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August 2016 Sectoral

Published on: 2016-08-29 14:46:41     1320 times read    0  Comments
 BPO: Business of Billions

--BY KRISHANA PRASAIN

Nepal has become a major outsourcing hub for international IT companies in recent years. Many Nepali companies are currently engaged in providing different types of IT solutions to their foreign clients. From engineering and healthcare to account and finance along with graphics and animation, Nepali companies over the past few years have started to provide services such as big data management, fulfilling numerous business process outsourcing (BPO) demands of companies across the world.

Nevertheless, a serious deficit of data exists when it comes to knowing the actual size of the BPO business in the country. It is generally believed that Nepali BPO firms are collecting large amounts of revenue but the actual data is largely unknown as companies do not want to disclose financial information due to different reasons. Various attempts of surveys and research on the domestic BPO industry have met with disappointment in the past due to the lack of response from the outsourcing companies. “Fearing to lose clients, BPO firms do not want to participate in surveys,” says Abhijit Gupta, Executive Member and Chairperson of software and BPO committee, Computer Association Nepal (CAN). 

According to industry sources, the total turnover is estimated to be somewhere between Rs 6-10 billion per year. Offshore development centres such as Deerwalk Services, Verisk Information Technologies and Pioneer Solutions along with mainstream outsourcing companies including Cloud Factory, BrainDigit IT Solutions, Leapfrog Technology, Javra Software and Yomari Inc are seen as the major players in the Nepali BPO industry. Similarly, a large number of mid and small sized outsourcing firms, working as software solutions developers to call centres, are also active in the scene. 

Nepali outsourcing companies are mainly serving clients from countries such as the US and Canada along with European nations and Australia, Japan and Russia. Compared to other South Asian BPO companies, Nepali outsourcing companies are providing their services at reasonable prices. This has been seen as the key reason as to why foreign clients want to get their business outsourced from Nepali companies. “The country is gradually becoming an outsourcing hub for foreign companies,” mentions Gupta.  “I think international investors should be encouraged more to invest in the Nepali BPO industry.” 

Nepali outsourcing companies have even started designing animation for Hollywood film studios, while freelance outsourcing has also increased gradually over the recent years.

The growing engagement with foreign clients has led Nepali companies to provide services across various sectors. Pioneer Solutions Nepal, for example, having its head office in the US city of Colorado is providing outsourcing services for environment trackers. The company is active in enhancing software development and also provides after sales services. “The company is soon going to expand its IT services in the oil sector too,” informs a source close to the company. Similarly, the US-based Leapfrog Technology works on software development for sectors including banking, finance and healthcare. “Since we are a US-based company, we work as per required by our headquarters,“ says Richan Shrestha, Senior Vice- President of Leapfrog Technology Nepal. 

In recent years, some Nepal-based BPO firms have also grown significantly.  CloudFactory, for instance, is one such BPO company that has gained immense name and fame in the country’s outsourcing scene in a short span of time. The Nepal-based crowd-sourcing company is active in big data services, data processing, data collection along with audio/video transcription, categorisation, web research and image tagging. 

Basically, the companies have their own clients or get projects from abroad on the basis of marketing and references. “We get more than 200 projects monthly including both short and long term projects,” says CAN BPO Committee Chairperson Gupta who is also the Managing Director of Young Minds, an outsourcing firm. According to him, long-term projects may take at least six months or more while some short-term projects can be completed in as little as  a day or two. 

Apart from providing services to foreign companies, Nepali BPO firms are also serving domestic clients.  According to Gupta, companies these days are working for government ministries and other offices providing services such as data management along with software and app development.  “We also develop software for government offices. Recently, we developed a software for the Nepal Police to maintain criminal records,” he informs. 

While the BPO business has sharply increased over the last one decade, the lack of adequate human resources is becoming a major obstruction to the overall development of the industry. As the flight of human resources from Nepal has gone up significantly in recent years, it is becoming difficult for BPO companies to find skilled manpower. It is also proving hard for the companies to retain staff as most employees target foreign countries after gaining experience and knowledge. 

Though BPO firms get a 50 percent tax waiver on profits, entrepreneurs complain that there is no favourable environment for the industry’s overall development. They point to the continuing shortage of electricity as the major obstacle to business, among other difficulties.  “We need uninterruptable supply of power in order to effectively complete the projects we have undertaken. The ongoing long hours of electricity shortage has been taking a toll on our activities,” says Gupta. He says that the severe power outage has caused many firms to lose projects because foreign clients do not think Nepali firms can complete projects on time. 

Industry leaders have asked the government to formulate strategic plans to spur the BPO business in the country. “The industry needs strong strategic plans and policies from the government side,” views Leapfrog Technology Senior Vice-President Shrestha.  “The government needs to prioritise the development of BPO businesses like other industries.”    

With the number of mobile device users is increasing sharply across the world, the outsourcing business has a bright future in Nepal, industry leaders opine.  “Similarly, Big Data management and artificial intelligence have immense future prospects,” mentions Leapfrog Senior VP Shrestha. “We can create business and jobs in huge numbers if there is adequate manpower and support from the government,” he adds.

“Nepali BPO companies provide all kinds of services”​

Abhijit Gupta Chairperson Software and BPO Committee, CANAbhijit Gupta
Chairperson
Software and BPO Committee, CAN

The number of Nepali BPO companies has increased significantly in recent years. How do you view the growth of the Nepali BPO industry?
The BPO business has drastically increased in Nepal over the last one decade. BPO is a business with good scope as associated expenditures are low in the country and employees are hard working and the operating capability is good. One can have an outsourcing job by staying at home and can bid on a project by oneself. Many Nepali IT students studying and working abroad are also doing outsourcing individually. Even my friends abroad sometimes offer me projects.         

Nevertheless, there are various anomalies in the BPO business. Except for a few companies, many outsourcing companies are currently operating without registration. 

What is the size of the Nepali BPO industry? How much is invested in outsourcing businesses?
There is no authentic data as companies do not participate in surveys fearing to lose clients, tax liabilities and other various reasons. But it can be estimated that outsourcing companies are having good  financial turnovers. As there are many unregistered companies, it is difficult to predict how much the total investment is in the BPO business, since data collection for such firms is literally vague. 

Due to online transactions being confidential, the data on financial turnover is very difficult to obtain. For example, a company designs a small Wordpress theme and shares it online and the license of the same design continues to sell 8,000 to 10,000 times at a charge of USD 20-50 per license, now imagine the amount they earn. 

What are major areas of Nepali BPO companies? What are the new trends in the outsourcing industry?
Nepali outsourcing companies have been working and providing all kinds of ICT related services to their clients. As per my experience, the work on the design sector is less in the context of Nepal. However, in context of easy outsourcing and small projects, converting the graphics (PSD) design to HTML (Hyper Text Markup Language) is done at maximum here. Likewise, converting the same HTML to complete websites across different open source or custom platforms such as Joomla, Shopify, Magento, Drupal,  Wordpress etc and programming it as per the needs of the clients is also another major area of work for Nepali companies which is booming. 

Similarly, big data management across various sectors such as healthcare services and medical transcriptions has also grown in recent years. Infact, data management projects holds a huge business prospects for BPO companies as data is already being digitized by lots of companies. With time, data will be huge and needs management. Meanwhile, BPO services to local companies have also increased over the past few years. Most of the local companies prefer to outsource tasks to other local companies to cut down costs and for better performance of their business. This could be in any area from designing to hosting or cloud services. 

Collaboration is an important factor these days as a single outsourcing company might not be able to provide all the kinds of services. So I think the more we collaborate, the more the industry grows.    

What are the major markets? 
Nepali BPO business is global and there is no particular market that Nepali BPO companies are working for. There is no border restriction for outsourcing. Rather, we need to enhance our capabilities or development, deliverable and communication proficiency in order to get the business from any parts of the world.   

There are no rules formulated for outsourcing. Has the lack of rules created problems for outsourcing companies? How can the government formulate appropriate policies?
I think the outsourcing business is not a high priority for our government like in other neighboring countries. Though we get some tax waiver, 40 percent perhaps in our annual tax returns compared to other companies, still many things are lacking Recently, government raised paid-up capital for  any foreign company  willing to establish its subsidiary in Nepal toUSD 50,000. The provision is not helpful as establishing a software company does not require that much amount of money. Similarly, power outage has always been one major problem for Nepali BPO companies. The inadequate supply of electricity is holding back the industry from exploring its full potential. Our weakness in the eyes of foreign clients is that we might not complete projects in time which is basically due to the electricity shortage.  

The government should introduce policies so that the foreign countries are encouraged to invest in the Nepali BPO industry. The government should also organise some international programmes and seminars so that our business can be highlighted internationally.

It’s said that outsourcing companies make a lot of money and do not pay taxes properly to the government. Why is this? 
Anyone would register a company with a purpose. If the purpose comes out to be beneficial, it encourages for such activities to others as well. Now, let me give you an example of Nepali Company involved in local, corporate and government projects. They register their companies in Nepal because they need to show their registration certificate, financial turnover, past project experiences and so on for the government tender bid. They have a purpose here. But working as an ODC (Offshore Development Centre) or Outsourcing Company does not really compel them to register as they can run such business without registering as well. The purpose for registering except for the ethical one is not seen here. The government should come up with effective provisions to encourage companies to register and then only run. This will also contribute in taxes and will also bring such companies off the closets.  

Nonetheless, the tax evasion also happens because the BPO industry here is so fragmented. Big outsourcing companies run legally and can be traced easily. But to bring those operating from their residences with fewer manpower and other resources under the tax system is very difficult. Frankly speaking, I am not against those small unregistered industries. But if we could show them right path, it could help in the development of ICT industry of Nepal.


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