KATHMANDU - The millennium marked the start of the Information and Technology (IT) sector's rapid growth in Nepal, and in the decade since, Nepali developers have managed to leave their footprints on the global stage. A journey that started with the companies here developing software products mostly for schools and colleges is now onto its next leg: many of them today routinely create top-of-the-line products that can be marketed not just in Nepal but in the global market as well.
Today, Nepal boasts a bevy of young, sharp, savvy developers adept at churning out cutting-edge IT products: in fact, in the rapidly evolving IT sector here, celebrated locally produced products such as CashOnAd, Swiper and Picovico represent just the first wave.
And these developers are creating everything from the ground up these days. Up until some five years ago, developing a 'standard' software or a programme in Nepal meant hiring a bunch of developers from abroad; now the demands of local corporations and institutions are being met entirely by Nepali developers themselves. That growth has led to clients and end-users abroad keeping a keen eye on the Nepali developers and these observers are starting to peg Nepal as an outsource hub. "We have several young developers who have proved their calibre in the field of information and technology in the international arena," says Allen Bilochan Tuladhar, the country director of Microsoft Innovation Centre Nepal. "And the sector is definitely evolving as the next big thing in Nepal."
That Nepal has made inroads in the global IT market can be attested to by the fact that the US State Department recently chose to stage the REC@nnect boot camp in Kathmandu. The camp, which was held last week, was initiated in order to lend support to the entrepreneurial IT ecosystem here. The event, organised by CRDF Global, drew a total of 20 tech start-ups from Nepal and a similar number of participants from 12 countries in South and Central Asia. That coming together of developers from far-flung areas enabled the attendees to exchange their visions and working models, an experience that should help the local start-ups further refine their work processes and products.
Such events should help the local Business Process Outsourcing (BPO) sector too, which has been quietly growing in the shadows. Though there isn't official data available, the BPO sector in Nepal is estimated to have a total annual turnover of more than Rs 5 billion. The country today has somewhere around 200 small and large BPO companies, which employ over 3,000 tech workers. Companies like GeoSpatial Systems, Serving Minds, Yomari Inc and Verisk Information Technologies (known as D2Hawkeye formerly) have established a strong presence in the domain and have grown by leaps and bounds year on year. Apart from these major companies, there are also small-time developers on the fringes working on smaller projects.
So lucrative is the business for some of these BPO companies that they are paying Rs 15,000 a month for their entry-level positions and the salaries get to as high as Rs 150,000-Rs 200,000 (S$3,100-S$4,100) a month for some of their managers.
Analysts have forecast that the global BPO market will be worth around US$93.4 billion (S$117 billion) in 2015, up from the US$71.92 billion in 2010, and that India, China and the Philippines will remain the leaders in driving the BPO market. But the way Nepali companies are starting to evolve, they should be able to get even more of their fingers in that pie. Industry insiders say that with the Nepali developers improving their capabilities, numerous IT firms based in India have already been passing on their business to Nepali developers, and that trend will continue to increase.
Nepal has the potential to turn into a preferred destination for outsourced IT work because, at least for now, it can provide cheap manpower. Most software outsourcing firms are paid on an hourly, monthly or by-the-project basis and the pay scale starts from US$10-15 per hour to beyond US$5,000 per project, depending on the type of project. Industry insiders say that companies in the West can save up to 70 per cent of their IT costs if they outsource the work, compared to the investment they need to make for developing the software in their own county. While most of the Nepali companies, so far, receive the bulk of their contracts from the US and Europe through Indian companies, they can achieve a higher degree of success if they manage to land the contracts directly, without a middleman.
We already have the required critical mass of experts here. Today, there are around 45 engineering colleges in the country estimated to be producing 7,000 engineers annually, of which around 1,500-2,000 are IT graduates, and because of that, the sector can produce enough manpower to take on the projects coming their way. Moreover, there are also several institutes offering courses on specific software development packages. But since Nepal's neighbours already have a larger army of developers at their disposal, the IT firms will have to learn to refine the quality of their work.
But that potential that Nepal possesses can only be optimally nurtured if the government lends a helping hand. The lack of a proper government policy for the IT sector has hindered its growth, which has gotten to where it has all on its own. Owing to the lack of a concrete policy, those involved in the sector sometimes fear advertising the gains they have made or the products they have created, and some even refrain from turning into publicly listed companies, even though such a move could be advantageous for business. The absence of such policies has in the past led to huge sums of money made by the IT companies going unaccounted for. And while the talent abounds locally, several Nepali IT firms have been registered in India because our neighbour offers better possibilities for establishing the much-needed networks. Just as these other countries have, Nepal too needs to come up with a concrete policy and tax-exemption schemes, at least for certain incubation periods, to encourage the companies' growth and to allow them to get all their operations above board.
It's not just the foreign markets that the IT firms in Nepal should be targeting if they want to continue growing. The local market is still largely untapped. While their products are gathering accolades in the foreign market, the companies have not been able to grow the local market as much as they could have. "If we compare ourselves with our neighbouring countries, we are in the initial stage. To succeed on this front, we need to bring the IT and business sectors together," says Ameet Agrawal of Janaki Technologies, a noted name in the country's IT sector.
Around the world, many IT start-ups need cash infusions and seed funds to get going. Nepal still lacks investors and venture capitalists to fire up fledgling companies here. There is much that our young guns can achieve in the coming years, but for them to succeed, the government needs to come up with the mechanisms to help them find feasible projects and assist them by providing the infrastructure.