Bharti Airtel's Outsourcing Strategy: Contract Comparison

This case study examines Bharti Airtel's strategic outsourcing initiatives, focusing on contracts with IBM versus Nokia, Ericsson, and Siemens. It highlights the differences in contract terms, including tenure and responsibilities, where IBM managed comprehensive IT services and the latter focused on network capacity and maintenance. The analysis covers the advantages and disadvantages for Bharti Airtel and its service providers, emphasizing payment structures tied to network usage and revenue sharing. The report also explores contract governance, vendor incentives, and essential clauses for safeguarding all parties' interests, ultimately recommending improvements for long-term success. Desklib provides this case study along with a wealth of other solved assignments.

Running head: BHARTI AIRTEL CASE STUDY
BHARTI AIRTEL CASE STUDY
Name of the Student
Name of the University
Author Note

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Executive Summary
The Strategic Outsourcing often forms a critical part of the different organizations and in order to
ensure long term success with respect to the same, it can be stated to be considered as
considerably important for the different organizations to plan accordingly and outsource the
different activities of the firm. The given report is based on the case study of Bharti Airtel and
their strategic outsourcing initiatives which have been adopted by the firm. The report follows a
rather structured format with respect to which it can be understood that, the company got into a
contract with two sets of vendors named IBM and Nokia, Ericsson and Siemens and had clauses
for each. The report tends to examine each of the clauses and recommends certain ways in which
these contracts with each vendor could be improved.

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Table of Contents
Introduction......................................................................................................................................3
Brief overview of the company.......................................................................................................3
Question 1 and 2: What was different in the contracts with IBM compared to the contract with
Nokia, Ericsson and Siemens? Discussing advantages and disadvantages.....................................4
Comparing the two contracts: Similarity.........................................................................................7
Comparing the two contracts: Differences......................................................................................7
The Advantages of the contracts for the parties..............................................................................7
Question 3: How were these two contracts governed? What was different in each?......................9
Question 4: What were the incentives offered to each service provider and why were they not the
same to all?......................................................................................................................................9
Q.5 how were the vendors incentivized to provide innovation?...................................................10
Q6: What clauses would you include in each contract to safe guard the interests of all parties?. 11
Conclusion and Recommendations................................................................................................11
References......................................................................................................................................13

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Introduction
The networking business is not any easy task and in order to ensure success in the long
run of the business, it becomes considerably crucial for the firm to ensure that it gets hold of the
best vendor contract which might be available to it and in addition to this, undertakes the
adequate procedures to ensure that their overall operations of the firm are successful and that it is
able to overtake its different competitors as present. The report will be based on the case of
Bharti Airtel. Bharti Airtel is a successful organization which has been carrying out its
operations since a long period of time and with respect to this, it is important for the firm to
ensure that it provides excellent service to the customers (Agnihotri 2013). With respect to this,
the firm will be required to get in the best contracts with the different vendors which will not
only assist the business in gaining overall success but will also go a long way in ensuring that the
firm is able to achieve its objectives. Hence, the primary aim of the report can be stated to be to
compare the different contracts which have been received from IBM and Nokia, Ericsson as well
as Siemens (Martinez-Jerez and Narayanan 2007). This will assist in understanding, which
contract is best for the firm and help in examining the different incentives which were offered to
the different contractors in order to carry out their overall operations. Lastly, the report will also
be discussing certain clauses which are crucial to be included in the contract for long term
success.
Brief overview of the company
The Bharti was found in the year 1995 and begun with a capital of $900 million for
startup. Mittal was a successful entrepreneur who begin its operations and started various
businesses. The reason why he got into the telecommunications business was due to the fact that
he wanted to undertake the advantage of the liberalization of the market and ensure that he was

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successfully able to come up and bid for a government license in order to operate in the private
telecom service in Delhi. When Bharti was able to win this tender, it successfully launched the
GSM service which came to be known as the Airtel (Ansoff et al. 2019). The company
undertook a drive for continuous expansion whereby the firm expanded to various
geographically large areas, and also went public in the meantime. The business is managed
closely and seeks to ensure that, the operations of the firm can be managed successfully in the
long run of the business.
Question 1 and 2: What was different in the contracts with IBM compared to the contract
with Nokia, Ericsson and Siemens? Discussing advantages and disadvantages.
The firm in order to ensure success signed in different contracts with IBM as well as with
Nokia, Ericsson and Siemens. The firm aimed to sign the overall deal with two different
contractors because it wanted to ensure that the firm is able to take advantage of the expertise of
both the companies in order to be able to gain adequate success in the long run. Although a
majority of the contract was being signed by the Nokia, Ericsson and Siemens but at the same
time the Bharti Airtel firm wanted to ensure that it got into a contract with the vendors like IBM
as well for which it would have taken assistance with respect to the buildup, maintenance as well
as the servicing of the core infrastructural function (Martinez-Jerez and Narayanan 2007)
The excerpts from the proposal will be discussed in the following sections which will
then be followed by a discussion on the differences and similarities between the two contracts.
Ericsson, Nokia and Siemens
 The contract of Ericsson, Nokia and Siemens stated that it will provide the firm, Bharti
with a network capacity in accordance with the requirements of the firm in each of the

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circle where Bharti operates and for those circles as well with respect to which the
agreement has been formed.
 The payment was to be paid by Bharti to the different vendors as per a particular fees
which has been agreed upon and decision regarding the capacity has been made. The rest
of the payment which was supposed to be made to the organization would be based on
the running of the network and the usage by the Bharti customers (Ansoff et al. 2019).
Hence, the main highlight of the contract was to exclude the payment for the unused
capacity by the firm.
 It was also decided within the scope of the particular contract, once the capacity will be
installed, the ownership of the assets and the other related capacities belongs to Bharti.
They will be responsible for ensuring that the network is maintained in a good condition
and that the equipment’s are maintained well (Hitt, Ireland and Hoskisson 2012).
However, the rest of the equipment’s will be taken care of by the equipment suppliers as
per the Operations and Management agreement.
 The contracts and related agreements will undergo a quality control. This means that, in
order to ensure the success of Bharti service to the end customers, the network quality
will be checked successfully in order to ensure that the bets service is provided.
 The maintenance of the quality will be jointly managed by Bharti and the related vendors
and the measurements will be done in numerical. Related problems and regards will be
linked to the quality and payments will be set accordingly.
 The agreement was set for a period of three years and depended greatly on the renewal by
mutual consent of the vendor and the Bharti Airtel Company as well.
IBM

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 The contract between IBM and Bharti stated that IBM will be providing Bharti will a
complete has well as comprehensive management service in order to supply, install as
well as manage the hardware as well as the software requirements of the firm so as to
ensure that, the firm is successfully able to meet the requirements of the firm in regard to
the IT architecture of the firm. This outsourcing of the firm not only comprises of the
management of hardware components but also includes all telecom network-specific
structures as well as the networks (Agnihotri 2013).
 The contract also mentioned that, it will cater to the needs of the firm related to the
customer service of the firm and all negotiations with external software and hardware
providing suppliers as well.
 Moreover, additionally all the maintenance of hardware and software was also assigned
to the organization which ensured that all security issues and related components were
taken care of by the firm (Damodaran 2013). Related software maintenance aspects like
the Human resource management, fraud management, financial and enterprise
management including business management was required to be maintained by the firm.
 So as to ensure that the quality of the service can be maintained adequately, the firm
would also be required to ensure that, IBM services will be subject to various quality
measures and key performance indicators which will help in understanding whether the
performance being provided by the firm is adequate in nature or not. A penalty and
reward mechanism will be required to be maintained in order to ensure success.
 The Bharti would be required to pay a considerable share of revenues to the firm. The
tenure of the agreement can be stated to be lasting for five years and can then be extended

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or renewed for a term of 5 years as well. As the revenue increases with time, the overall
revenue percentage share to be given to IBM will reduce.
The primary outcome of both the proposals would be that the employees would be
transferred out of Bharti and would be transferred to the vendor firms.
Comparing the two contracts: Similarity
The primary similarity between the different contracts can be stated to be that the
contracts have been filed for a particular time frame and in a similar way, these contracts define
that both IBM and Nokia, Ericsson and Siemens would be required to be responsible for the
maintenance of the different contracts in hand and would also be required to ensure that they take
responsibility for the adequate quality services which are required to be provided and that, in
case any loophole is identified then, they will be able to penalize or reward the vendors for the
same (Freeman 2010).
Comparing the two contracts: Differences
 The primary differences which can be largely highlighted in the contracts can be stated to
be the tenure of the contracts. On one hand, the tenure of the contract of IBM may be
stated to be five years, however, for the Ericsson, Nokia and Siemens, the period of
contract is 3 years.
 Secondly, where the operations of the Ericsson, Nokia and Siemens are greatly centered
on the maintenance of the networks, IBM has been provided with the responsibility of
maintaining the hardware of the firm (Martinez-Jerez and Narayanan 2007).
 Gupta signed two separate contracts. What were the advantages and disadvantages for the
two different contracts, for Bharti and its service providers

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The Advantages of the contracts for the parties
 The primary advantage of Bharti in the case of the contract related to the Ericsson, Nokia
and Siemens can be stated to be the fact that the payment will be comparatively on a
lower rate and will only take place once the firm has been able to successfully provide the
capacity of the network (Agnihotri 2013).
 Additionally for Bharti, the maintenance of various suppliers, hardware’s as well as the
networking has been easily outsourced which can stated to be very profitable for the firm.
Moreover, in case they are not able to abide by the rules, they will be penalized by the
firm.
 Moreover, the different quality standards which the firm stresses upon can be stated to be
an advantage for Bharti as it is covered under the contract of the firm (Damodaran 2013).
This means, that in order to ensure the success of the firm`s operations, Bharti has
transferred all its risk to the firm vendors.
 The only disadvantage of the firm in this scenario is that, it will be required to share its
profits and revenue with IBM for the initial years.
For IBM and Ericsson, Nokia and Siemens
For the vendors, the main disadvantage of the contracts are that, the entire responsibility
of maintaining the system, will fall on their heads. This means that the firm will be required to
ensure that it is successfully able to maintain the working of the networks as well as the
hardware if it wants to successfully maintain the duration of the contract. Secondly, it will also
be required to ensure that the quality control measures are adequately measured and checked as
per the particular standard.

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Secondly, for Ericsson, Nokia and Siemens, they will not be paid any fees initially and
will only be paid once the capacity starts running. This can prove to be a disadvantage for the
firm in the long run.
An advantage, in the case of the contracts can be stated to be the revenue which will be
paid out to IBM and will result in the overall success of the firm.
Question 3: How were these two contracts governed? What was different in each?
The contracts will be governed by the vendors and adequate Quality control measures
will be assigned for each aspect of the contract in order to ensure that, the firm is successfully
able to engage in the long term success and that, the customers as well as the employees do not
face any issues.
There are a large number of differences in the contracts which can be highlighted as
follows:
 The primary differences which can be largely highlighted in the contracts can be stated to
be the tenure of the contracts (Freeman 2010). On one hand, the tenure of the contract of
IBM may be stated to be five years, however, for the Ericsson, Nokia and Siemens, the
period of contract is 3 years.
 Secondly, where the operations of the Ericsson, Nokia and Siemens are greatly centered
on the maintenance of the networks, IBM has been provided with the responsibility of
maintaining the hardware of the firm.
However, the contracts are for a limited time frame and subject to a non-renewal in case
of any dispute. According to the case study, there will also take place a shift of the employees
from one firm to another which might become very difficult for the firm in the long run.

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Question 4: What were the incentives offered to each service provider and why were they
not the same to all?
In the particular contract, each of the team members, were offered with a certain set of
incentives, which cannot be stated to be equal for all the vendors. There existed a considerable
difference between the two separate contracts and with respect to which it can be understood
that, the incentives were different (Martinez-Jerez and Narayanan 2007). It can be understood
that, while IBM was offered with a share of revenues of the firm, the Ericsson, Siemens and the
Nokia were provided with complete freedom to work with the networking’s and further contract
dealings with the firm.
The reason why the contract incentives were not similar for all the firms can be largely
contributed to the fact that the responsibilities of the different vendors were quite different. This
means that, where the Nokia, Ericsson and Siemens were only provided with the opportunity of
networking responsibilities and a fee would have been charged later on for maintained capacity,
the IBM was being provided with a large number of additional responsibilities for which they
were being provided with a share of the revenue (Burgelman, Maidique and Wheelwright 1996).
When the IBM is being promised with an adequate share of revenue, then, they take things on
their own and tend to ensure that, the performance of the firm is up to the standard mark.
Moreover, as an assistance, the organizations had been provided with adequate support like
employees and guidance.

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Q.5 how were the vendors incentivized to provide innovation?
The different incentives which were provided to the different vendors can be stated to be
as follows:
 IBM: IBM was made to sign the particular contract on the basis of the incentive that the
Bharti would be sharing adequate meals with them. With respect to this, it can be
rightfully mentioned that, IBM could experience a considerable share of revenue from
Bharti as well. They would also be provided with adequate employee support
(Damodaran 2013).
 Nokia, Ericsson and Siemens: These vendors would be provided with adequate employee
support who are professionally trained and would assist the firm to engage in successful
operations with Bharti.
Q6: What clauses would you include in each contract to safe guard the interests of all
parties?
In order to safe guard the interest of all the parties in the contract, the following clauses
could have been included in the particular contract.
1. There should have been a critical clause of termination of the contract. This means that,
in order to ensure success of the firms and the overall operations, there should have been
a mention of the manner in which the termination of the contract could be done (David
and David 2013).
2. The division of networking between Ericsson, Nokia and the Siemens should have been
mentioned adequately in order to see to it that, the work could easily be distributed
between the different parties.