Balancing Act

When Kalpathi Suresh cofounded SSI in 1991, with just one center to provide Oracle and other RDBMS training, many wondered
whether his venture would succeed. It did. Today SSI has 759 training centers
spread across the country. Quite a feat, and as Suresh says," If you want
to grow, you have to aspire high". Like any IT training company, SSI too,
is going through the slowdown. With Java and eBiz losing its sheen, the company
experimented with different models and challenged the recession. With margins in
IT education becoming really thin, the company came out with a surprise that
became the most talked about M&A in the recent times. And as SSI begins this
fiscal after its merger with Aptech, we take a look at SSI’s existence.

"While the rest of the world was embracing databases like Oracle, Sybase and Ingres, we were way behind and rooted in COBOL" Kalpathi S Suresh, chairman and CEO of SSI, on why he set up shop with RDBMS training in 1991

The training face

Kalpathi Suresh and his team were looking at all possible avenues to make
the most out of the IT education market. While NIIT and Aptech competed
nationally, SSI dominated the Southern market by aggressively launching new
centers. With the urban market coming to a point of saturation, the company saw
an opportunity in emerging upcountry areas. Here, the strategy had to be
different. So in the year 2000 the company pioneered a concept called
Educational Service Providers (ESP). In the ESP model, the company identifies
the entrepreneurs and provides the seed capital to start a center, the ESP’s
typically cater to the upcountry areas where infrastructure needs to be
incubated with local expertise. Once the ESP becomes established and
self-sustaining, it turns into a franchisee. SSI claims that the ESP model was a
success and enabled it to foray into rural areas in the south where there were
no reputed IT training institutes. The year 2000-01 was also one of the best
periods for SSI, with growth soaring by 168%. With that SSI became the third
force in IT education after NIIT and Aptech.

In 2001, the going was good for SSI in the first half, and its growth rate
was the talk of the town. But still the company is not very well known in the
northern region. So it commissioned KPMG to suggest a strategy to become a major
national force in the IT education arena. KPMG in turn suggested a franchisee
led growth model for two reasons–to firm up the dwindling IT education
revenues and to expand SSI’s reach outside of South India. But, the model did
not succeed as expected because the timing was not right.

The software side

While on the IT education front, the company tried novel approaches to boost
its sagging revenues, a significant portion of its revenues also came from its
IT consulting practice. The company’s consulting and software business started
in 1999, with the acquisition of Indigo International, a company focused on
securities practice. And since then, it has grown rapidly through acquisitions.
In 2000 it acquired the US based Albion Orion to expand into North American
markets. During that time SSI and NASDAQ Global Holdings also forged a joint
venture company called Indigo Markets to offer Internet trading solutions for
stock exchanges.

Moving forward

If we look at SSI, post July 2002, the signs were obvious–on the education
side the company was struggling to keep its business profitable, but to do that,
it badly needed a turnaround. On the software front, the company needed more
offshore contracts. During August 2002, rumor mills were agog that SSI was
planning to exit the training business. But it defied all such theories and
silenced its critics by announcing its merger with Aptech in the first quarter
of 2003. Now the road ahead for the company looks more promising–education
wise it has become the most powerful group in terms of the total number of
training centers. As M Ramprasad, director, MAPE Advisory Group sums it up,
"SSI has unfolded the biggest ever consolidation exercise in the Indian IT
education industry, and the SSI-Aptech combine is uniquely positioned to grow
over the long term". But its too early to claim "happily ever after…"

Shrikanth G