Outsourcing in Nepal: What the future holds for the industry

This article is a submission by Kantipur Management. Kantipur Management is a certified ISO 9001:2015 company specializing in Contact Center and Business Process Outsourcing.

Over the last 15 years, Nepal has emerged as an ideal outsourcing destination.

According to the Trading Economics BoP of 2020, Nepal exported ICT services amounting to 287 million. Business process outsourcing (BPO) services in the country initially emerged in the late 1990s, with an increase in medical transcription services and call centers.

Also, the government of Nepal selected IT and  BPO as one of the five priority potential export service industries in 2010. With the increasing need for outsourcing services globally, there were over 6000 BPO enterprises in Nepal in 2013, and the number is likely to grow each year.

Multinational businesses are outsourcing in Nepal due to lower labor costs in comparison to India, Pakistan, and other South Asian Countries. Many companies have extended their business and created a niche market for their products and services in Nepal, leveraging the growing demand and low operation cost.

Nepal outsourcing firms provide their services at a fair price. The salary can start from NRs. 15,000 to NRs. 2,00,000 per month, depending upon the skill and experience of the individual.

BPO services in Nepal

The era of outsourcing in Nepal started in the late 1990s and early 2000s with the emerging medical transcription services and call centers. In the year 2013, it was recorded there were more than 6,000 BPO companies in the country, of which only 256 were legally registered.

Cotiviti and HLE now ‘Alaya. co’, Leapfrog, Cloudfactory, Deerwalk, InfoDevelopers, Logpoint, Verisk Nepal, Yomari, and Fusemachine are leading BPOs in Nepal that came to rise in the early 2000s to 2010.

Established in 2004, Cotiviti is an American firm and one of the oldest BPO and IT companies in Nepal. With more than 18 years of operational experience, the company has 300 team members that offer software development, design, testing, and healthcare informatics solutions.

Similarly, Deerwalk, Leapfrog, cloud factory, and HLE Nepal, now ‘Alaya’ came on the rise after 2010 and have established themselves in the outsourcing business.

Outsourcing companies in Nepal provide a wide variety of services. HLE Nepal, now ‘Alaya. co’ specializes in the mortgage industry and offers mortgage and broker support for home loans and applications. Similarly, Fusemachine specializes in AI strategy, support, and products.

Cloudfactory provides services for data processing, analysis, and machine learning. Likewise, leapfrog and Deerwalk offer software development, data management, product engineering, and healthcare analytics.

These BPO firms have established themselves in niche industries such as healthcare, education technology, and banking and finance. Outsourcing firms in Nepal mostly serve clients from the United States and Canada, as well as Europe, Australia, Japan, and Russia.

Fast forward to 2020, the Covid-19 pandemic has brought the importance of remote jobs, and there has been more growth in outsourcing business and remote jobs.

The global BPO market size was valued at 261.9 billion in 2022, and it is projected to grow at an annual growth rate of 9.4% from 2023 to 2030. From this, we can analyze that outsourcing in Nepal is expected to grow furthermore in the next years.

Future of outsourcing in Nepal

Outsourcing in Nepal has high potential due to continuous innovations, comparatively low wages, a highly skilled workforce with English proficiency, and flexible timezone.

Similarly, the government of Nepal has been emphasizing ICT in education and improving educational curricula to produce highly skilled and equipped graduates to help grow the IT and BPO industries in Nepal.

Here’s what businesses should expect in the future of outsourcing in Nepal:

Skilled talent pool with English proficiency

Nepal has a pool of highly skilled young graduates from management, science, and technology streams, delivering quality services to outsourcing firms.

14.9% of the total population of Nepal is between the age group of 18-24 and 17.5% is between the age group of 25-34, with high internet penetration among these Gen Z and millennial groups.

Further, English is used in formal education in schools and universities in Nepal. As such, English proficiency is high among youths in Nepal. EF has ranked Nepal in 65th position in English proficiency globally and 9th in Asia.

Rise in export value

As per Nepal Trade Integration Strategy (NTIS) 2016, the export value of IT & BPO increased to at least US $100 million in 2016. Nepal Rastra Bank reports that the contribution of IT services climbed by 17.1% in the fiscal year 2020-21, despite the Covid-19 pandemic.

Implementation of policies

To create a favorable business environment for BPO and IT industry Nepal government has implemented policies to promote its growth. Initiatives such as tax incentives, the development of infrastructures, and the establishment of an IT park have helped attract foreign investment in Nepal.

Rise in internet services

The Internet penetration rose from 35% in 2020 to 51.6% at the start of 2023.  According to Nepal Telecommunication Authority, fixed broadband is accessed by 33% of the people and mobile broadband is accessed by 98.46%.

Continuous investment in high-speed internet and infrastructure will help improve operational efficiency and attract more outsourcing businesses in Nepal.

Due to the above factors, it is expected that outsourcing in Nepal holds considerable potential in the industry now and in the next years.

With the growth in technology, data privacy and protection is as important concern for companies in Nepal as it is to any other nation. The good part is companies are addressing it. Outsourcing organizations are making an effort to understand data privacy and protection policies in Nepal and how they impact their firms, especially the outsourcing industry.

In another area, outsourcing firms are also trying to focus on maintaining service quality to deliver exceptional customer experience and maintaining international standards to establish themselves on a competitive edge.

Further, we hope that the collaboration between the public and private sectors will also play an important role in creating a favorable environment for outsourcing firms.

Why businesses are outsourcing in Nepal

Nepal is an emerging ideal destination for outsourcing business alongside other South Asian countries. Due to low labor costs, an English-proficient skilled workforce, and a flexible timezone, Nepal has successfully joined the global market.

The country has established itself as a viable offshore outsourcing location. The current skilled workforce combined with favorable outsourcing policies and internet services are the top reasons the country should be considered for outsourcing customer support and technology services.

In the coming years, we expect the outsourcing industry to rise even more due to lucrative government policies for outsourcing businesses.

Pareshor Kharel is a customer service enthusiast and the managing director at Kantipur Management Private Limited. He can be reached at [email protected]