IT is one of the fastest-growing industries in Nepal, report saysFriendlier government policy would encourage domestic companies to use locally developed software, according to insiders.
MBA graduate Suresh Pandey worked for three years in a database management company in Dubai till 2013.
During his stint at the firm that managed data of its client companies, he was exposed to multiple applications and software used by business organisations of all sizes.
“Most of the software and apps were made by developers in India, Bangladesh and other countries as they were cheaper than technicians in Western countries,” said Pandey.
“The number of information technology (IT) technicians in Nepal was also increasing, so I returned to set up an IT outsourcing company.”
Pandey arrived in Nepal in 2013 and gathered a group of programmers and developers to make software for foreign companies. For the first four months, they worked without registering the company, and projects came primarily through Pandey's links at his former workplace.
“After it was confirmed that the business model worked, we formally registered the company and scaled up operations.”
Smtech Technology worked primarily for foreign clients till 2019. After the introduction of 4G in Nepal in 2017, the use of the internet swelled among the public and businesses.
“Although the public had access to fast internet, there was not much digitisation in business operations. Large companies used foreign-made software while small enterprises still used handwritten bills and maintained accounts and stock-keeping manually,” he said.
“So we started making low-cost software for small and medium enterprises to promote digitisation among them.”
Smtech Technology makes applications for hospitality management, enterprise resource planning, retail management, retail management, human resource and payroll, accounting and customer relation management.
Using the software developed by Smtech Technology, enterprises such as restaurants and department stores can have end-to-end digitisation of their activities and get regular analytics of their business.
“Restaurants like Biryani Adda, Jimbu Thakali and Michael Grills, among others, are our notable customers. Our end-to-end digitisation software has helped them scale up their franchise and operate each of their branches in a streamlined manner,” Pandey added.
Business really took off during the Covid-19 pandemic when every SME wanted to go digital by having their own mobile ordering app and digital account-keeping software that’s compatible with online payment.
The company has served more than 2,000 Nepali SMEs since 2019, however, most of its revenues still come from outsourcing projects from foreign companies.
“One of the major barriers Nepali SMEs encounter in going digital is high-priced software. To overcome this issue, we developed standard software for each category and make minor tweaks to customise them as per the needs of the customer,” said Pandey.
“Besides, we take subscription fees from companies for technical support and cloud storage.”
The company has 30 full-time employees who develop software and provide round-the-clock technical support. Besides, it commissions freelancers for specific projects.
A recent study by the Institute for Integrated Development Studies (IIDS) states that IT is one of the fastest-growing industries in Nepal.
Rapid revenue growth in the IT sector demonstrates the success of Nepali companies in offering high-quality services to international clients, resulting in an increased influx of foreign exchange. These achievements highlight the competitiveness and competence of Nepal’s IT services, contributing to the country’s economic development, says the report.
“The majority of foreign clients come either through the personal connections of entrepreneurs who have worked abroad or through Nepali IT professionals in foreign countries who work as mediators between Nepali companies and foreign clients,” said Pandey.
According to International Finance Corporation–Asia Pacific (IFC), Nepal’s digital payment usage lags at 29 percent, falling short of the South Asian average.
Yet, with a 94 percent mobile penetration rate, the country brims with untapped potential for digital financial services.
There are 10 digital payment system operators and 27 payment service providers in Nepal.
The government, however, hasn’t incentivised the public to transact digitally.
The condition is even direr in other sectors such as accounting and billing where enterprises have to obtain permission from the Inland Revenue Department to use digital technology instead of making it a default option.
“Such policies are hurting the outsourcing of software to Nepal as well,” said Pandey.
“If Nepali enterprises don’t use the software, how can we convince foreign companies to use Nepali software? Besides, outsourcing in Nepal isn’t institutionalised by the government, which is driving potential clients to competing countries.”
Several Asian countries like India, the Philippines, Vietnam and Sri Lanka are considered emerging hubs of outsourcing globally.
“These countries have a better policy to support the outsourcing industry and their domestic companies are also willing to use domestically developed software. Although the situation has improved in Nepal over the years, this is not enough to grow like our neighbours,” he added.
The public often cites technological difficulty as a barrier to the digitisation of business. But Pandey says that is not the case.
“If anyone can use Facebook, why not business software? If they find it complex to operate the software, then they must go to other software makers who make software as easily operable as social media. But it should not be an excuse for not going digital in the 21st century,” Pandey said.