferencing , anddedicated data and voiceline services to businesscustomers

Offerings: broadband,long-distance, video-conferencing , anddedicated data and voiceline services to businesscustomers

Offerings:DSL to homes &businesses, Wi-Fi, VPN,and video surveillance

Offerings:DSL to homes &businesses, Wi-Fi, VPN,and video surveillance


5/21

No. of towns connected by Mobile network expected to growfrom 1400 to >5000 towns by the end of 2007

No. of base stations would jump to 40,000 from the current

5000

2000-3000 people needed to be hired to build and maintainthe increased infrastructure

Bharti began deploying newer technologies like

EDGE a 2.5G GSM-compatible technology

Presence in the international carrier business throughparticipation in i2i undersea cable system, a JV with SingTel


6/21

y Customer base was increasing at 100% per year, requiring ahuge network expansion

y Budgeting and tendering process taking up tremendousmanagement time

y Managing firms IT capital expenditure in face of fasttechnological change

y Traditional SCM conflict Local optimization in case ofequipment


7/21

y GSM network was set up by Ericsson

y By 2003 relationships were developed with Nokia and Siemens

y Conflict of interest in the approach of selling boxes MSC andBSC

y Capacity (Erlangs) had to be increased

y Financial requirements and delay were matter of concern


8/21

y An IT system to match the projected size of the organization

y Core competency in operations, not IT design (HW & SWdependency)

y IT requirements belonged to one of the following categories:y Telecom network system and softwarey Customer management information systemsy Business support software

y Through acquisitions Bharti had inherited IT systems whichfaced incompatibility problem

y Some softwares like fraud management not offered by vendors


9/21

y At any time almost 30-40% capacity lying vacanty Effectively locking up money in capital expenditurey In 2007 this figure would represent something in the

range of 300-400 million $ on the balance sheet ofBharti

y A need to install 40000 base stations by 2007 to reach all5161 census townsy

From where would the money & manpower come?

y Time delay of around 6 months to an year in getting aninstalled capacity up & running


10/21

y Difficult to hire the best and brightest, to meet theconstant growth

y

2000-3000 people required for the network expansionactivities alone

y Bhartis image of being a local upcoming operator

preventing talented IT/Telecom guys


11/21

1. Ink deal with IBM for complete end-to-endsupplying, installing, and managing all its IThardware and software

2. Ericsson, Nokia and Siemens for Build up,maintenance and servicing of the telecom network


12/21

IBMs expertise in managing IT infrastructure for

telecom companies

Complete and comprehensive end-to-endmanagement service

Maintenance of all software and hardware , even

those supplied by other suppliers

Negotiations with all external hardware andsoftware suppliers will be done by IBM experts

Payment to IBM will be proportional to the

revenues Bharti generates


13/21

Proposed revenue sharing model can impact IBMscommitment to the project

Transfer of around 270 employees to IBM

Cultural difference at IBM may lead employees toopposing this move

Could instill similar fear in minds employees fromother departments also leading to a panic situation

IBMs relations with local suppliers were underdoubt

Doubts over access to new creative applicationsbecause of IBMs hold on whole of IT operations


14/21

y

Established players with access to worlds besttechnology

y Network capacity payment made only after usage by

Bharti customersy Excludes payment for unused capacityy Transfer of equipment investment risk to vendors

y Strict quality control maintenance

y Specified in SLAsy Penalties and rewards linked to quality achieved

y Core competency operating expertise retained byBharti


15/21

y Transfer of large numbers of network staffy Vendor company might not agree; staff may not want to

be transferred

y Culture and value clashes

yVendors have limited operations in Indiay No prior experience in similar arrangements

y Bad service and product quality could trickle down toBhartis customers and affect brand equity


16/21

y Phenomenal growth targets in near futurey Self funding and in house expertise may not suffice

y Changing technology

y 2G -> 2.5G - >3Gy Bharti does not have the kind of technological expertise &

money to cope up with fast speed of change

y Immediate requirement of skilled network developers in large

number who are hard to recruit & retain

y Incompatibility of legacy systems bottleneck in fastintroduction on new technologies & services


17/21

y Probable loss of operational expertise

y Loss in choice if all IT related activities outsourced to

IBMy New innovations in SW & HW out of reach

y Speed of introducing new services

y

Transfer of nearly 1070 employeesy Question of Job security

y Risk of excessive dependence on vendors


18/21

y Huge investment in network equipment

y Concern about absorbing hundreds of Bhartiemployeesy

Different values and corporate cultures

y IBM felt a major and unfamiliar risk with revenuesharing modely What if revenue didnt grow as predictedy Huge investment needed immediately for rewards later

ony Need to predict Bhartis revenue over next 5-10 years


19/21

y

No Capital lock up in extra capacity investment as it is vendorsresponsibility

y Managers can spend more time in devising Value Added Servicesinstead of worrying about in house IT management & capitalexpansion

y Use of vendors technical expertise

y Easy up gradation to 3G technology

y No software incompatibility problem

y No requirement of building in house IT expertise


20/21

y Opportunity of business expansion in India

y IBM needs to join Bharti to show commitment towards its

on demand strategy

y Dangers in not signing with Bhartiy Very fast growth predicted chances of capacity lying vacant remote

y Refusal indicates risk averse tactics in India

y Future lock outs from lucrative deals with Bharti & other operatorsy Possibility of competitors eating up a lot of market share


21/21

y Negotiate for employment security of employees transferred toother firms

y

Strict Norms for SLAs and O&M agreements

y Develop a small & specialized internal IT Team to handleimmediate requirements

y

Focus on new services to differentiate yourself from thecompetition

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Bharti Airtel Group6 SCM-B