Strategic Outsourcing of Bharti Airtel
Analyse sectorielle : Strategic Outsourcing of Bharti Airtel. Recherche parmi 298 000+ dissertationsPar NIKHILA TUMMALA • 4 Juillet 2019 • Analyse sectorielle • 962 Mots (4 Pages) • 437 Vues
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Strategic Outsourcing at Bharti Airtel
Limited
Contract Evaluation – Network Vendors[pic 3]
Object of the Clause | Actual Contract | Category | Suggestion |
Technical Governance:
| Deliverables are defined by Bharti ex-ante, vendor will provide network capacity based on projected erlang Requirement. | They have defined Routines for handling all the scenarios (A1, B1, C1) | Instead of routines, a centralized or decentralized authority to manage the contract will help both parties in case of any situation within parties or external |
Enforcement Mechanism
| Investment of passive Infrastructure to be done by Bharti, rest of the investment for installing capacity will be made by Vendors ; Bharti included Service level agreements | A bilateral Application in CC and Self enforcement in Supervision mechanism (D3, E1) | Could use third party expert to supervise the contract; brings mutual trust in the contract |
Remuneration Mechanism | Based on Intensity of Use | F4 | - |
Duration of the contract | 3 years, subject to renewal with mutual agreement | G4 | - |
This contract can be defined as – A1, B1, C1, D3, E1, F4, G4
Contract Evaluation – IBM
Object of the Clause | Actual Contract | Category | Suggestion |
Technical Governance: | No complete contract due to | Created decentralized authority | - |
A) Strategic Coordination | bounded rationality; joint | (A3, B3, C3) | |
B) Organizational Coordination | governing body to manage | ||
C) Operational Coordination | the arrangement |
Enforcement Mechanism
- Credible Commitments
- Supervision Mechanism
IBM will be making initial capital investments in form of IT Infrastructure; SLA based measurement to monitor performance
A Unilateral Application in CC and Self enforcement in Supervision mechanism
(D2, E1)
Could use specialized supervisor to enforce the contract
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Duration of the contract 5 year + 5 year renewable clause
G4 -
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This contract can be defined as – A3, B3, C3, D2, E1, F2, G4
SHOULD AIRTEL GO AHEAD WITH OUTSOURCING OF NETWORK AND IT INFRASTRUCTURE OUTSOURCING ?
Why did the need arise?
Renegotiating (Budgeting and tendering process) for network expansion is becoming very frequent and ends up taking lot of time and effort
- Need for usage linked cost model.
- Industry growth rate : 17% per annum
- Transition to 3G Services, involves deploying of EDGE
- Opportunity of expanding wireline services(currently 6 circles) to any circles with wireless license ( 15 circles).
- Major milestones to achieve
Area of Growth | 2004 | 2007 |
Towns connected using GSM | 1400 | 5161 |
Base Station | 5000 | 40000 |
Human Resource | +2000-3000 |
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- Control over Operation (Core Competence) - Outsourcing implies giving control of your core competency to outsiders.
- Following problems & cost associated to
outsourcing can be avoided
- Human resource issues associated to transfer of staff.
- Risk of excessive dependence upon vendors.
- Elimination of Time Delay: Typically 6-7 months between identification of need for capacity increase and its realization
- Cost Saving : Eliminate need to maintain extra capacity of 30 to 40% amounting to $300- $400 millions.
- Alignment of interests of both network vendors and Bharti thereby reducing cost
- Saving time and effort on Planning, tendering, negotiations financing , purchasing and installing, (which has become more frequent and is expected to be so or more).
- Cost of Recruitment and managing (need for 2000 to 3000 in
2004 alone)
- Improvement in quality of service offered by increasing responsiveness to change in demand. Also Quality control and service level agreements
- Ownership of Assets.
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- Control over Innovations, by keeping IT to
itself (Innovations in product and services one of the key value propositions for wireless services)
- Following problems & cost associated to
outsourcing can be avoided
- Revenue sharing with IBM
- Human resource issues associated to transfer of staff.
- Limited to applications provided by IBM.
- Risk of excessive dependence upon vendors.
- Consistent IT Infrastructure across organization will Streamline all the systems and processes will reduce cost and improve efficiency of processes within organization.
- Alignment of interests of both vendors and Bharti thereby reducing cost.
- Outsourcing of negotiations with external software and hardware provider.
- Cost of managing 270 IT Staff.
- Improvement in quality of service : Quality control and service
level agreements
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