Jorge Valencia Madrid

Paul Zaentz-Lewis

Case Analysis: Bharti

Airtel

Supply Chain Management

Profesor: Juan Pablo Torres
23 October 2015

EXECUTIVE SUMMARY
As of June 9, 2005, Bharti Airtel limited was the leading provider of
Wireless telephone services by market share in India, while also
providing land-line telephone and data/broadband services together with
long distance, group data, and enterprise services. The company was
experiencing truly explosive growth (at 100% per year) and needed to
find a way to control costs while allowing for similar growth over the next
years.
Bharti Airtel was already working with multiple suppliers for various
components of its networks, including Nokia and Siemens, for its
telecom network equipment, and IBM, Sun Microsystems, HP, and Oracle
for its IT infrastructure. Given the nature of working with so many
providers, the company had rag-tag technology platforms the frequently
were incompatible with older technology, and new requirements, such as
fraud detection and prevention brought even more vendors into the mix.
The current situation was (accurately) described as fragmented bubbles
of outsourcing by the group CIO, Jai Menon.
The technology also had an impact on Bharti Airtels human resources
needs and demands. The jumble of technology required an extraordinary
amount of technicians to develop and maintain it, and the company was
having trouble recruiting, training, and retaining qualified employees.
The joint managing director of the company, Akhil Gupta, had just
finalized a complex purchasing agreement which would result in the
outsourcing of various aspects of the companys business processes.
Telecom network responsibilities would be outsourced to Ericsson, Nokia,
and Siemens, and IT infrastructure would be outsourced to IBM. The
proposal was met coldly by the other members of Bharti Airtels directors
and managers, who felt that this would place them in an overly
dependent position with the vendors. As well, it broke with standard
telecom practices of the time.
To add an additional challenge, IBM was not certain that entering into
this agreement would be beneficial to them Bharti Airtel could approve
the proposal, only to have it rejected by the vendor identified as the best
provider for technology infrastructure.
PROBLEM

Bharti Airtel needs to develop a strategy to manage its capital

expenditures for its operations in order to meet the needs of triple-digit
growth. Technology, infrastructure, and human resources needs
represent the three main areas of concern.

ANALYSIS
Bharti Airtels core competencies are:
Network Operations;
Innovation; and,
Sales and Marketing.
Bharti Airtel already has outsourcing agreements in place with many
vendors:
The original GSM network was set up with help from Ericsson. By
2003 they were working with Nokia and Siemens.
Suppliers were easy to change due to the GSM standard
technology.
Bharti purchased equipment of services from these vendors in one
or more of the circles in which it operated in India.
The current agreements resulted in conflicts of interest.
Why are other executives/directors opposed to the deal?
The agreement is the first of its kind there was no way to judge it
based on precedent.
Potential loss of access to technology.
Delay in Go-to-Market capabilities large multinational providers
were not known for being limber in the development, testing, and
introduction of new technologies.
Transferring staff to the vendors could be met with resistance,
based on differing cultures, the fact that the vendors are not
Indian companies, and a resistance to change.
A transversal concern was that Bharti Airtel would become too
dependent upon the vendors technology, becoming their slaves.
RECOMMENDATION
Bharti Airtel not only should, but needs to move forward with a strategic
outsourcing plan.

They face a huge capital expenditure to continue growing their

customer base at the current rate and on their own.
Technology is becoming obsolete faster and faster; Bharti Airtel
would have additional cost in maintaining an up-to-date
technology infrastructure.
They can focus on their core strengths of operational excellence,
product innovation, and marketing, branding, and pricing,
maintaining technologies used to compete in the market in-house.
Outsourcing to various providers helps to diversify risk.
KPIs and/or other metrics need to be in place in order to ensure
that all parties are performing adequately. These KPIs could consist
of:
o Outage rate
o Call drop rate
o Customer dynamics (data usage, phone usage, other
metrics)
o Network performance (speed)

HOW TO CONVINCE IBM

One key challenge that Bharti faced with the outsourcing agreement was
bringing the suppliers onboard, especially IBM, given the revenuesharing required by the agreement. As well, the up-front investments
required were considered to be very risky given the unfamiliar nature of
the proposal. How could Bharti Airtel convince IBM to become their IT
partner?
Before Bharti needed to say anything, IBM recognized that the telecom
industry (land-line and wireless) in India was experiencing double-digit
growth (17% in 2003). The opportunities offered by this type of growth
were very attractive. Also attractive was Bhartis position to be able to
take advantage of this given its expertise in sales and marketing, as well
as operations.
As well, the financial growth of Bharti Airtel was improving period-overperiod, and turning down the opportunity could hurt IBMs future growth
in the Indian market.

APPENDIX