The future of Nepal’s tech industryTech brands that rely on a ‘made in Nepal’ sentiment to sustain their businesses are destined to ‘die in Nepal’.
Over the next 12-24 months, most tech companies in Nepal will face existential challenges. Those that do not turn to outsourcing will cease to exist. The global war for talent and the culture of celebrity entrepreneurship are accelerants for the ongoing change. If appropriately managed, this shift can potentially re-orient Nepal’s growth trajectory in a materially favourable direction.
The market for tech talent is borderless—physical or otherwise. In a reductive sense, access to a laptop and a broadband connection are the only assets a tech worker needs to be gainfully employed. Low entry barriers, combined with a plethora of freelancing platforms (e.g., Upwork, Fiverr, Toptal, etc.), have paved the way for near-seamless and location-agnostic interactions among qualified talent and well-paying opportunities.
Into this equation enters the pay-to-play mindset. Basically, market forces dissuade tech talent from providing services below globally established rates. Based on anecdotally verified data, these rates are anywhere between 2-3 times more than what the local Nepali market can afford. Herein lies the rub: The wage-rate differential across physical borders normalises in a digital world, creating every disincentive for the Nepali tech talent to service domestic clientele.
A corollary of this reality is that at any given point, it is the least capable talent that willingly serves the domestic market. Over time, even these resources gain sufficient experience to outgrow Nepal-centric opportunities and graduate into a world of higher-paying jobs: With companies abroad, independently or by working for off-shoring companies that are based in Nepal.
Surviving this trend requires every Nepal-centric tech outfit to diversify its balance sheet. With a few exceptions—for instance, category leaders buffered by regulatory moats—wage-rate pressures will ensure that Nepal-only tech startups and tech-enabled small and medium enterprises (SMEs) either adapt by accessing projects from abroad or fail. Tech brands that rely on a “made in Nepal” sentiment to sustain their businesses are destined to “die in Nepal”, destroying shareholder value, forcing investment write-offs, and signalling commercial capital away from Nepali startups.
Further accelerating the shift toward outsourcing is an entrenched and destructive culture of celebrity entrepreneurship. As the saying goes, our politics reflects our social and cultural values; by extension, several of our local startups (and their founders) are reflections of our collective political mindsets (and “youth politicians”). Our cultural/social bias in favour of deifying cult personalities at the expense of sustainable business models is a recipe for disaster.
The most egregious manifestation of celebrity entrepreneurship is where the founders create entitled, alternate realities. When the fog lifts—and it always does—behind the curtains of self-grandeur lie business models that melt at the first hint of real competition. For seasoned Nepali tech workers who have survived celebrity entrepreneurs and their zombie startups, outsourcing companies have become preferred destinations.
As tech companies transition to becoming hybrid outsourcing shops, a once-in-a-generation opportunity emerges—i.e., the opportunity to re-orient Nepal’s future workforce in favour of digital skills. The new generation of workforce entrants is already on this path. The time was yesterday for our policymakers and business owners to catch up.
A categorical rejection of celebrity entrepreneurs’ calls for “made in Nepal” is part of adapting to this paradigmatic shift; the other is reconciling with a new and irreversible reality where talent has the option of moving across borders without physically moving an inch. Enacting policies that enable the growth of Nepal as a preferred offshoring destination will lead to middle-income status a lot faster than the worn-out narratives on hydropower and tourism that we have been fed for decades.
The ongoing shift is a monumental opportunity for another reason—the obvious linkage between tech talent and diversification of Nepal’s remittance base. Re-positioning the Nepali economy to capitalise on its traditional comparative advantage—i.e., its labour force—by creating incentives and options for Nepali tech SMEs and talent to provide globally competitive services from the comfort of home is a reimagined future that is within reach. Tech businesses must re-align their priorities to embrace this shift and policymakers must create the regulatory and fiscal space to facilitate this transition.
A future in which Nepali tech talent can compete and succeed on a level playing field with talent from across the globe is now. And, in this future, every tech company in Nepal will be an outsourcing company.