Govt Doesn’t Trust Nepali IT Companies

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Govt Doesn’t Trust Nepali IT Companies

Golchha Organisation has a distinct history in Nepal's industrial sector. The conglomerate, which entered Nepal's industrial sector entering jute business years ago, has diversified to many areas now. Sanjay Golchha, Director of Golchha Organisation, is in the business of information technology (IT). He has been involved in developing software and trading computer hardware, among others, through his firm Neoteric Nepal.

Madan Lamsal, the Editor-in-Chief of New Business Age, talked to Golchha on a wide range of issues related to Nepal’s IT sector. Excerpts:

How did you enter the business sector?
I did my high school at St Xavier’s Kathmandu. Then I went to the United Kingdom for my MBA. After completing higher studies, I returned to Nepal and joined my family business (Golchha Organisation). Initially, I was involved in the family's traditional business. But, my desire was to do something in the IT sector. That is why I opened an IT company. Gradually, I started trading computer hardware and developing software.

How is your business now?
Business is good. We have diversified our business. Today, we work in many areas ranging from making simple gadgets to supplying data centre equipment, telecom equipment, building IT infrastructure, software development and hardware trading, among others. We are a key player in Fibre to the Home (FTTH) Internet. We have also worked on business software like ERP. Probably, there are very few IT companies working at this level in Nepal. We have made software for most of the big companies in Nepal. Apart from that, we have supplied backend software and hardware for many hotels, hospitality companies and insurance companies. It may look like we are working invisibly. However, we are the backbone of hardware, software and other technologies in Nepal.

Can you reveal your annual turnover?
Let's not reveal how much business we are doing. However, Neoteric is the largest company in Nepal in terms of importing computers and peripherals as well as telecom equipment, and building infrastructure in the IT sector. Probably there is no company of this level in our field of work in Nepal. More than 200 large private sector companies in Nepal use the software developed by us. Hotels, cement, distilleries and other big companies are using our software.

The Golchha Organisation has an illustrious history in Nepal. This organisation has come to this level through different businesses, especially in the agriculture sector. What made you choose the IT sector?
Yes, we were in the traditional business. My grandfather Ram Lal Golchha started the jute business more than 100 years ago. At that time, the same business was innovative because nobody thought jute business was possible. Innovation is what we have learned. In fact, innovation is the legacy of our organisation. Our organisation has already been bringing innovative industries and innovative products. That's why I also chose the IT sector.

I was inclined towards technology from the beginning. I first did computer programming in 1984. Apple's personal computer had just started to come to the market. At that time, I was learning programming in a training institute. Then I had the opportunity to go to London for higher studies. Computers were a rare sight even in London. Still, I got to learn a lot because of my desire. I even had the opportunity to work for some companies there. At that time, companies had just started to adopt computer systems. These experiences also encouraged me to do something in the IT sector. However, I was involved in traditional business for some time even after returning to Nepal. But since my interest was in the IT sector, I gradually started working in the IT sector as well.

Where does Nepal rank in the world in terms of IT?
It is a very difficult question. I think we need to talk about where we are today and where we could have been. I have seen the development and expansion of the IT sector in Nepal up close. At one point, people would say ‘why are you wasting money’ when they see a computer in somebody’s home. Even banks didn’t have computers. There was a government agency called the National Computer Centre. I would go there to observe the computers. Computers were placed in an air-conditioned room and we had to take off our shoes to enter the room. We have come to the present day from that time. Today, the financial sector of the country is fully computerised. Many other sectors are dependent on IT systems. But I think we have missed a lot of opportunities too. The way India developed its IT sector, we have lost the first and second waves of that development. There were many opportunities for India in the IT sector. Bangalore developed as an IT hub. But in Nepal, it was limited to talks. IT could have created a lot of jobs in Nepal, but it didn’t happen. There may be other reasons behind this. I may be wrong. But, the truth is we have been unable to take advantage of many opportunities in IT.

But in the last 10 years, the sector has expanded a lot. A lot of people are involved in the IT sector today. Many are working in an institutional manner, while others are working independently. Small groups of, say 10-20 people, are developing and exporting IT products. Our statistics may not show this, but it is a fact. Thousands of IT professionals work for foreign multinational companies from Kathmandu.

Things could have been a lot better. We could have created more jobs. We failed to make ‘Brand Nepal’ in the IT sector. The confidence that should have been in IT services in Nepal could not be built. The government launched campaigns like Visit Nepal to bring more tourists. However, in the case of IT, no such program has ever been launched. The government should have come up with the slogan ‘Let's bring IT services to Nepal, let's create employment’.

The government seems to have completely missed the IT sector. The financial sector has embraced IT largely because the private sector is involved in our banks and financial institutions. Nepal has made a lot of progress in fintech. However, public service delivery is still traditional. You still have to wait many days to get a driving licence. Even general government services are difficult to obtain.

Why do you think it happened?
The government did not trust the domestic IT companies. When the US sent a rocket to the moon for the first time, it had collaborated with the private sector. I don’t think the US government said ‘only the companies that had already reached the moon’ are eligible for bidding. But in Nepal, the private sector is discouraged by inserting unnecessary criteria like this. This is what we call a trust deficit. Had the government given us the opportunity by specifying our responsibilities, we could have also done so. It would have enhanced the skills of domestic companies. We could also compete in the international market. However, the government has a mentality that local companies cannot work.

Is it because some private sector companies failed to provide the required service?
I think the track record of local companies is very good. Our accountability is also good. Some companies may have failed, but it’s a different matter altogether. But, looking at the statistics, it is good. Let's also look at how foreign companies are performing. Most of the works done by foreign companies in Nepal have failed. Let's look at the driving licence project. What is the condition? It was handled by a foreign company. Did the foreign company perform well? Nepali companies could have done it better.

The government worked for the development of IT in the past. It built an IT park. Maybe it was not sufficient. What can be done now?
I am not an expert. But, in my opinion, the bottomline is education. If we are to create more jobs in IT, we have to focus on providing good education and enhancing skills of our workforce. But, education alone is not enough. It’s like which came first: egg or chicken? College education alone won’t help because you don’t get management skills and experience at college. No one can become skillful without working. There has to be some push. The government should give that push.

In addition, we should be able to bring in multinational companies because they bring along management skills. It is not that we do not have technical skills. But, in my opinion, there is a lack of experience. While students fear they might not get employment, IT companies have not been able to find such skilled people because the supply is very low. Good thing is, IT colleges are coming up now. Many new students are also coming. I think our future is bright.

Talking about the IT sector, in which fields has Nepal excelled? Also, please tell us where we should do better?
In my opinion, the private sector has done a good job by providing IT education. India managed to perform extremely well in the first wave due to good education imparted by Indian Institutes of Technology (IITs). In Nepal too, it is now necessary to create a similar base for IT education. Lot of good things are happening now. We are conducting courses in artificial intelligence. IT graduates are returning from the US. They are working here and developing the workforce needed for the industry. But, there is still a lot to do. You talked about IT Park. With due respect to all those who were involved in building it, I would say that it is not like building a factory. It would be wrong to say IT companies will come now that the IT Park is built. Space is never a problem for the IT industry, it is the shortage of bright minds. If we produce a capable workforce, IT companies themselves will build IT parks. There is a problem in understanding the basics.

You said that the IT professionals are turning back from abroad. But we are still seeing brain drain. Is there any way we can retain them here?
The personality of people working in the IT sector is different from others. They are all introverts. That is why they cannot be stopped. For skilled people, there is no dearth of markets. They can go anywhere to ply their trade. Countries like the US, Japan etc roll out the red carpet for them. That is why it is difficult to stop the brain drain. The only way to retain them is to create an environment conducive for them to work here. But, whether we can create such an environment is an important issue.

Most IT companies are focused on specific areas. But your company has a diversified business. Why is that?
That is because every company in Nepal is expanding horizontally. The market size is limited to vertical growth. There is a limitation in terms of backward and forward integrations. Only horizontal growth is possible in such a situation. Therefore, there is a need to diversify the business. However, it is not easy. But, as far as our company is concerned, it has its own DNA. If we can add value to something within that DNA, we can grow horizontally.

How cheap or expensive are your software and hardware products compared to products of other companies?
The software we develop is not like installing a simple mobile application. We work on the same project for 1-2 years. We have consultants and experts. It's not just about software, there has to be local knowledge too. Talking about business software, we offer everything that is available for free to those having a high price tag. We quote prices according to the services given. Customers are charged according to the extent to which they seek automation, the extent to which they seek to control their business through IT, etc.

Talking about prices of products of other companies, there are packaged software in foreign markets which are available for Rs 5,000 to Rs 50,000. We don’t provide such software. These are mere platforms. We have to develop products according to the needs of clients based on such platforms. To put it simply, platforms are like the chassis of motor vehicles. It is up to the customers what they want to build - a bus or a truck.

What are the prospects for backward and forward integration in your industry?
In my opinion, it is not possible on computers. Computers are a highly integrated device. Its main components are silicon, microchip, and semiconductor which are made by two or three companies in some countries. Even India doesn’t have a semiconductor company. Investment of billions of dollars is needed to set up such companies. That is not possible in Nepal. Forward linkage in IT is developing software and applications. There is no limit to that. Anything can be done.

How do you see the technological advancements in the world?
We can do a lot even if we adopt technology from 10 years back. We don’t need rocket science immediately. We don’t need artificial intelligence immediately. What we need is a foundation for the development of the IT sector. Unfortunately, even that is not happening.  

The technological advancements that the world is seeing is beyond our level. But what I feel is, there is a lot of hype. The media may have been giving such content because some people want to hear it, watch it. However, it is not clear when such technology will come and make a difference in our lives. Some technologies may not look as glamorous, but they are making a difference in our lives.  There are some technologies that have negative sides too. For example cryptocurrency, blockchain etc.

What dimensions of IT do you think are yet to come in Nepal?
Data centres are very important in IT. Hydropower and a cold climate is needed for that. As we have both these things, we should encourage big companies like Google and Microsoft to build their data centres in Nepal. I have seen the possibility in this too.

Technology is making everyday life easier for people. What technology services can be brought to Nepal now?
A lot can be done. Previously, technology was just one area. This is not the case now. In my opinion, there is no such area where IT is not present. Earlier, banks were only financial institutions. But today, they have established themselves as an information management company. Similarly, information technology has brought a lot of advancements in the field of health and agriculture. It would be good if we could adopt them.

Lately, many startup companies are coming to Nepal. Most of them are IT related companies. Did you also start as a startup company?
It is not possible to define which is a startup and which is not. But, my group is affiliated with startups. I am involved in more than 6-7 startup companies working in the fields of finance, management, technology, etc. Earlier, I was also involved in Tootle.

I feel uncomfortable in the way the new generation thinks about startups. That is because everything has to be correct for a startup to succeed. Everybody has a new vision. I can give 10 ideas right now. Neither do I have a shortage of funds. The main thing is lack of education. If you don’t have proper knowledge, the startup won’t take off. You can see a lot of content on ‘how a startup fails’ in Google. You can learn a lot from there as well. You can succeed only if you take the shortcomings seriously.

Business model has to  be correct for a startup to succeed. Only then you can bring investors on board. Whether they are ready to invest big is another important thing. In India, many foreign companies have not been able to make profit after years of investing. We need to look at these issues as well.   

You said that there is a lack of commitment, planning, education and devotion in startup business. Apart from these, are there any policy problems? Tell us about your experience.
Technology is always ahead of the rules. When we brought Tootle, there was no policy provision regarding ridesharing. At that time, there was a dilemma as to what to do. Fintech also came before the government introduced policy provisions. Earlier also, there was no policy of bringing four-wheelers into the county because everybody was using horse-drawn carriages. This is not the case here only. It is the same in other countries. We should study the ground reality. Almost 99% of the startups fail. I am not trying to discourage others. What I mean to say is, we should learn from our mistakes.

Why did you leave Tootle?
Instead of staying in one place, you have to move and explore new things. There was an issue regarding investment capacity. That is why I decided to exit.

How optimistic are you about startups?
I am very optimistic. But, a reality check has to be done. Not all entrepreneurs become successful. I think startups should go beyond hype and face the reality.

Why do startups fail in Nepal? Is it because the government is not helping or is there some other reason?
I don't want to blame the government for levying taxes. Taxes don’t fail businesses. However, the government should have worked on the development of skilled manpower and built the ecosystem of education and management. But it didn’t happen.

It is somewhat controversial too. Foreign companies are also coming to Nepal's startup scene. Let’s not discuss whether or not they are good for us. However, they are bringing technology and creating jobs; improving services and facilities, which is good. It would have been better had the government made these companies invest in technology as well. I think it would be better if the government brings some policies to this extent. If they are seeing a market in Nepal, they should make some investments here as well. The government should bring a policy that requires these foreign companies to invest in skill enhancement and human resources development.

You were among the initial promoters of Tootle. But it seems to be lagging behind other ride-sharing companies right now, isn’t it?
I can’t say much as I was in Tootle for a very short time. We are in an open market economy. We cannot be efficient in every aspect of the business. Our competitor had more experience. We tried a lot but failed. It should be considered natural in an open market economy. I think the other reason is the competitor had deep pockets. It had sufficient funds for investment. Still, we developed a technology to compete with a foreign company. The technology can be sold elsewhere.

Talking about my company, we develop software in Nepal. However, we haven’t reached a position to sell our software in the international market. Even if we reach that level in terms of technology, we will still lack access and marketing skills. There are several issues like this which affect IT companies.

Does this mean that the government should help IT companies to enter the international market?
Not completely. But some help is needed. The government is our guardian. If we are looking for government support, our expectations should also be based on reality. We are not expecting the government to bring us clients from the US. But it can make policy decisions allowing us to open our offices there. There should be such support.

Nepali IT officials working for foreign companies from Nepal are facing difficulty in bringing their salaries. This is because our payment gateway leaves a lot to be desired. It is also difficult to receive payments from credit cards. Many say IT companies do not bring their earnings to Nepal to save taxes, which is not true. They are trying to bring the money to Nepal, but there has to be a system for that.

Are there any other problems that startups are facing?
Earlier, there was a problem in financing. But now, angel investors have arrived. If someone comes up with a good business idea and it has a social impact, s/he will not have a funding problem. Non-governmental organisations are also providing grants. Therefore, there is no problem in investment. If someone says s/he is not getting investment, it means that s/he didn't try hard enough to look for investment. But whether everyone has such knowledge or not is another matter. We know about such an opportunity, but the people may not know.

Are you also into e-commerce?
Yes. I have been operating neostore.com.np for the past 15 years. You may not believe it, but I was running an e-commerce site 20 years ago as well. I had started yetishop.com to export pashmina products from Nepal. However, there was a problem with the payment gateway at that time. Banks did not agree to arrange payment gateways. Therefore, it was not very effective. I have started a few new projects. I will tell you about it when the time comes.

Do you think a separate law for startups would be easier?
Why do startups need a separate law? Aren't they a business enterprise? Startups should operate as per the laws related to their business. 

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