Strategic outsourcing at Bharti Airtel
Submitted by: Kanika Agarwal
In March 2004, Airtel signed a deal with IBM for a 10 year partnership
arrangement for an “on demand” business transformation with payments
based on a predetermined percentage of Bharti’s revenues.
In July 2004 Bharti signed 3 successive deals with its telecom vendors
for the transfer of buildup and management of its telecom network to
vendors like Ericsson, Nokia & Siemens.
“Reverse Outsourcing” – Bharti an Indian company outsourced its
telecom & IT network to the West.
Bharti’s core competency lies in network operations , company needs to
outsource when it does not have it because it has to manage capital
expenditure for its operations thus it focused on core and saved its cost.
Telecom vendors made on basis of installed capacity
Structured in two parts
Outlining network design & Installation
Concerning maintenance & running of network once
Network design and installation
Bharti would pay its vendor acc to capacity installed or
capacity used by customers.
Ownership of assets rests with Bharti & maintenance
responsibility with service providers.
Investments for passive infrastructure such as towers, air
conditioners and generator sets with telecom equipment
would be handled by Bharti
Thus Bharti shared sufficient risk on network planning &
Agreement Involving Maintenance of the
Vendors responsible for maintenance of network so
vendors established network operations
centre(NOC)capable of monitoring activity in the
Vendors guaranteed a high quality of service for Bharti’s
Several SLA were made (service level agreements) to
take care of quality of customer satisfaction
Agreement with IBM
Based on revenue sharing over a period of 10 yrs ( 5
years renewal clause) and maintain Bharti's IT network in
exchange for a portion of Bharti’s revenues
IBM looked at 2 key factors
No of Bharti’s subscribers
No of Bharti’s employees / agents
The no of subscribers acts as a major impact to Bharti’s
One problem was related to material imports which usually were
monitored by the government on the basis of invoices.
In the arrangement with IBM no invoices existed and billing was
separate from the importation.
Bharti had to then create invoices and reconcile them with the
bills calculated on the basis of the new agreements.
Internal communication required to clarify the limits of
agreement with IBM and also the process of handling the
Most challenging issue – Transfer of personnel as people were
more attached to working in Bharti’s organization environment
and they had the option to return to Bharti.
• Huge capital expenditure needed to help growing
• Rapidly changing trends in telecom industry leads to
quicker obsolescence of equipments.
• Keep the IT applications that are used to tackle
• Risk diversified by involving three vendors instead on
• Proper governing mechanism should be in place.
Uncertainties in capital expenditures kept low.
Transferring equipment investment risk to vendor.
Pay for use and avoid excess capacity wastage.
Lower Human resources cost due to their transfer to vendor
High bargaining power for Bharti, due to high competition
between service providers.
Unused capacity will earn nothing, but necessary
Inability to increase prices to cover the increased
Absorbing Bharthi employees.
Uncertainty in growth of Bharti.
Issue of scope for IBM