By Govindan Parayil (eds.)
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Additional resources for Political Economy and Information Capitalism in India: Digital Divide, Development and Equity
For example, certain activities are best undertaken by specialised entities, which are able to reduce costs through such specialisation either because of the large scale of operations they can sustain by pooling demands from multiple players or because of their ability to keep overhead costs down and run profitably a small-scale operation. In other cases, outsourcing may reduce costs by transferring activities to firms operating in a labour market segment different from that of the outsourcing firm, where wages and, therefore, the costs of undertaking certain activities are lower.
The fourth form of decoupling is illustrated by India’s exclusion from the Japanese market. While Japan’s market size relative to the US and the European Union is small, its absolute size is nearly $35 billion. However, India’s share of this market is about one-half per cent compared to India’s shares of nearly 4 per cent and 2 per cent of the North American and European markets respectively. More importantly, Japan’s dependency ratio is very low, suggesting a variety of structural and insti- ICTs and Decoupled Development 17 tutional factors involved in excluding Indian exports to Japan.
4 Besides reduced costs, a second factor that could motivate firms to outsource certain activities can be their desire to convert the fixed managerial salary and wage costs involved in undertaking an activity inhouse into recurring costs, allowing them to curtail those costs when capacity utilisation falls due to demand constraints. Finally, firms may outsource because they find the need to focus their managerial attention on core areas, rather than fritter away energies in micro-managing non-core activities.