Bharti Airtell
1. Do you think Bharti should enter the outsourcing agreements outlined by Gupta? What do you see as advantages and disadvantages of such agreements? Bharti is proposing outsourcing that would hand over responsibility for the buildup, maintenance, and servicing their telecom network to Nokia, Siemens, and Ericsson. They would also outsource the buildup, maintenance, and servicing of their core IT infrastructure to IBM.
I definitely believe Bharti should enter the outsourcing agreements outlined by Gupta. Bharti had challenges to expand their network as their customer base grew 100 percent per year. Not only was management having trouble budgeting for the network expansion, but also the equipment they were purchasing was no longer much use. “There were problems with our scalability in our system. With very rapid growth, we would soon be making decisions that could not be altered later on and for which we might be sorry (Applegate, 380).” This shows the company did not have the internal capabilities needed for their expected growth. Beyond their internal environment, the Indian market for telecommunications was growing rapidly. “The total telecom revenue for 2003 was $8.5 billion and was growing at 17 percent per annum. Estimates for the wireless market through 2008 showed the market growing from $1.5 billion to $10.9 billion (Applegate, 372).” This rapidly growing market has a lot of opportunity for Bharti. By 2003, the market became highly competitive. In order for a firm to survive, they had to fight to capture new subscribers and lower unit costs. These outsourcing agreements will provide Bharti with the opportunity to gain a competitive advantage.
Page 303 in Applegate provides some common themes as to why a company would place a large component of their ability to execute their business model into the hands of another firm. First, Bharti would have significant cost savings. The vendors would be required to make the initial investment in network equipment.
I definitely believe Bharti should enter the outsourcing agreements outlined by Gupta. Bharti had challenges to expand their network as their customer base grew 100 percent per year. Not only was management having trouble budgeting for the network expansion, but also the equipment they were purchasing was no longer much use. “There were problems with our scalability in our system. With very rapid growth, we would soon be making decisions that could not be altered later on and for which we might be sorry (Applegate, 380).” This shows the company did not have the internal capabilities needed for their expected growth. Beyond their internal environment, the Indian market for telecommunications was growing rapidly. “The total telecom revenue for 2003 was $8.5 billion and was growing at 17 percent per annum. Estimates for the wireless market through 2008 showed the market growing from $1.5 billion to $10.9 billion (Applegate, 372).” This rapidly growing market has a lot of opportunity for Bharti. By 2003, the market became highly competitive. In order for a firm to survive, they had to fight to capture new subscribers and lower unit costs. These outsourcing agreements will provide Bharti with the opportunity to gain a competitive advantage.
Page 303 in Applegate provides some common themes as to why a company would place a large component of their ability to execute their business model into the hands of another firm. First, Bharti would have significant cost savings. The vendors would be required to make the initial investment in network equipment.
Cited: Applegate, L. M., Austin, R. D., & Soule, D. L. (2009). Corporate information strategy and management. (8th ed.). New York: McGraw-Hill/Irwin.