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GROUP 8

M Gautam 13P081Mitual Jain 13P086

Nitin Dangwal 13P094 Anupama Rana 13P195

Nikhil Saini 13P218Palak Khaneja 13P219

Prathmesh Waghmare 13P221

Strategic Outsourcing at Bharti

Airtel Limited

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About Airtel  A family owned business that was started in 1995 and launched its

services using GSM

3 SBUs include : Mobile services; Long-distance, Group data &enterprise; and Broadband and Telephone services

First provider in India to launch national & international long-distanceservice

Sold equity interests for greater capital inflows and later went public in2002

2004 revenues of $1113.4 million marked a 100% increase over 2003

Has presence in all major economic & industrial centers (15 of 23circles)

Has 25% market share and over 6 million mobile subscribers

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Indian Market for

Telecommunication Experiencing a growth rate of 17% per annum

Wireless services contribute about 18% of telecom revenues

In addition to 3G, huge potential remained in the development ofbasic phones (6 of 100 inhabitants had a telephone connection)

Highly competitive industry with mobile rates as low as 3-4 US centsper minute; and ARPU had fallen to 50% in 3 years

Airtel’s Future Plans:

To have presence in 5161 census towns (currently present in 1400

towns)

Increase the number to base station from 5000 to 40000 by March2004

This would mean hiring of over 2000-3000 people

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Current Problems Keeping pace with expansion

o Industry is growing at an exponential rate, it is important to match the industry

growth rate

Capital expenditures and the risko They require a reliable, predictable usage – linked cost structure

o Want to buy fewer boxes but get maximum capacity and coverage to staycompetitive

IT Requirementso Need an IT network that could scale up to match the size of the organization it has

projected

o Scalability is a problem with the current set-up

o IT infrastructure is further complicated by incompatible IT system

Human resources issueo Difficult to hire and retain the right people

Focusing on core competencies

o  Airtel‟s core competency is in operations and not in IT design

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Outsourcing Network InfrastructureBenefits:

Prior experience of working with Ericson, Nokia and Siemens

Time and cost involved in frequent tendering and negotiations could be avoided

 Avoiding a possible conflict of interest associated with vendors wanting to sell moreboxes, while Airtel‟s intent to minimize the same

Outsourcing partner would need to bear the burden of the 30-40% excess capacity

Reduction in Airtel‟s capital expenditure

Time-delay of setting of the capacity could be reduced Penalties and rewards would ensure quality

Possible Concerns:

Operations was Airtel‟s bread and butter

Outsourcing partner might not be willing to invest in excess capacity, in order to avoidrisk of demand fluctuations

Forecasts of the two companies might vary which will affect resource allocation

Strategic objectives of network infra partner and that of Airtel might be different

Under performance of the network infrastructure

Partner might not be willing to absorb Airtel‟s employees, also, different work culturesand HR policies

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Outsourcing IT InfrastructureBenefits:

Prior experience of working with IBM

Improved scalability

Can focus on their core-competency

Improved IT integration and compatibility

Reduction in up-front investment in IT

Reduced burden of installation, maintenance, integration of IT infrastructure

Penalties and rewards would ensure quality

Possible Concerns:

S/w & h/w applications not supported by IBM would be no longer available

IBM might not be willing to work with other members

Might lead to delayed TTM for IT-based services

Would imply over-dependence upon vendors

IBM might not be willing to make risky IT investments of behalf of Airtel

Under performance of the IT infrastructure, as a result of the reduced control

Would mean losing several IT employees. Partner might not be willing to absorb Airtel‟s 

employees, also, different work cultures and HR policies

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Vendor’s Perspective

NetworkVendors

Opportunities Leveraging Airtel‟s market

share in fast growingTelecom market

Increasing equipmentprices to cover risk

Concerns Equipment investment

risk

 Absorbing Airtel‟s employees in a different

culture

IT VendorsOpportunities

•  Executing its intenational

„on- demand‟ startegy

• Revenue share with Airtel

Concerns Cash flows will depend on

 Airtel‟s future

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Options Available with Airtel

“The main pain point for

 Airtel was the budgeting ofever increasing Capex.Outsourcing both networkand IT gives them theliberty to focus on theircore competency.But the outsourcingcontract should clearlydefine KPIs” 

•Threat ofobsolescence of IT

technology•High Capexrequired for settingup IT infra

•Focus onCore

Competency•Highscalability andflexibility

•Status Quo•High Capex•LessScalability•More Control

•Scalability in ITinfra•No threat of

obsolescence oftechnology•Still high capexrequired formanaging network

   N

  e   t  w  o  r   k

IT Capabilities

Inhouse Outsourced

   I  n   h  o  u  s

  e

   O  u   t  s  o  u

  r  c  e   d Outsource Both Network & IT

infrastructure

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Thank You