Bharti Airtel Outsourcing
* Bharti Airtel aimed to be a low cost provider in the highly capital intensive telecom industry. They needed to keep pace with the rapid growth of their customer base, which was growing at almost 100 percent per year. Their strategy was to acquire new customers and achieve low cost per minute, but it required huge capital investments. * They outsourced everything and concentrated only on marketing, sales and distribution. They redefined the core activities in telecom industry and concentrated all their resources in acquiring and retaining customers. * There were two parts to the Outsourcing deal between Bharti and telecom vendors. First was build up, maintenance, and servicing of the telecom network to equipment vendors Nokia, Siemens and Ericson. Then there was the deal with IBM to provide all in all IT solutions.
1) Advantages of Outsourcing their Network management to Ericsson, Nokia, & Siemens:
* Keeping pace with network expansion due to faster installations. * Freed the management of time consuming budgeting, tendering, financing, purchasing and installing process. They could now focus on core competencies of the company. * Shift from short-term agreements with equipment vendors to long term commitments to get better bargains and service. * Bharti will pay for network capacity (erlangs) only when it up and running. No need to pay for unused capacity. This solved the problem of conflict of interest between Bharti and the network suppliers. * Increased flexibility, no need to make huge capital investments will enable transferring of the risk to the network supplier. * No Production costs( no capital investments, no labor costs), reduced Transaction costs as no need for new tenders every six months( reduced search & contract costs, reduced enforcement costs because of implementation of relational governance, lower adaptation costs because of pay for use model) * They were able to achieve Predictable Cost
1) Advantages of Outsourcing their Network management to Ericsson, Nokia, & Siemens:
* Keeping pace with network expansion due to faster installations. * Freed the management of time consuming budgeting, tendering, financing, purchasing and installing process. They could now focus on core competencies of the company. * Shift from short-term agreements with equipment vendors to long term commitments to get better bargains and service. * Bharti will pay for network capacity (erlangs) only when it up and running. No need to pay for unused capacity. This solved the problem of conflict of interest between Bharti and the network suppliers. * Increased flexibility, no need to make huge capital investments will enable transferring of the risk to the network supplier. * No Production costs( no capital investments, no labor costs), reduced Transaction costs as no need for new tenders every six months( reduced search & contract costs, reduced enforcement costs because of implementation of relational governance, lower adaptation costs because of pay for use model) * They were able to achieve Predictable Cost