Outsourced vs insourced business models in the Indian mobile telecommunications industry

Abstract

EXECUTIVE SUMMARY The Indian mobile telecommunications market is growing at a rate of about 60% per annum. The drivers for the growth have been the decrease in regulation and the intense competition which has constantly driven down the prices. In a market that has become increasingly difficult to differentiate oneself in, Bharti Airtel has outsourced its entire network, once considered as the core competence of a mobile operator. In this backdrop, we have contrasted the approaches of the two major mobile operators in India – Bharti Airtel & BSNL and tried to understand the basis for their different approaches. Also, we have applied the Strategic Sourcing framework1 to the 2 companies and concluded that the difference in approaches can be reconciled chiefly, among other factors to the perception of the business that the companies feel that they are in. The step by step approach to outsourcing and well designed contracts with IBM, Ericsson, Nokia, etc. that align the incentives of the different players involved have resulted in the successful roll-out of outsourcing and subsequent excellent performance by Bharti Airtel. We compared the evolution of Bharti Airtel with that of the mobile telecommunication industry globally. Bharti Airtel seems to be in the vanguard of a transformation in the role of the service mediary (mobile operator) who acts increasingly as the keystone player of a mobile and internet ecosystem, confines himself to and concentrates on value chain coordination and customer relationship management.2 The future challenges for a mobile operator in the Indian market are to increase the low penetration (<10%) by coming up with innovative value propositions and to increase revenue/ subscriber by offering data and value-added services. To counter the increase in churn rate that will occur with the introduction of number portability and the possible convergence in technology, it is imperative for the mobile operators to build a strong brand focussed on customer service even at the cost of moving away from technology, if need be.