Fundamentally, there are three reasons why the case for more Nepali IT and business process outsourcing (together, “IT Services”) is self-evident. One, demand in the global market for these services is theoretically limitless; two, the Nepali mindset is familiar with and predisposed to exporting services; and three, service-led growth is a material component of Nepal’s GDP, critical to its foreign currency earnings, and must grow rapidly if Nepal is to achieve middle-income status.
Based on publicly available data and conservative assumptions, we estimate the current IT Services labor pool in Nepal to be 240,000 (less than 1% of the total population) and its 5-year growth rate to be 4.52%, on average. This growth rate accounts for a natural rate of churn in the IT labor force – i.e., the difference between new entrants into this pool and members who over time, do not meet a “substantial presence test” from an income tax perspective. We also segment the existing IT Services labor pool in Nepal into four categories: (i) exceptionally skilled (~5%, or 12,000); (ii) highly skilled (~30%, or 72,000); (iii) high-growth potential (~50%, or 120,000); (iv) functionally oriented (~20%, or 48,000).
By our definitions, exceptionally-skilled and a majority of highly skilled IT Service providers – together, approximately 35% of the total IT services labor pool – are already participants in outsourcing business operations, either as corporate employees and/or as freelancers. The more successful of these corporate entities are domiciled abroad, primarily for ease of doing business, and use Nepal as a cost-center where funds are remitted monthly to cover operating expenses including salaries, overheads, and other administrative costs. This business model makes good commercial sense and has a verifiable track record of success, but is only accessible to approximately a third of the capacity that Nepal has to offer.
In fact, over 70% of the IT Services labor pool in Nepal is unable to systematically tap international demand centers. Contributing factors to this dynamic are many, but chief among them is a lack of experience in and exposure to “soft skills” – elements that are critical to long-term relationship building and sustained growth. Meanwhile, Dollar for Dollar, the technical value that Nepali IT Services professionals can generate for international clientele, is extremely competitive. This is evidenced by the large numbers of registered development shops that identify at least one international client in their portfolio over any given 18-month period. The common struggle that these firms (and freelancers) confront is maintaining a steady flow of work while minimizing transaction costs.
This is where VikasaTech can make a difference. Our business model caters to the majority of IT Services professionals who chose to remain in Nepal – both firms and individuals – and prefer to focus on their core engineering and development capabilities, leaving sales and marketing, relationship management, and back-office support to a well-networked and specialized entity like VikasaTech. At VikasaTech, our ambition is exponentially growing the volume of IT Services provided by Nepali professionals to the rest of the world, creating high-paying jobs in Nepal, and real options for this and future generations of Nepali IT Services professionals.
