''Software Industry in Nepal is Much Bigger than  We Think It is''

Sanjib Raj Bhandari is the CEO of Mercantile Office Systems, the pioneer company in Nepal's IT sector. Having seen the evolution of sorts in IT in the past two decades, Raj Bhandari himself has effected a sea-change in his business, priorities and processes. At the beginning, his company was a computer distributer in the mid-1980s, became an internet service provider in 1990s, produced own brands of computers in the beginning of 2000, and now in 2011, Mercantile is chiefly a software producing company. Mercantile-produced software are extensively used in Nepal, especially in the banking sector. Raj Bhandari foresees Nepal's great future in IT, as well as expresses concern that we are among the “bottom few” in the global IT map. He says Nepal also lags in South Asia behind India, Pakistan, Sri Lanka and Bangladesh. Excerpts:  

Your company Mercantile has been considered one of the pioneers in Nepal's IT sector. How do you view the growth of the sector over the period of last two decades?

The growth has been tremendous over this period. If you look at the very beginning in the early 1990, we had a problem not only with the fact that we were all very new to IT sector, but there were no government policies specially addressing this sector. Computers and its parts were considered luxury items thumbing that the ordinary people do not need them. That psyche was reflected in the government policies. We had a lot of difficulties in doing business not only of hardware but also the software. The policies vis-à-vis IT sector were very unfriendly.

We've come a very-very long way. Today the overall policies are very positive. This transformation has helped both the hardware and software industries to grow. There's been a sea of change not only in the IT development but also on how the government and the people at large perceive the IT now. 

Could you please elaborate on how Mercantile managed to grow to become the market leader as it is now?

I run a number of IT companies, of which I run two flagship companies from this building (see picture). The first one is Mercantile Office Systems (MOS), which we started in 1985. It concentrated mainly on distribution of computer and IT related products and software development. We started internet business including email under the MOS in 1992-93. The second one is Mercantile Communications which we started in 1995. We did not know too much when we started internet service under the MOS. It was very much exploring and doing things as you go along. We did not have much technical know-how. Internet was completely new. When we started email service in December 1993, email was not available for the public in India. When we started the internet in 1995, commercial internet had just begun in Singapore. It would not begin in India for another 3 or 4 years. So it was very-very new, we would not know what we were doing, we learnt as we went along, we sought help from a lot of people from outside. Today you can go and hire engineers. In those days, we did not find engineers. We had to actually train our own engineers.   

You have been selling your own Mercantile brand of computers and office systems. Do you see any need to bring changes in your products or services?

We have been distributing computers since 1985. In the beginning of 2000, we experimented with our own products. We were very successful for two years, but later we could not compete with the international products. The reason was that we needed to be 25 per cent cheaper than the international products and the other products available. In the beginning, we could maintain the difference but later we could not. So, we slowly phased the production out. We don't have the products now.

Your company software are extensively used by Nepali companies. What distinguishes your products and services from the others?

I think it is the quality. We have from the very beginning emphasised on quality and we have always maintained ourselves and concentrated on niche market. We have seldom gone for mass market. Most of our services are in the gear to corporates. Some of our products like computer notebooks and communication software are now available for mass marketing. Our services like technical, banking and software services have always been very selective. That's how we actually maintain our profile.

Could you tell us where does Nepal stand in the global IT map and what position Nepal has in South Asia? What are the hindrances as well as prospects for the growth of this sector?

If there were a global IT map, we would find ourselves in the bottom few. I often say that our proximity with India is only in relation to geography. Our proximity with India is not in development scale, manufacturing and specially IT. In South Asia, India is way-way up, then would come Pakistan or Sri Lanka not necessarily in the order, and we would be close behind Bangladesh but it does not mean too much, as we still have a lot of run to cover.   

Nonetheless, the software industry in Nepal is much bigger than we think it is. We do not have proper statistics. But my guess is that there are over 5,000 people working in the software industry of Nepal. There are maybe 40 to 50 companies that have employed some 30 to 40 people each. There could be as many as 10 companies with over 100 people in each. Many of these companies are involved in software exports. Their figures do not reflect national figures because many of them do not want to come out in the open as it would create far too big problems for them. And, as their customer base is abroad and as they do not need a formal registration in Nepal, they choose not to be in the legal hassles here. This is something the government really needs to address.    

There are a lot of capabilities within the country to develop software. If you look at the hardware sales, the value addition, in terms services, distribution and warranty the Nepali companies provide, is between 2 to 8 per cent. If you look at the software, the value addition is over 90 per cent. There are some 7-8 companies that are exporting services to where the potential lies.  

How are the government policies impacting on the growth of this sector?

The government role is obviously very-very important here. But, the software industry does not need, does not look for government leadership and does not make their plans and projects relying or looking at the government action. The private sector must lead. If the government can catch up the pace, it's fine. Otherwise, the growth will find its own path. A great example is the trekking business. When the trekking agencies started in the 1970s, they organised themselves without government aid. Later on, the government came in to issue the licenses to them. The government has policies and has made policies in the past too. But execution has been the problem in Nepal. Emphasis really has to be on execution, not so much on formulating and announcing the policies.

Do you see any possibility of government and private sector working together for the development of IT sector?

Traditionally, we think that the partnership between the government and private sector is fruitful. But, what we have discovered is that the government has very soft corner for IT sector, but still the cooperation has not yielded true fruits. This is not only the fault of the government. I feel the private sector too has not played its part. When you demand so many things from the government, you make your business compatible to the policies and accountable to the country. If you look at any industrial development in Nepal, it has always been private sector led. So the progress has to be made by private sector. If the government assists, it is welcome; if it doesn’t, it need not be bothered.

As I previously mentioned, the initiatives has been taken by the private sector. However, if the government and the private sector were to cooperate, the government could obviously help with better and improved policies. The government could also help by buying software and looking for solutions, let's say in electricity or telecom companies. This encourages Nepali IT companies to take part. But right now, the terms, conditions and perks in international standards that the government boasts are rather punitive to Nepali companies. I repeat they are not only discriminatory but also punitive. Those companies put such conditions which Nepali companies simply cannot meet. Or, if they can be met, they could be agents only. This is very humiliating. It is fine if the government entertains the business from international companies in the area where Nepali IT companies cannot compete. But the Nepali government is disqualifying the Nepali companies for many other reasons. To correct this, the government need not do too many things. What it can do is to just encourage, invite and qualify Nepali companies to take part in business bidding to provide service for Nepal government and institutions. There could be many areas like e-commerce, trade, billing boards for telecom and other government bodies – where the Nepali companies too can perform well, given little amendment in service procurement mechanism. Therefore, for now it would be enough to revoke the punitive and discriminatory policies on the part of the government; let alone making fancy policies.

The Computer Association of Nepal (CAN) and ICT Association of Nepal are holding Info Tech Fairs every year. How do you evaluate the role of these fairs in promoting IT business in the country?

The CAN and ICT info-tech fair attracts hundreds of thousands of visitors every year. Obviously it plays the central role in awareness, as it educates the public at large. However, it is almost like the flagship event for CAN and ICT. It is important for these organisations to focus and involve in other large events of info-tech. Right now they are perceived as single event institutions. They need to move out of that.  

There are some unused infrastructures on IT, one of them being the IT Park in Banepa, Kavre. Why do you think such utilities are almost defunct?

In 1992, a high level commission was set up to look at the development of IT and the benefits of IT Park. Ten years down the line, many things have changed, in particular the communication technologies. The IT Park is yet to embrace the changes. That could be the major reason for it being a mess.      

Still, don't you think there is a digital divide prevalent in the country? How do you think such divide can be narrowed down?

Digital divide is alarming. Only one or two per cent of Nepali people have access to internet and IT in general. Increasing the access of people to IT and telecommunications can lower the digital divide as both these sectors are complimentary and intertwined. The number of people having access to IT and telecommunications is increasing. I'm happy with that and hopeful too.  

As a matter of fact, your company operates an online media too. How much do think it has contributed to the growth of online media in Nepal? How economically feasible is it?

When we established a news portal in 1999, it was definitely not sustainable for the next 5-6 years. But today for the last 3 or 4 years, the portal has been doing fine economically too. We have hired almost 20 people. The portal pays for itself and is also making money. Online media came with more people having access to communication, computer and education. To have access to online media, one must have computer device, must have access to communication and must be educated. In developed markets, the online media has overshadowed the traditional media. I am still doubtful that will happen in Nepal in the foreseeable future.

Every successful company stores plans for future as well. What about yours?

We will obviously expand on our communication network. We will expand our institutional network to cover entire country now. In banking software, we expect to grow at least 100 per cent on year basis. We are also looking on international market and we are very hopeful. As of now, over 50 per cent of the banks, over 70 per cent of the development banks and 90 per cent of the finance companies use our software. This covers almost 1000 branches in the country's financial system. Even if you say each branch in average uses this software 20 to 30 times, some 20 to 30 thousand use our software daily.    

What could be the way forward?

With the growth of communication and education and population as well, the IT sector can only grow. I see its great future in Nepal.