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Bharti, the largest private sector telecommunication company in India, was growing at a rate of 100% a year and needed to manage their growth. Seeking a stable partner who could provide flexible and adaptive technology for them, as well as their customers, they chose IBM. Corporate Director of IT and Technology and CIO, Dr. Jai Menon, Chairman and Group Managing Director, Sunil B. Mittal and JMD, Akhil Gupta talk about how this partnership has people talking and has everyone – Bharti, IBM and the customers – happy.
How they became an On Demand Business
JM = Dr.Jai Menon-Corporate Director of IT and Technology and CIO
SM = Sunil B.Mittal-Chairman and Group Managing Director
AG = Akhil Gupta-JMD
JM: Bharti is an integrated telecom service provider in India. It provides services both for long distance, backbone services, fixed-line access services, and a very large part of its business is the mobile services.
SM: Bharti's headquarters are out of New Delhi, India. Has now operations spread all over the country in all the 27 states.
AG: This is the largest private sector telecommunication company in India. We have roughly about 12 million customers today. Our revenues, for the full year, should be to the tune of something about 2 billion dollars. And our market capitalization is about 10 billion dollars.
JM: The telecom industry has actually witnessed tremendous growth over the past five to eight years.
SM: We are growing at near enough 100 percent a year. And we will be a 25 million customer company in the next couple of years. And we believe that we need to manage this growth and that's the biggest challenge in front of us.
JM: That leads to us really requiring a partner who has a very grand vision on where communications and computing is headed, and who can help us implement the right kind of technologies for the right kind of services to our customers.
JM: So we needed somebody who came to us not just for cost reduction or giving us a component technology, but somebody who understood our business, understood what the business processes could change into, and come along with us and be very flexible and adaptive in terms of what needs to be delivered to take us to where we need to go to.
AG: I think the only big vendor or partner I could look for all across, including with Widpro and Infosys (I have a great respect for them) was IBM.
SM: And we felt that the hunger that IBM displayed, and the passion with which they came into this bidding process, gave me the comfort that they would be able to do this job.
SM: Transformational outsourcing, for me, equals to changing of religion of this industry. In fact, after our announcement with IBM, I saw jaws dropping around the world.
SM: People have been shocked. How can you give your heart of the business away? Our neck is on the line, there is no question. The world is watching us.
AG: Because there was some criticism that, while the world is looking for outsourcing to India, we have done the opposite. And our answer to that was, first, we don't treat IBM as a pure U.S. company. IBM, with 10,000 plus people in India, is as much as an Indian company. After all, when they are expanding in India, they are employing Indians. Two, we have gone for what meets the necessity of the needs of our company. And if that is IBM, so be it.
JM: For us to respond to this very, very demanding marketplace, we need a technology partner who can provide to us technology in an on demand manner. On demand, simply meaning, that we don't have to do a whole lot of upfront payments and investments to make it happen.
AG: On demand to me means that whatever I need for the end result, I can simply demand. Now, that obviously doesn't mean that you don't plan ahead and they don't consult each other. But what I don't need is distinct pieces. I want it as a package so that I can apply that in conjunction with whatever elements are there and put it for the service of my customer. That is to me, on demand.
SM: This on demand model takes care...into account all the shifts in technologies. And the fact is, we are a telecom company. We are not technologists. We buy technology and serve the customers.
AG: One of the significant features of this contract with IBM is that the payments are linked as a percentage of revenue. So there is a shared revenue approach.
JM: What that does for us is really take away all the headache of worrying about, "Oh what IT do I need for long distance? What IT do I need for mobile? What do I need for fixed line and submarine, et cetera, et cetera."
AG: IT budgeting was always the most complex exercise. I am certain, in most of the companies, that's the most complex exercise. In our case, all that somebody has to do is predict what our revenue is going to be, and bang, here we know what the IT expenditure will be.
JM: The shared revenue is very, very important because now IBM also gets linked to our growth. So it incents IBM to bring in those IT innovations that are clearly really necessary for us to be competitive. We get better revenue market share, greater is our revenue and so is IBM's revenue. So it's a win-win.
We can feel that we are getting a great value out of this contract because we can see the customer satisfaction level is going up.
SM: And the stock prices ever since we have gone into this deal, is very evident that people are liking this.
JM: For us, the relationship with IBM actually got facets beyond just the IT part. We have a very, very strong facet that we call a joint go to market arrangement.
SM: We are now approaching the customers and giving him the solution which he could have never gotten before. We are on the verge of picking up some very large orders coming from government agencies and banking industry which will reshape this entire industry. We could not have done this as a telecom company alone or as a mobile company alone.
AG: I'm convinced we will have unique selling propositions in the market which our competitors will take months to follow. And months, in terms of IT and products, is a big time.
JM: The integration of the IBM and the Bharti teams has been a phenomenal success.
SM: I believe people are executing well. We have launched now seven new circles in the last five months – all have been launched on time. We have acquired two companies in this period – both have been integrated into the outsourcing model.
JM: We believe in IBM. We’ve seen a fantastic start already. And now the proof is in the pudding and we are already beginning to savor the pudding.
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