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Bharti Tele-Venture
BHARTI TELE-VENTURES telecom
The man who gave away his network
Bharti Tele-Ventures Chairman Sunil Mittal thinks outsiders can handle core functions
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better than him. is he taking on too much risk? the world is watching.
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Erlang! What? Erlang! No you won't find that term in

Type your e-mail id
Webster's or Roget's as yet. It's a measure of 60
minutes of telecom usage. And it is at the centre of the
world's most unconventional telecom experiment being Subscribe Me
carried out by Sunil Mittal's Rs 5,400-crore Bharti Tele-
Ventures (BTV). Mittal has staked his 12-year-old Please enter your
business - currently India's largest private sector and email id for we
telecom company - on an audacious gamble. And he is BW magazine.
counting on erlangs, more erlangs and many more UnSubscribe Me
erlangs to make his gamble work.

Earlier this year, Bharti decided to outsource both its IT

systems management and its networks. These are
things that all telcos globally consider their core
business. First, in March, BTV signed a deal, handing
over its entire information technology management to IBM. For the next 10 years IBM will operate
BTV's data centre, its disaster recovery site at Chennai, all the billing that BTV does in its circles
around the country, its CRM programme, all applications development, as well as the IT help desk.
IBM will also handle over 80 per cent of BTV's current programme and project management.

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Businessworld: The man who gave away his network Page 2 of 10

Then, over a period of four months, BTV signed contracts outsourcing its entire network
management to Ericsson (14 circles), Nokia Networks (4) and Siemens (3). The total value of the
contracts: $724 million. This trio will manage base stations (antennae, switches, routers, transmitters
and receivers) within their circles, deploy new stations as required, roll out new networks and
applications, and take on board roughly 800 BTV staff. They will also add new staff dedicated to BTV
as the networks expand.

As a result of these outsourcing contracts, BTV will now just handle a few things: marketing, sales
and distribution. Apart from that, it will just monitor its vendors, see that they stick to the parameters
of the contracts, and make sure that they deploy and build only the best systems and networks for
Bharti's operations. In other words, just the bare minimum.

"What are you doing? How can you give your lifeline out?" That was how the CEO of a European
telecom company recently reacted while talking to Mittal. He was aghast because most telco CEOs
consider their networks to be the absolute core of their business. Giving control of the network to
someone else, in their opinion, is a suicidal move.

Mittal, on his part, says he was never a prisoner of the 'to do or not to do' dilemma. He was always
clear that outsourcing was the path to take. The basic dilemma was how would he outsource and still
make sure that his organisation functioned just as efficiently as before.

As far as BTV is concerned, the advantages of outsourcing on this scale are crystal clear. The
company will not only save on current operational costs, it will also dramatically reduce its capex
requirements as it expands its networks over the next couple of years. Above all, by handing over
these tasks lock, stock and barrel to someone else, it frees up much senior management bandwidth
to focus on really important things like strategy and long-term growth.

Here's how the outsourcing experiment - and it is still an experiment - is expected to help BTV. First,
the company expects its GSM subscriber base to balloon from 8.2 million to 25 million by 2007.
Given that a telecom service provider needs to keep 30 per cent spare capacity as buffer in its
network, that means BTV would need to create capacity for about 32 million lines. Adding each line
at today's prices costs about $100. Therefore, BTV would be looking at a capex of approximately
$2,430 million (Rs 11,178 crore), if it were to handle this on its own. Having outsourced the network,
however, BTV will pay only for use of 25 million lines that it actually uses. That would cost it roughly
$1,700 million (Rs 7,820 crore). Thus BTV, though Mittal refuses to confirm the numbers, would save
almost $730 million (Rs 3,358 crore) of capex on its balance sheet by 2007. Second, BTV saves
massively on operating expenses as well - its vendors are charging it substantially less to manage
and operate each line and each base station than what it incurs on its own.

Finally, by outsourcing the work, BTV

has transferred around 1,000 engineers -
with a salary bill of approximately Rs 80
crore per annum - from its balance sheet
to that of the vendors. And it won't need
any additional engineers on its payrolls
for the 18,000 base stations that would
be set up over the next two years. (It
would have needed an additional 1,200
engineers for those base stations). It will
be the network operator that will hire
those people. There are many marginal
benefits as well. Post-outsourcing, for
instance, BTV's per-subscriber billing
cost will come down by Rs 2, to Rs 10-
13.

Financial benefits apart, vendor

consolidation also makes life simpler for
BTV in many ways. Prior to outsourcing
IT to IBM, BTV was dealing with a dozen
IT suppliers. It had billing from Kenan Systems, customer care from Oracle, hardware from Sun
Microsystems and HP, storage systems from EMC, fraud management systems from Subex, data
warehousing from NCR Teradata, interconnect systems from Intec, mediation systems from Hughes
Software and Comptel.

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BTV also had to figure out how to integrate the various systems from multiple vendors. Now, it is IBM
- not BTV - that deals with such nitty-gritty. As an incentive, BTV also gets access to IBM's global
expertise. The Okhla office is just one facility where IBM does work for BTV. Some jobs have been
transferred to IBM's global telecom innovation centre at Le Gaude in France. The India team of IBM
also gets instructions from the US, where about 30 per cent of IBM's global service workforce is
located.

Outsourcing also frees up senior management bandwidth to focus on tasks they consider really
important. Till now, key executives like BTV's joint managing director and CFO, Akhil Gupta, often
spent significant time on mundane things like tendering. "Akhil was always very frustrated with the
budgeting process and was very keen on a predictable business model. ... earlier, every six months
there was a fresh tender for network expansion. There used to be a naked parade with one vendor
playing against another," says Mittal.

Spotlight on BTV
At least 16 global telecom majors are watching BTV's outsourcing experiment. Equipment
vendors, mobile telecom operators, are all watching this roll-out. "What they want to know is how
a mobile services provider grows along with a vendor of equipment," says Mikael Steinbach, V-P
(global services) India & Sri Lanka, of Ericsson.

Sunil Mittal says companies are even asking for a week-to-week assessment: "Very senior
people have approached us - from Russia, Europe, SingTel." A Malaysian and an Indonesian
operator are being briefed. Mittal says even Hutch, which has outsourced services in Australia,
is evaluating the model.

For IBM, this is a showcase deal. IBM's global CEO Sam Palmisano has met Mittal thrice and
has been in constant touch with him on the progress. Palmisano also gets a regular report on
the project.

Nokia Networks' GM (operations solutions) Jukka Raikkonen says of the 20 networks that Nokia
operates, it has the maximum responsibility in Sweden's 3GIS, where it does network build out,
first line maintenance, entire operations and maintenance, customer care and billing. Nokia is
doing practically all of this for BTV. He adds: "In mature markets growth is a challenge. The
trend is to have operations and maintenance activities outsourced - what BTV is doing now.
India and China will contribute 80 per cent of the subscriber growth in the next five years.''

Mittal has only good words to offer about BTV's performance after outsourcing. "Quality of
network, call placement, clarity of sound, blocking rates have gone down. Congestion is down,
call completion is higher," he says, without giving any figures.

While in pure theoretical terms, Mittal saw the obvious advantages of outsourcing, he had to make
sure that his steps did not jeopardise the telecom operation he has worked so hard to build. A

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setback could threaten his status as India's largest private telecom operator, send the organisation
into a spin and, of course, deter any global telecom operator from going this way for many years to
come.

Finally, Mittal also needed to convince his partners that he wasn't taking a foolhardy step. His equity
partner in BTV, Singapore Telecom (SingTel), had dabbled in minor outsourcing and wasn't
particularly happy with what it had achieved. It was against the move. So Mittal had to engage his
technical teams with those of SingTel to convince them. BTV's board itself was split over the issue.
"There were some members who had doubts, they thought it was risky. We had to convince them,"
says Mittal.

Finally, BTV also had to figure out how to make it work. For about 18 months, Akhil Gupta, CTO Don
Price, and corporate director (IT & technology) Jai Menon combed through the successes and
failures of telecom outsourcing around the world. In particular, they studied UK's Virgin Mobile's deal
with T-Mobile which ended in a divorce. Part of Virgin's mobile network came to T-Mobile when the
latter acquired Mercury to whom Virgin had outsourced its network. T-Mobile was not willing to
handle the network on the terms and conditions agreed to by Mercury. "There were issues around
the contracts. They were not comprehensive in nature. Responsibilities were not clearly defined,"
explains Mittal. Among the successes, BTV studied O2 in The Netherlands and Hutch in Australia,
who outsource parts of their networks. However, these weren't good models either, as they operate
in saturated markets which did not envisage any further expansion.

Eventually, BTV concluded that the way to make outsourcing work on such a huge scale was by
creating very tight, extremely detailed Service Level Agreements (SLAs). These SLAs needed to take
into account every possible contingency. BTV picked up some of the SLAs from existing operators
and modified them to suit its special requirements. "We have a belief that the SLAs will be met. If the
agreement is not met, we have mechanisms to deal with them," says Price.

BTV, of course, has exposed itself to the risks associated with being the pioneer. If this experiment
fails, Mittal and his men will have to get down to the work all over again - setting up networks, hiring
operators, planning, implementing and monitoring software, inviting and evaluating tenders - just to
name a few. Not to forget the loss of learning during the period in which BTV wouldn't be managing
those operations hands-on. That could set BTV's race to reach the 25-million subscriber mark by
2007 back by a few years. "The flip side is that if it does not work then it is a painful process for the
company to re-engage in those areas. We are already tracking it. That's not the route we will need to
go," says Mittal. Obviously, BTV is convinced that a rethink on the deals will not be necessary and
that outsourcing will be the fulcrum of its future growth.

Erlangonomics

It's hard to believe that when BTV first broached the topic of outsourcing IT and network
management with the vendors, the proposal met with a less than enthusiastic response. But that was
precisely the case. Logically, vendors should have loved the idea for the amount of business coming
their way. But that's not how they saw it. In India, network expansion typically gets triggered at 70 per
cent capacity utilisation. Hence, at any given point in time, telecom operators have 30 per cent spare
capacity that is never used, but which rolls on from expansion to expansion. This gives vendors lots
of opportunity to sell new equipment even before full capacity utilisation has been achieved by the
telco.

In the Erlang-based pay-per-use model of outsourcing, vendors would essentially lose out on this
opportunity. Besides, as they were going to handle the networks, they would need to make sure that
capacity utilisation was being done efficiently. Their resistance was logical.

But BTV proposed Erlangonomics to win over the network management vendors. And a revenue
sharing model to win over IBM, the IT-service provider. Either way, it works to its advantage. Network
management comprises 50-55 per cent (20-25 per cent equipment costs and 30-35 per cent
operations cost) of the cost of a telco's operations. Revenue share here would have been a huge
burden as revenues grow higher. IT costs are between 5-6 per cent only. Besides, here, as revenues
grow, BTV will pay a smaller percentage share of revenues to IBM. Instead of making the generally
accepted practice of revenue sharing per subscriber as the basis of pay-per-use transactions, BTV
preferred to pay by the number of Erlangs it uses.

Even for the vendors it was a learning process. Ericsson, for instance, has service outsourcing deals
with 40 of the 1,000 networks who use its equipment. They didn't have a similar contract anywhere.
"We manage some part of their network for a one-time payment. We do not take end-to-end

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responsibility. In that sense, Bharti is the biggest end-to-end outsourcing deal that we have entered
into," says Mikael Steinbach, V-P (global services), India & Sri Lanka.

Clearly, the contracts have changed the dynamics of the operator-vendor relationship. "Earlier, their
job was to sell more and ours was to buy less. The pressure was on both sides. I must buy less to
serve my customers and they must sell more to serve their interests. Suddenly that's gone. We buy
as much as we use. They can theoretically leave one base station and charge me $100 million. (It)
doesn't matter if it meets our needs," says Mittal. Not to mention the convenience of operations and
lesser costs. "...there are a number of issues where we don't have to present to them. The day-to-
day negotiations are gone. Therefore we can reduce costs quite a lot," says Ericsson CEO Carl-
Henric Svanberg

At least 16 global telecom majors, including 10 in the Asia Pacific region, four in Europe and two in
America, are watching BTV's outsourcing experiment, says David Jordan, V-P ( telecom, Asia
Pacific) IBM. Equipment vendors also confirm the global interest. Mobile telecom operators like O2 in
Holland, Brazil Telecom and one in Spain are watching this roll-out.

So far, telcos around the world have only flirted with outsourcing. "Outsourcing by telcos is just
starting. They still have strong vertical integration and low levels of outsourcing," says Stephen
Young, analyst at Ovum, a London-based telecom industry consultant. Until the mid-1990s,
companies like Optus and Telstra in Australia gave away some peripheral activities like facilities
management and logistics. Others experimented with outsourcing IT help desks, call centers and
data centres. Later, parts of IT systems, billing, CRM, and network operations were outsourced also.
But no one has so far outsourced the entire network. For instance, Nokia Networks' general manager
(operations solutions), Jukka Raikkonen, says : "The trend to outsource critical functions is only just
beginning. In that sense BTV is a pioneer."

A Reality Check

The real reason why there's so much global interest in BTV is not just that the operators would like to
know how the relationship is faring. Rather, they would like answers to questions that forced them
not to outsource.

One of those is the overbearing dependence on the vendor for speed of delivery. Could nimble
operators controlling their own networks beat it tomorrow on reaction time? Has BTV swapped the
speed of delivery with the convenience of outsourcing? A recent incident has raised a question mark.
BTV, Hutch and Idea were all racing to launch their EDGE (Enhanced Data Rate for Global
Evolution) services. But, on 28 July, Idea - not BTV -became India's first telecom operator to launch
EDGE services. The incident is an example of how a small, but nimble, operator beat BTV on
reaction time.

The second major question relates to handling exigencies in the event any of the deals goes awry.
With the roll out on, there is a 44-page document that covers the service level agreements (SLAs).
Six SLAs are radio-frequency related while three are switch-related (back-end). The points covered
include network availability, accessibility and call drops. The partners are committed to 99.99 per
cent availability of service and less than one per cent blocking at network level (accessibility
parameter), a call-drop rate of less than 2 per cent (call drops tolerated while talking), and no more
than one out of 100 calls blocked at a time.

This is a change of religion for our vendors

Bharti group chairman Sunil Mittal spoke to Rajeev Dubey and Anup Jayaram on why he
outsourced his network and IT functions.Excerpts:
z Outsourcing contracts obviously mean
less headaches. But what is the flip side
of outsourcing?

The areas where we have touched upon

and which have a major impact on the
industry are IT and network. Let me take the
IT piece first, which we have outsourced to
IBM. There have been cases of IT
outsourcing in the past, except that it was

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only in verticals. IBM has a very big

outsourcing practice. But people have been
doing only one piece of it. They have done
in verticals - billing, intranet only, data
warehousing only, IT help desk. We have
gone in a more comprehensive way right
from my own desktop to, to the most
complex piece of IT architecture, handling
data mining, or writing letters on an IBM
keyboard - all is with IBM.

Similarly, on the infrastructure side, it is the

first of its kind outsourcing in the world. We
were wondering why do we buy these
boxes, we do not understand the technology
inside these, how they perform; so why are
we doing it all in house? It is like an airline,
they do not make the aircraft or know what goes inside these but buy it. Some are even
doing wet leases, where the crew comes with the aircraft. That has become an
established norm.

What we felt was when we do not understand the technology that are we trying to
manage here. We are planning networks, building networks, maintaining networks and
optimising networks. Every time things go beyond our control, we ask Ericsson or Nokia
to help us. We combined it and said let's put the responsibility for the network on the
vendors, much to the displeasure of the vendors.

z Why the resistance from vendors?

It is very different now. This is a change of religion for them. They never did it in the past.
For one, we pay for what we use. I buy a box and I do not pay for it. I pay for the traffic
which comes and nothing extra. My model becomes much more predictable now, my
business planning is very predictable. Our business planning on capex takes just five
minutes to close now. Number of customers, traffic minutes of use expected multiplied
with $ per Erlang (measure of our traffic) we have finalised with the vendor - it's a 5
minutes job. Anyone can do it. Earlier the capex budget planning used to take 3-4
months. If we say our customers have to grow from 7 to 14 million, we say 7 million
customers are coming, they will use approximately these many minutes and these many
minutes they will need, and project it for 14 million and pay our vendors. We pay our
vendors when we use the Erlangs.

z What about the pitfalls?

We have SLAs (Service Level Agreements). They have to meet these. We must plan,
install, maintain in the correct way. They have to deliver on SLAs. They know the
equipment best, the box. Optimisation is happening, efficiency has improved, planning
has improved. First time in the world, there is an alignment between the operator and the
equipment vendor. Complete alignment. I say I want 5,000 sites. They say network will
be delivered, maybe you need just 3,000 sites. That's the difference.

z How do you monitor SLAs?

It is a fully computerised industry. Every month, a dashboard comes out with orange, red
or green signs. The dashboard shows the key parameters - call drops, blockages,
network efficiency, coverage, capacity, everything. There are about 100 parameters that
we look at. If the dashboard remains green, they get a bonus on top of the rates that we
have. Red or orange leads to a penalty. It is in their interest to keep it green.

z Why were they resistant earlier?

Suddenly, the total amount that they were getting has gone down. Earlier, they did not
manage the network and did not have the thing about keeping it up and running to well-
defined parameters. You can ask me what is the incentive for them to agree. Well, they
have a three-year contract, eyes closed. No negotiation. Whatever they supply. Earlier,
every six months there was a fresh tender for network expansion. That has gone now.

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They are happy. They can build projections. There is certainty. More importantly, it is
going to be payment to them all the time now.

Tell us about the initial discussions that happened. Very clearly, we wanted a predictable
business model. We like a lot of predictability in our business. Tariffs are going down like
crazy. You needed predictability to know how deep you can go in the business by cutting
tariffs. Secondly, we also recognise that we are building a business that will be one of the
largest in the world. I am not saying the largest but one of the top seven or eight
networks in the world. This year, for example, we will do what we did in the last nine
years put together - in terms of network size. We have got 1,400 towns today. We will be
over 5,000 by end of the year. We have 5,000 base stations today, by end of year we will
have 10,000 base stations. It is a remarkable rollout. Wherever I go in the country, there
is only one message to the CEO: roll out. Earlier he used to call us asking "can I do 50
cities in this state?" and we would ask, "what will be the rate of return?" We would say
you can do 30 towns. Now, it is simply go ahead, roll out. We will have coverage which
will be superior to BSNL in one years time. For all this we would have needed another
3,000-4000 people. It would have put a lot of pressure on Bharti.

For a technical guy, working with Ericsson or Nokia is the first choice. Those are tech
companies, we are not a tech company. People seamlessly went to Nokia, Ericsson,
Motorola, Siemens and are very happy. Now we have a handful of people, who are
willing to do superior, rich tasks of engaging IBM, overseeing network, lot of thought-
leadership work. The routine part is with IBM. We are 6,000 people and would have
probably gone to 12,000 people. Now we will do with maybe 7,000 people. In a company
which is already in a pressure cooker mode - huge growth, huge technology changes -
this takes away lot of pressure.

z How much of management time, attention and energy have been saved by this?

We will save lot of time now. So far, it has been a stress because we have put lot of
effort in making this happen. The corporate team led by Akhil Gupta has spent hell of a
lot of time. Now, outsourcing is coming into operation. It is taking lot of budgeting time,
managing time. We are still in transition. The full benefit of this will be visible by 1 April
2005. Other area where we feel we have mitigated risk is by going with the best in the
world. We had offers from others, including Indian companies, as well. We decided we
will go with the best. It was not only cost saving which we have achieved. It was
provoked more by our concern about delivering quality to the customer. We thought this
could be done by going with the best, by experts in the areas rather than generalists. We
are now really managing our core competency,

which is customer relations.

z Almost 16 networks are watching you. What is the kind of interest level?

For IBM, this is a showcase in the world. If they succeed here they will work through
some very big accounts in the world. Sam Palmisano is directly in touch with me. From
their point of view, it is more than just an outsourcing contract. Ericsson, Nokia and
Siemens - if they succeed here (the religion of this industry can change in Europe, Asia
and other parts of the world) it will change the telecom outsourcing scene in the world.

z If this works, this is going to be, as you say, a change of religion for the telecom
industry. For you to take this decision it took two years...

The main opposition comes from very well entrenched departments in these areas. Let
me tell you about a very large telecom operator. Tell him we want to outsource the
network. How many people are impacted? 9,000 people in network, another 7,000
people in IT. People who run those departments are not going to let it go. They ask what
will happen to network security. What if we need a new package tomorrow, how will we
do this? And the CEO says, Ah! OK. Can't do it. The point is we are young. We know we
can. Watch us do it. It is quite akin to bogeys of security that we keep hearing. Maybe,
five years down the line we would have been more vulnerable to saying yes to it. It is not
easy for people to let go. For a large, $25-billion company, it is not easy to take risks as
we can.

Therefore, this model will be very carefully watched. We will be 25 million customers in

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two years time. We will not be a small, Mickey Mouse network. And if we succeed from
nearly 10 million to 25 million seamlessly, we would have delivered an answer to the
world. Some people will consider it now and some will wait for 25 million customers to do
it. Not too long ago, all call centers were run by telecom companies, but no longer. Once
we saw the magic of this formula, we went the whole hog.

z What were the networks that you assessed that failed?

We checked on the IT side. Optus-IBM, we realised the weaknesses of that

arrangement. One or two other IT contracts which had gone bad in Europe, Accenture
and HP had gone bad. There were issues around the contracts. They were not
comprehensive in nature. Responsibilities were not clearly defined.

z When was this ideas first proposed?

On IT, about three years back. In our minds we were very clear that we need to
outsource now. Then there were triggers, like, Jai Menon joined us. He was a trigger
point for us to start actively working on IT outsourcing. Within months of his joining, we
started putting it together. We had TCS, Wipro, HP, IBM coming over. On network, of
course, Akhil was always very frustrated with the budgeting process and was very keen
on a predictable business model. I was very clear that experts should manage the stuff
and that is how it started. That is where the idea germinated. Akhil led this piece and he
was intimately involved in IT outsourcing as well, looking at the financial angle. He
ensured that the company was very well insulated. It is remarkable, the arrangement with
IBM. If we grow, they grow.

z There could a threat that at the end of this contract you will become an IBM shop.
IBM servers, storage, etc.

That will not happen. We have an Architecture Review Board. The architecture design is
in our hands. We tell them what we need. If we want Kenen billing it will be so. If I tell
them I want Siebel CRM and not Oracle, they will buy Siebel. Unless, they can say that
they can do it better. For example, my computer has now changed to IBM, that part is
OK. 7,000-8000 PCs are being changed all over the company. In some areas they are
very good. In some areas they are relying on our staff. IBM does not do everything
themselves. The good news is they do the big servers. Many of my systems work on Sun
machines. They say they will get it for us as they have a better deal with Sun. IBM is
currently building firewalls across the networks. There is no conflict of interest. BTV gets
the best of the things to serve its customers. It will come through IBM, which will take
money from us as per the contract.

If the SLAs are not met, BTV can defer payments. If things go really bad - if SLAs are violated for two
consecutive quarters - BTV has the option to cancel the contract. Says Price: "We review the SLAs
every week and also add new Key Performance Indicators (KPIs) when required. For instance, since
we signed the contract, the KPIs have gone up from nine to 24 with the EDGE rollout."

But what happens if BTV decides to withdraw? Mittal says that there are enough takers: "Imagine, if
Ericsson collapses, somebody else will take over, say Nokia. If IBM fails, HP or Wipro will come and
take over." As for managing the complexity of the migration, BTV has tried to mitigate that by
ensuring multiple vendors manage a geography. "There could be proprietary elements, but by and
large the radio technology is common across different providers," says Price. Besides, employees
handling BTV networks get transferred to BTV in the event of cancellation of contract. Their training
in handling multiple networks will ensure continuity of operations.

Vendor takes control

Last fortnight, JP Morgan Chase & Co ended a $5-billion IT outsourcing contract signed with
IBM in 2002. The move, the bank said, would let it control the core IT function as it believes
technology infrastructure conveys a competitive advantage. Could BTV end up losing the IT
edge, with IBM replacing BTV equipment with its own gear?

Says an IT solutions provider who now has to deal with IBM instead of BTV: "IBM will first go for

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the low hanging fruit like servers. Here margins are between 14-30 per cent and IBM would be
keen to deploy its own servers rather than procure from rivals HP or Sun Microsystems."
Already, for pre-paid billing, IBM installed its own storage system without inviting bids from
competitors.

Says a vendor: "It was worth a mere $40,000, hence it did not cause too much pain. IBM could
add on its own products in future."

For instance, BTV has around 1,400 servers, of which about 780 are non-IBM. These can be
replaced by IBM systems whenever replacements or new deployments happen. However,
Oracle differs. Says S.P.S. Grover, senior director, Oracle India: "IBM is a delivery arm taking
care of the daily operations. The controls reside in-house with the Architecture Review Board
(ARB) of BTV. There could be a case that the customer is not concerned whether he is getting
an IBM or an HP box, but only about the SLAs. Even in that case, SLAs are technically defined.
Chances of a misuse are remote."

Also, software takes couple of years to stabilise. For instance, ERP systems can take three
years to deploy and settle. Once done, it won't be prudent or cost effective to rip it apart and
replace with a new solution. Yet the ARB has to ensure that BTV does not become a hostage to
its outsourcing partner.

There is a drawback to this arrangement, though. There are not too many companies that have the
capability in IT management and network management globally. For instance, only the likes of HP,
Accenture and EDS are considered in the same class as IBM. On the network side, there would be
all of six or seven players who have the capability to take up outsourcing jobs. Of these, three -
Ericsson, Nokia and Siemens - are already part of the BTV experiment.

And, finally, long-term contracts like the 10-year

agreement with IBM require taking a bet not only on
IBM's capability to deliver over such a long period, but
also on IBM's capability to keep pace with the
technological changes happening in the industry. BTV
says that the reason why it decided to go with some of
the world's largest in their business was to alleviate
such apprehensions. "You are taking a bet on $89 billion
IBM, $45 billion Nokia, $25 billion Ericsson and $100
billion Siemens. We can be struck by a nuclear bomb
tomorrow. Risks are always there. I think we are quite
safe," says Mittal.

The company, though, is leaving nothing to chance. It

has set up an elaborate monitoring infrastructure. Ten
BTV engineers regularly monitor the network, 29
oversee the VAS deployment, six oversee new site Joint MD Akhil Gupta is the
deployments and another 10 look after the quality of the mastermind behind the
network. outsourcing of core functions

Within BTV itself, a 50-people IT Solutions Engagement team keeps the management updated on
new IT deployments. They keep the non-IT managers - within finance, marketing, HR - updated on
the IT deployments. They report to the respective CIOs in the circles on a weekly basis. A five-
member Architecture Review Board (ARB) headed by Jai Menon takes all technology-related
decisions. The ARB meets once in two weeks.

A BTV governance team tracks the service level agreements on a daily basis. The team essentially
ensures that all SLAs are met. On the network side, BTV retains a technical team of 100 persons to
focus on five areas: design and planning, network deployment, operations and maintenance, value
added services, and quality assurance. Half of the team will be looking into the last two areas.

In case of any slippage on an SLA by any of the partners, there are four levels through which a
problem can be escalated, right up to Mittal himself. For instance, something like a bug in the
database system would be handled by the engagement team, faulty billing would call for Menon's
attention, network disruptions would be escalated to Akhil Gupta, while serious systems failures
leading to a network crash would call for Mittal's intervention.

http://www.businessworldindia.com/oct0404/coverstory01.asp 1/20/2005
Businessworld: The man who gave away his network Page 10 of 10

Mittal, particularly, has a second reason for making sure that outsourcing works seamlessly. After all,
he has planned his second innings beyond telecom. "My target is 50 (years), I am 46 now. My job in
the company, in terms of driving it, is coming to the last phase," Mittal insists. Like his father, will it be
politics next? "There are other frontiers to cross," he says.

Though the real impact of outsourcing on the BTV balance sheet will be visible only by March 2005,
very soon it will become apparent how it's doing. Then, of course, Mittal can prepare for an innings of
his choice.

With inputs from Anup Jayaram

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