Essay About Bharti Airtel And Industry Structure

Business Analyst
Which of the four reasons we discussed in class seem to dominate their sourcing decision (one of these reasons is cost, just to make sure you are focusing on the right list of factors!)? If there were other key factors, discuss them briefly.  Did they follow best practices (as discussed in this class) in this decision?Strategic sourcing of goods and services in a firm can lead to competitive advantage, firm prosperity, satisfied customers and a more valuable firm (Module3; pg. 5). Bharti Airtel needed to maximize its imminent flexibility and growth potential by embracing a business driven agenda for to deliver new services rapidly, increase ARPU by enhancing footprint. With competition intensifying in the Indian telecom services market, Bharti Airtel required to find a way to focus on developing new services that could set it apart from the competition and strengthen its customer relationships (Case pg. 4, Exhibit 9&10). The factors favoring and dominating the outsourcing of technology decision by Bharti Airtel which enabled it to focus resources on growing the business can be categorized as industry structure (Factor1), Realization of greater economies (Factor2), Need for greater flexibility and expertise in workforce (Factor3) (Module 10, slide 27). The 4 VRIOs must be true for at least one resource to have a core competency and that is not the case with IT design, HR and processes. Utilizing Porter’s arrow for the case we can assess that above factors were adding cost and impacting profits for Bharti. Bharti’s IT designs was in one of three categories, telecom network systems, customer management information systems, and business supported software and hardware architectures. All of which was not a part of their core competency of operations. Also Bharti was having difficulties in hiring retaining the best and brightest in the IT related field. This was because grow in the industry was so rapid not lonely in India but all across the world employees had opportunities to work for companies that were not only catering to the Indian market. Industry matters in profitability and other forms of value creation and these industry structure can dramatically affect sourcing decisions (Factor1). Understanding why and how any particular industry impacts firms’ profits is critical including the industry structure as little an individual firm can do about the overall forces (Module3 slide 31). The outsourcing strategy, pioneered by Bharti Airtel, was because of the high level of oligopolistic competition among mobile telecom service providers (Exhibit 6&7), but the Bharti Airtel outsourcing strategy is important in pushing the limits of what could be called core competence in a business model dominated by outsourcing. Bharti is faced with a challenge of managing firms IT capital expenditure (Factor 2) (Case pg.10) and by outsourcing the network and IT design would enable them to focus on their core capabilities ( case pg. 7). This would allow them in not investing to maintain excess capacity and focus on capacity Erlang. Overall uncertainties in capital expenditure would become low and enable Bharti to transfer equipment risk to vendor (Case pg. 2).Bharti outsourcing their IT and network services, would allow for them to focus on services as well as focus on their customer needs in order to set them apart from their key competitors. With outsourcing Bharti will have less people to manage and this would lower human resource cost due to their transfer to vendor companies (Factor3).The outsource vendor can produce hardware and software cheaper than Bharti can (Page2) and with Bharti’s lack of knowledge (Factor3) in developing IT would be time and cost consuming for them to try a new technology and putting it on the market themselves (Case pg.7). The equipment vendor could handle this issue because they have the expertise and knowledge on the process and hardware. Outsourcing will ensure that new products would developed faster and the time will be reduced to get the product or service to their customers. The best practices to Bharti’s outsourcing decision was there executive understanding the risk of outsourcing and mitigating them with a strong principal agent relationship (Module 12,5&7). Bharti ensured that their assets will not be traded away or lost through unbonded outsourcing (Case pg.8&9). They also permit tendering which would have provided them a best cost (Module 12 slide 33).They also Contracted with your vendors to move you quickly up the learning curve (pg. 1&4).