Bharti Airtel Case Study
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Bharti Airtel Limited is a telecommunication industry founded by Sunil Mittal in 1995. The main goal of Mittal was to grab the advantage if the liberalization of Indian telecom market which is allowing companies to bid for a government license to operate first private mobile telecom service in Delhi. Bharti won the bid and immediately launched its service, known as “Airtel,” using GSM (Global System for Mobile communications technology). Bharti went public in 2002 with Indian National Stock Exchange, the Mumbai Exchange, and the Delhi Stock Exchange, raising $172 million in its initial public offering (IPO), and by the end of 2002 they raised over $1 billion through direct investments.
In year 2002 and 2003, Bharti faced many competitors, who were lowering their mobile tariffs in order to capture new subscribers. These competitors were able to lower their unit costs while their shares increased through acquisition and bankruptcy of smaller competitors. Bhartis major competitors were BSNL, MTNL, Hutch-Essar, Tata, Idea Cellular, and Reliance. In order to successfully establish itself in Indian telecom market, Bharti has to adopt latest technologies like 3G technology, Value added services- Including data transmission, short messaging services (SMS), games, ring tones, and ring back tones to name a few. These services needed to be efficient and reliable.
The main core competency of Bhartis was operations and its main focus was to maintain the leadership quality with competitive pricing. Scalability and flexibility of infrastructure was the success criteria in order to meet the growing customer demands. Sales and promotion was also the core competency of Bharti. It endorsed three big Indian personalities, Sachin Tendulkar, Shahrukh Khan and musician A.R. Rahman, for the promotion of its product and services.
Advantages of outsourcing were that the company can use its resources and expert knowledge in innovation, advancing and upgrading its product, successfully utilizing its marketing strategy, branding and pricing. With the outsourcing, company does not have to keep investing 30 percent to 40 percent more in maintaining excess capacity. It will also improve the overall profits of the industry by reducing conflicts between network equipment vendor and telecom company.
On the other hand, disadvantages of outsourcing can lead to the loss of Bharti core competency. Its IT infrastructure was further more complex by the fact that it had inherited other IT systems which were incompatible with the existing one and the software and hardware applications not supported by IBM would no longer be available. The other concern was the transfer of nearly 1000 employee which might cause cultural and managerial problems.
The major concerns about entering an outsourcing agreement with IBM were that the IT and marketing department were concerned that the software or hardware applications not supported by IBM