Can outsourcing create innovative business models?

September 24, 2010

In the last blog I explained how outsourcing helps innovation. In this blog I will discuss how outsourcing can help companies to come up with new and innovative business models using Bharti Airtel as an example.

Bharti Airtel is India’s largest Telecom service provider had following set of requirements in growing their business all over India and globally:
Provide high quality customer service
Add new customers without increasing capex and decreasing total cost of ownership
Reduce the calling fee to the customers
Manage end-to-end business processes using latest Information Technology
Manage and grow telecom network capacity along with the growth of customers

Can outsourcing create innovative business models Can outsourcing create innovative business models?
How did Bharati Airtel achieve all the above goals?
Airtel outsourced everything except marketing, customer service, and finance. Airtel outsourced all their business processes to IBM to manage it. By using IBM’s IT infrastructure and standardized business frameworks, Airtel reduced their capital expenses and increased the quality of customer experience. Airtel outsourced their telecom networks to Ericsson and Nokia. Ericsson agreed to get paid by the usage of their network infrastructure instead of upfront payment. This again reduced Airtel’s capital expenses.

By outsourcing their capital intensive tasks to their partners, Airtel concentrated in acquiring new customers and managing them efficiently. Airtel managed to acquire new customers without investing in new IT and telecom infrastructure and it gave them a significant competitive advantage over their competitors. Using IBM’s expertise in customer faced IT business processes Airtel managed to give superior customer service to their customers. By adding new customers with fixed cost Airtel reduced their service fee to their customers and this made their customers to use their phones more frequently which directly benefits Airtel’s profit margin.

As the late business guru C.K. Prahalad explained in his landmark book The Fortune at the Bottom of the Pyramid emerging markets need new and innovative business models to make profit by targeting poorest people. Airtel successfully created a innovative business model by outsourcing all capital intensive services to third party vendors and kept core competencies within their company. Their business model also helped them to get into new businesses telemedia and digital TV. Globally Airtel is the third largest mobile operator and in India it owns more than 30% of mobile market.

So the answer is YES, outsourcing helps companies create innovative business models, Airtel is one example and I am sure you can find several other companies use outsourcing to create innovation in their businesses.


Comments

3 Responses to “Can outsourcing create innovative business models?”

  1. Sushant Prakash on September 25th, 2010 10:00 am

    Indeed a good and innovative business model is a must for business success to maximize profits for all the stakeholders.

    However, for a new vendor this is quite challenging as to which model to select for his outsourcing business.

    And this is just one of the concerns faced by the budding lpo vendors.

    What is required is somebody who can guide aspiring lpo vendors on these issues and make their journey smoother by addressing their concerns.

    One such opportunity is The Global LPO Conference 2010 – Buyers and Vendors Meet It. aims to bring together key executives with extensive interests in the legal outsourcing industry. The attending buyer segment includes Law Firm Partners, General Counsels and other senior In-house Counsels from leading US, UK and Canada based companies; while the vendor community is represented by senior most executives from leading LPO vendors from countries like India, Bangladesh, Philippines, Sri Lanka, Israel, Kenya, Mauritius, and South Africa. It sbring the most significant executives from both the buyer and vendor communities together on a common platform to enable them to engage in meaningful and strategic dialogues to further their business interests.

    Thus it not only serves as an excellent platform for addressing the concerns but also an opportunity to show the capabilities of the vendors and develop new business relationships and strengthen the existing ones.

  2. Mike on September 26th, 2010 4:14 pm

    Not only Airtel is taking the outsourcing strategy for innovation, Uninor, the other mobile operator in India outsourced their IT to wipor, back office to other BPO vendors. Indeed globalization has given several innovative business models to companies

  3. Atul Jaiswal on March 13th, 2011 4:17 pm

    I agree to outsource those thing which don’t add value, or unnecessary increase investment but 1 thing i want to say that, i am airtel user, there were no problem in using of it but right now from few months Airtel doing idiotic things. they deduct money from balance. whenever i try call on customer care then its take too much time to connect and then i file a complaint regarding my balance deduction, then customer care try distract me. when i asked them what are the reason you deduct money from balance without informing then they said there is scheme activated on your number and it is subscribed by you. while truth is that i never subscribed any scheme by myself. when i told them please deactivate my scheme and never try to activate on my number but they didn’t listen my request and they are still continue with and activate any scheme without giving any information.
    i want tell one thing if Airtel thing that he is growing as comparison to their competitor then his thinking totally wrong. They cheating customers and earning money by doing their idiotic things. I am only the victim there are many customers are facing problems as like me.
    If Airtel thinking they are very clever then it means they are foolish. they are insane in their work and in their scheme.
    Me and my known persons are going to switch to other company. one promise i want to make it that in future i will not use airtel.
    I have 1 request that please forward my complaint to the top management or to the owner of the company because i don’t have any contact for conversation to the top management.

    Aitel= Cheater

    thank you

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