India has a long history of outsourcing with comparatively solid legal establishments, and sincere efforts to support outsourcing laws.[1] There also has been a significant growth of business process outsourcing to India after the year 2000 Y2K computer problem.[2] Moreover, the Indian government has embraced foreign outsourcing with the help of their “functional democracy, thriving entrepreneurship, rule of law and a well-educated, mobile and relatively cheap workforce.”[3] The benefits of Indian outsourcing will continue to draw foreign companies because (1) the parent company can specialize in the “core” functions while outsourcing “non-core” back end business processes, (2) cost-saving of labor costs in comparison to domestic labor salaries in a developed country labor market, (3) India service providers can provide better service and performance as a result of business process specialization, (4) reduction in capital investment, especially for start-up companies outsourcing non-core business processes, and (5) more efficient labor completion as a result of a fast and responsive method for the outsourced business process work in country with opposite work hours.[4] However, as India becomes a more developed country, the labor cost savings will decrease, but in “absolute terms,” India should still remain more inexpensive in comparison to developed “Western countries.”[5]
An Indian direct third-party business formation provides a significant advertising cost saving advantage for a U.S. start-up digital media sales S-corporation. Accordingly, the advertising cost savings can be shared with the sales clients in the form of more inexpensive marketing costs. Additionally, this smaller media sales company who outsources its business processes using an Indian direct third-party formation can compete with a larger U.S. digital media sales company because the larger digital media sales company’s overhead cost of doing business with higher employee salaries prohibits the low-cost advertising rates of the smaller outsourcing company. Furthermore, the business formations of choice for larger companies tends to be expensive captive entities or joint ventures due to the parent company having more control. Yet, these formations cannot compete with the Indian direct third-party model for cost saving because captive entities and joint ventures have considerable Indian tax obligations.
As a final consideration, the success of the smaller media company will always be dependent on finding a talented Indian third-party business, which can deliver quality business process work. To further this goal, India is devoting financial resources into developing new technology, digital infrastructure, education, and data security to combat the negative quality control reputation of the cynical West.[6] As with any business, talent and hard work determine success. If a U.S. start-up digital media sales company collaborates with a gifted quality driven Indian third-party business service provider, then this business model can achieve competitive advertising costs that undercut the existing U.S. digital media market.
[1] Bharat Vagadia, Outsourcing To India- A Legal Handbook 167 (2007).
[2] Anupam Chander, The Electronic Silk Road 60 (2013).
[3] Uttara Gharapure & Aditya Bandyopadhyay, Law of Outsourcing Contracts 181 (2009).
[4] Bharat Vagadia, Outsourcing To India- A Legal Handbook 167 (2007).
[5] Anupam Chander, The Electronic Silk Road 207 (2013).
[6] Mark Kobayashi-Hillary, Outsourcing to India: The Offshore Advantage 158 (2004); see Uttara Gharapure & Aditya Bandyopadhyay, Law of Outsourcing Contracts 181 (2009); see also Pavan Duggal, Law of Business Outsourcing 7 (2004); Aparna Viswanathan, Outsourcing to India: Cross-Border Legal Issues 3 (2008).
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