New Heights for Nepal’s IT Industry

The global IT outsourcing market is a huge and growing arena. Its size is projected to increase from US$651.54 billion in 2024 to US$850.73 billion by 2029, showing a strong CAGR.¹At the epicentre of this frenetic activity is the Asia-Pacific region, which is both the largest and fastest growing market in the world.¹For Nepal, located at the heart of this region, a window of opportunity of historic proportions is opening up. With global IT spending continuing to rise after recent economic and political turmoil, demand for quality IT services remains robust.²

However, geographic location alone does not guarantee success. Being in the most dynamic region of the world means not only proximity to opportunities, but also proximity to the fiercest competition. On the one hand, there is IT giant India, which has long and firmly occupied a dominant position in the global outsourcing market.³On the other hand, there are ambitious and fast-growing players, such as Bangladesh, which are actively increasing their human resources potential and pushing out the recognized leaders.³In these circumstances, the strategy of simply copying the Indian model, based on scale and low cost, is a losing proposition for Nepal. Trying to compete with India on the number of programmers or the cost per man-hour is to enter a race where the winner is already known.

The Nepalese IT industry is thus at a critical juncture. Further growth and globalization require not passively following regional trends but developing its own unique strategy. The path to success for Nepal is not a race to the bottom but an ascent up the value chain. It involves moving from competing on price to competing on value, from being a mere implementer to being a partner with deep and sought-after expertise in niche but fast-growing technology areas. This article is a study that proposes concrete steps for such a strategic maneuver.

Current Situation of Nepal: Between Potential and Reality

Today, Nepal’s IT sector is at a crossroads, where enormous potential collides with systemic barriers that prevent it from being fully realized. The question that has become almost rhetorical is increasingly being asked in professional circles in the country: why, despite having technically competent specialists, Nepal has not yet produced a single IT product or company that has become a “unicorn” on the world stage?⁶The response that is emerging within the community itself points to a deep cultural and business dilemma. Local companies prefer a proven, low-risk business model: get a 30-40% advance payment and start developing according to the client’s technical specifications.⁶This model provides a stable income and avoids the risks associated with creating your own product, but it also drives the industry into a “service trap”.

The trap is that companies that successfully operate on a service model become highly skilled executors of other people’s ideas. They hone their coding and technical implementation skills, but fail to invest in the critical growth competencies: strategic marketing, global market research, product management, and, most importantly, international sales. The result is deep expertise in writing code, but a shallow understanding of business strategy. To break out of this cycle, a catalyst is needed to reduce the risks associated with investing in developing their own intellectual property (IP) and creating the infrastructure to promote it in the global marketplace.

Despite these challenges, Nepal’s talent base is robust. The country is home to a plethora of IT companies specializing in a wide range of services, from custom software development to complex areas such as artificial intelligence (AI), financial technology (FinTech), and health technology (HealthTech).⁷The presence of major development centers for US companies like LIS Nepal, Cotiviti and Deerwalk in the country, as well as the success of local leaders like Leapfrog Technology, F1Soft and CloudFactory, is undeniable proof that Nepal has the talent to do world-class work.⁸

The economic context makes the development of IT exports vital for the country. Nepal’s economy accounts for only 0.04% of the world’s GDP¹², and diversification through high-tech exports can become a powerful driver of national development. The government is aware of this importance and declares the development of the digital economy as one of its priorities.¹³A positive signal was the holding of the Third Investment Summit, at which key political forces expressed a common commitment to creating a favorable investment climate.¹⁴In addition, there is an influx of foreign direct investment into the services sector, which indicates confidence on the part of foreign partners.¹⁵

However, government initiatives face serious obstacles. A history of political instability and the slow pace of implementation of government projects result in low efficiency in budget implementation. For example, by the end of the financial year, only a small portion of the funds allocated for development are often implemented.¹³This creates a gap between ambitious plans and their actual implementation, which slows down the creation of the infrastructure necessary for the IT sector.

Breakthrough Strategy: From Price to Value

For Nepalese companies to break out of the services trap and take their place on the global stage, a comprehensive strategy is needed that moves from price competition to offering unique value. This strategy should include three key elements: a focused focus on niche technologies, creating a supportive ecosystem with government and industry associations, and developing an aggressive marketing strategy to enter the global market.

Focus on Niche Technologies: Finding a Unique Offer

Rather than trying to compete with India across the board, Nepal should adopt an “acupuncture strategy” — focusing its resources and talent on a few narrow but fast-growing technology niches where the country already has some expertise and competitive advantages. This approach will help build a reputation as a center of excellence and attract clients looking for deep expertise rather than cheap labor. An analysis of global trends and existing competencies in Nepal highlights four of the most promising areas.

1. Financial technologies (FinTech)

• World trend: The global FinTech market is undergoing a transformation, with a focus on embedded finance, buy now, pay later (BNPL) services, virtual cards and hyper-personalized services powered by artificial intelligence.¹⁶Digital wallets have become a key battleground for customer loyalty, especially after Apple opened up its NFC ecosystem to third-party developers, sparking a new wave of innovation and competition.¹⁹
• Strengths of Nepal: Nepal is no stranger to this field. F1Soft International is a recognized pioneer in the domestic market, having created popular platforms such as eSewa and Fonepay, which are used by over 90% of the country’s financial institutions.⁸This is not just a local success, but a powerful proof of the country’s expertise in creating complex, scalable and secure financial ecosystems. In addition, companies like IME Group have experience in developing money transfer solutions.⁸
• Strategic opportunity: Nepalese companies can use their unique experience in building digital financial infrastructure in an emerging market to offer services to countries in Asia and Africa that are going through similar digitalization journeys. At the same time, they can position themselves as specialized partners for Western FinTech companies, offering expertise in developing mobile wallets, payment gateways, and secure transaction software.

2. Medical IT (HealthTech)

• World trend: The HealthTech market is experiencing explosive growth, with a projected CAGR of 13% to 17.5%.²⁰The main drivers are the widespread transition to electronic health records (EHR/EMR), the development of telemedicine and the use of AI for diagnostics and personalized treatment.²²The largest and most attractive market for outsourcing is the United States and North America as a whole, where advanced technologies are being actively introduced.²⁰
• Strengths of Nepal: Nepal is home to major development centers for global healthtech giants. Healthcare data analytics and informatics companies Deerwalk (now part of Cedar Gate Technologies) and Cotiviti employ hundreds of local workers.¹⁰This creates a unique cluster of talent in the country with deep expertise in one of the most complex and highly regulated industries.
• Strategic opportunity: Nepal has the potential to become a recognized global hub for HealthTech development. Companies can specialize in big data analytics for healthcare, EHR/EMR integration, telemedicine platform development, and software that meets stringent international security standards (e.g. HIPAA). The presence of Deerwalk and Cotiviti serves as a strong anchor that not only validates the quality of the local talent pool but also facilitates its further growth, creating a favorable ecosystem.

3. Artificial Intelligence and Machine Learning (AI/ML)

• World trend: Artificial intelligence has moved beyond being a niche technology and has become a fundamental force transforming every industry, from finance and healthcare to retail and manufacturing.²⁵The market is growing at a staggering rate (projected CAGR is 36.6%)²⁸), and the demand for services for the development and implementation of AI/ML solutions is huge and continues to increase.²⁹
• Strengths of Nepal: The country already has a sophisticated AI ecosystem. CloudFactory is one of the world leaders in preparing data for machine learning models, offering data annotation services.⁸Fusemachines is actively developing the direction of AI education and development of AI solutions.¹⁰And companies like Leapfrog Technology have deep expertise in big data analytics and AI.⁸
• Strategic opportunity: Nepal can carve out a niche as a provider of high-quality yet cost-effective AI/ML services. This fits in well with other niches, such as developing AI models for fraud detection in FinTech or for medical image analysis in HealthTech. The range of services can range from fundamental data labeling work (necessary for training any AI) to building custom machine learning models and integrating them into clients’ business processes.

4. Cybersecurity

• World trend: A severe global shortage of skilled cybersecurity professionals has led to a boom in the outsourcing market.³⁰Companies, especially small and medium-sized businesses, are increasingly outsourcing security functions to managed security service providers (MSSPs) that provide 24/7 monitoring, threat detection, and compliance assistance.³²
• Strengths of Nepal: Nepal’s key asset in this space is the presence of LogPoint, a global player in the security information and event management (SIEM) solutions market, whose development center is located in Nepal.¹¹This provides the country with access to advanced technologies and creates a pool of highly qualified specialists with experience working in a world-class product company.
• Strategic opportunity: Nepal can develop a niche for outsourced cybersecurity services, primarily targeting small and medium enterprises (SMEs) in Western countries that cannot afford to maintain a large in-house workforce. Building on the talent pool built around LogPoint, Nepalese companies can offer security monitoring, vulnerability assessment, compliance management, and incident response services.

Creating an Ecosystem: The Role of Government and Industry Associations

The efforts of individual companies, no matter how talented they are, are not enough for a systemic breakthrough to the global market. Coordinated actions at the national level, based on close public-private partnerships, are needed. The goal is to create a favorable ecosystem that will stimulate the transition from price competition to the offer of unique expertise. Fortunately, a detailed plan for such actions already exists – it has been developed by the country’s leading industry associations.

A key element of the strategy should be the government’s adoption of the proposals put forward by the Computer Associations of Nepal (CAN Federation). Their 24-point document is not just a wish list, but a roadmap for reform.³⁵Among the most important measures:

• Financial incentives: Introduction of a 15-year tax holiday (0% corporate tax) on income from IT services exports, provision of an 8% export credit (on par with other export industries) and issuance of unsecured “innovation loans” to startups.³⁶These measures are directly aimed at solving the problem of the “service trap” as they significantly reduce the risks associated with investments in research, development and creation of own products.
• Access to capital: Officially designating the IT sector as a “priority sector” for lending. This step will oblige banks to more actively finance IT companies, providing them with access to the capital they need to grow.³⁶
• Human capital development: Establishment of so-called “finishing schools” in each province. The purpose of these institutions is to bridge the gap between the academic knowledge of graduates and the real needs of industry, which is critical to improving the quality of the workforce.³⁵

In parallel, the role of Nepal Association of Software and IT Services (NAS-IT) in promoting the country internationally needs to be strengthened. The government should provide financial and organizational support to realize NAS-IT’s vision of “making Nepal a global technology hub.”⁷This includes expanding initiatives such as the Nepal IT Roadshow Australia 2025.³⁷, and their implementation in key markets of North America and Europe. The creation of the “IT Promotion Council” proposed by CAN Federation, similar to the Tourism Council, will allow coordinating the country’s branding, attracting investment and supporting local startups.³⁶

Finally, to gain the trust of Western clients, it is necessary to strengthen the legal and digital infrastructure. Adopting clear laws on data security and privacy is of paramount importance, as foreign partners are extremely sensitive to compliance issues with regulations such as GDPR.³⁰At the same time, priority should be given to expanding high-speed internet coverage across the country to ensure the stability and reliability needed to deliver world-class services.³⁶

It is important to take a sober view of the current situation. There is a noticeable gap between the ambitious and modern vision of the IT industry, which is demonstrated by the CAN Federation and NAS-IT, and the more traditional, fiscally restrained approach of the government, reflected in the state budget.¹⁴While the industry talks about 15-year tax breaks and an AI innovation fund, the government is struggling to spend its development budget (only 36% by the end of the year)¹³) and cuts grants to local governments.³⁸This means that at this stage, the driving force for change in Nepal’s IT sector is private sector dynamism, rather than consistent government support. For foreign investors and clients, this is an important signal: the most promising opportunities lie in partnerships with agile private companies and industry associations, which are the real drivers of change.

Marketing and Sales: How to Tell the World About Yourself

Solving the problem of marketing and sales skills deficit, which Nepalese IT specialists themselves complain about⁶, requires a systematic and unified approach. It is not enough for each company to promote itself alone. It is necessary to create a strong national brand for the entire IT sector of Nepal.

The first step should be to develop a unified national brand, “IT Nepal.” Its key message should be clear and compelling: “Nepal: High-end engineering from the top of the world. Specialized expertise in FinTech, HealthTech, and AI.” This slogan shifts the focus from low cost to high quality and unique competencies.

To reinforce this brand, it is necessary to create a portfolio of success stories. The achievements of leading Nepalese companies must be systematically documented and actively promoted. Detailed case studies of F1Soft payment platforms, Deerwalk analytics systems or LogPoint cybersecurity solutions will be a strong proof of the viability of the Nepalese industry for skeptical Western clients.

Next, a strategic presence on the global stage should be ensured. Instead of chaotic trips of individual representatives, a unified national calendar of participation in key global technology conferences such as Web Summit, Collision or SaaStr should be created. At these events, a unified “IT Nepal” pavilion should be presented, organized with the support of the established Council for the Promotion of IT³⁶and NAS-IT.³⁷Such a pavilion will allow the best companies of the country and their achievements to be presented in a united front.

Finally, it is critical to leverage existing international partnerships. US government programs such as the Digital Connectivity and Cybersecurity Partnership (DCCP) and the Infrastructure Transaction Assistance Network (ITAN) are already operational in Nepal and aim to create an enabling environment for investment and digital development.³⁹Integration into these programs and the use of their resources can significantly accelerate the entry of Nepalese companies into the American market and increase their credibility in the eyes of international partners.

Competitive Field: Lessons from World Outsourcing Leaders

Nepal does not need to reinvent the wheel to succeed in the global IT outsourcing market. By analyzing the strategies and value propositions of recognized leaders in this market, it is possible to identify the most suitable model to follow and develop its own unique position.

• India: India’s success model is built on three pillars: unrivaled scale, low cost and strong government support.⁵India offers a huge pool of IT professionals and advanced infrastructure, which enables it to carry out projects of any size at competitive prices. Lesson for Nepal: Direct competition with India on price and scale is futile. However, Nepal should learn from India’s strategic focus on supporting the IT sector and apply it to developing its own technology niches.
• Philippines: The Philippines’ competitive advantage lies in the highest quality of service, cultural compatibility with Western countries, excellent command of English and significant cost savings.⁴²Filipino professionals are renowned for their customer focus and professional ethics.
  Lesson for Nepal: The Philippines’ success proves that soft skills such as communication and service are as important as technical competencies to building long-term relationships with customers. Nepal needs to invest in these skills as well as technology training.
• Eastern Europe (Poland, Ukraine): This model is based on the reputation of suppliers high-quality and sophisticated engineering, a strong STEM education system and a straightforward, problem-solving culture.⁴⁶Companies from this region compete primarily value and expertise, not just cost. Lesson for Nepal: This is the most relevant and promising model to follow. By focusing on its “hidden champions” in niche technologies (FinTech, HealthTech, AI), Nepal can build a similar reputation and become known as a source of specialized, highly skilled and valuable talent.

For clarity, a comparative analysis of key outsourcing areas can be presented in the form of a table.

This table clearly demonstrates why copying the Indian model is a dead end for Nepal, and why the most viable strategy is to follow the example of Eastern Europe with its focus on high-tech niches. It turns complex competitive analysis into a clear and understandable format for a business audience, outlining a strategic corridor for the development of the country’s IT industry.

Conclusion: The Future of IT in Nepal is not a Dream but a Plan

Nepal’s path to recognition on the global IT map is not a matter of vague hopes, but a matter of clear strategic planning and decisive actions. An analysis of the current situation and global trends clearly shows that the time for radical changes has come. The country has the main resource — talented and ambitious youth capable of solving complex technological problems. However, for this potential to turn into real economic success, a systemic shift in approach is needed.

The path forward is clear and consists of several key steps. First, it is a decisive shift away from the “low-cost performer” model in favor of a strategy based on value and unique expertise. Second, it is a laser focus on those high-tech niches where Nepal already has proven competencies and strong “anchor” companies: FinTech, HealthTech, AI, and cybersecurity. Trying to embrace the immensity will only lead to a dispersion of resources, while concentrating efforts will allow you to build a world-class reputation in specific areas.

Third, the success of this transformation is impossible without a close and effective public-private partnership. The detailed reform plan proposed by industry leaders from the CAN Federation and NAS-IT should become not just a set of recommendations for the government, but a direct guide to action. Financial incentives, access to capital and human resource development are the levers that will allow the industry to break out of the “service trap” and start investing in its own growth.

Finally, even the most advanced technologies and talented professionals will remain unnoticed without proper marketing. Creating a unified, strong national brand for IT Nepal, actively promoting success stories and strategic presence in key global platforms is the last but not least piece of the puzzle.

By combining its natural assets with a well-thought-out national strategy, Nepal can move up the global value chain and carve out its own unique and respected place on the IT map of the world. The action plan is on the table. Now is the time to implement it.solving a problem; it is strategically cultivating its most valuable resource for the 21st-century global economy. have every chance of conquering it.

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A publishing and analytical center specializing in the economy and business of Nepal. Our expertise includes: economic analysis, financial forecasts, market trends, and corporate strategies. All publications are based on an objective, data-driven approach and serve as a primary source of verified information for investors, executives, and entrepreneurs.

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