Bharti Airtel outsourced the building and maintenance of its telecom network to vendors like Ericsson, Nokia, and Siemens in 2004. It also signed a 10-year partnership with IBM to outsource its IT network and operations based on a percentage of Bharti's revenues. This allowed Bharti to focus on its core operations while transferring investment risks and costs to vendors. However, outsourcing brought challenges around material imports, employee transfers between companies, and ensuring vendors had sufficient capacity for Bharti's growth. Overall, outsourcing helped lower Bharti's capital and resource costs while diversifying risks across multiple vendors.

1. Case Study
Strategic outsourcing at Bharti Airtel
Submitted by: Kanika Agarwal
Rini Rajan
Asma Hameed
Samrat Chowdhary
Ritesh Kumar

2. Introduction
 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.

3. Arrangement
 Telecom vendors made on basis of installed capacity
 Structured in two parts
 Outlining network design & Installation
 Concerning maintenance & running of network once
installed

4. 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 &
execution

5. Agreement Involving Maintenance of the
Network
 Vendors responsible for maintenance of network so
vendors established network operations
centre(NOC)capable of monitoring activity in the
networks
 Vendors guaranteed a high quality of service for Bharti’s
customers
 Several SLA were made (service level agreements) to
take care of quality of customer satisfaction

6. 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
gross revenues

7. IMPLEMENTATION
Few complications
 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
requests.
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.

9. Why outsourcing
• Huge capital expenditure needed to help growing
customer base.
• Rapidly changing trends in telecom industry leads to
quicker obsolescence of equipments.
• Keep the IT applications that are used to tackle
competition in-house.
• Risk diversified by involving three vendors instead on
one.
• Proper governing mechanism should be in place.

10. Advantages
 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
companies.
 High bargaining power for Bharti, due to high competition
between service providers.

11. Vendor concerns
 Unused capacity will earn nothing, but necessary
for operations.
 Inability to increase prices to cover the increased
risk.
 Absorbing Bharthi employees.
 Uncertainty in growth of Bharti.
 Issue of scope for IBM
 Cultural difference