|“The company needs to spend|
heavily on brand-building. We know the kind of money NIIT and Aptech spend
on advertisements and brand enhancement“
The big debate is on. While IT analysts feel the business model of
training-turned-service majors like NIIT and Aptech is sound, wafer-thin margins
and slow growth in training are putting pressure on the high-margin quick-growth
software fold. Should companies split their service and education models to
increase overall valuation? To add to the imponderables’ list, another company
is joining the fray to try and make it the ‘Big Three’. Propounding a
differently-designed training-service model, Globsyn Technologies wants to
strike lucky in the plus Rs 2,000-crore IT education segment.
The Globsyn model is no different from that of other training-cum-service
companies, with training notching up volumes while the service industry brings
in the margins. However, Globsyn’s training initiative endeavors to
differentiate itself from others’ by offering new-feel brands for different
levels of education. At the very high end of its offering are the ‘Technocampus’
software finishing schools.
The concept is to make a student job-ready with the necessary technology,
applications and project management of a real life atmosphere. Also included in
the courseware are personal effectiveness skills, including business
communication, organizational behavior and elements of finance and marketing,
all delivered with a technology bent. Currently, the company has 11 centers
across the country, with plans to ramp the number up to 14 by June-end. The only
Agrees Bikram Dasgupta, chairman and ceo, Globsyn Technologies, “This is
not a fully-scalable model.” Globsyn wants to maintain the exclusive nature
of this brand and will not stretch it on the lines of NIIT and Aptech, with
centers in every corner of the city. The way out is to target the overseas
market and establish the superiority of the concept on an Asia-Pacific
level.” The first step on this front has been the signing of a memorandum
of understanding with the $100-billion Samsung Asia Group in an effort to set up
a joint venture to push the Technocampus brand overseas.
While Technocampus will admittedly not make a dent in the volumes market but
create the Globsyn brand perception, it will be the ‘Knowledge Pubs’ which
are expected to compete with traditional IT education centers and roll in the
volumes. Here again, the company wants to play it differently, embracing a
click-and-brick model. Students will have the flexibility of choosing course
delivery either via the web or through teacher-led training programs, as against
the prevalent model of plain instructional-led training. The integrated learning
methodology can be a powerful tool as students can decide which modules and
which mode needs to be followed and pay only for that one, while accessing CBT
or WBT at any time of the day or night.
The company’s gameplan includes jacking the number up to 300 training
centers by March 2004, while the software service component will continue to
ensure healthy margins and necessary value addition. To fund and move on the
expansion spree, the company planned to float a Rs 21-crore IPO, with part of
the funds set to be used to set up marketing, instructional R&D and software
development centers in Delhi. Another plan was to invest in wholly-owned
subsidiaries in the US and the UK. However, the company had to forego the issue
due to poor market conditions.
The company will reenter the market at a later stage and till such time, debt
and internal accruals would keep the ship moving.
Nevertheless, the big question which training-turned-service companies are
being asked frequently is when they will split the business. A look at the price
earning multiples of companies like NIIT (16.5) and Aptech (5.6), as against
those of Infosys (62) and Wipro (96.2), are an indicator of the low esteem the
market has for the training model.
While the education model does bring in the cash quickly (payments are
usually made in advance), the service model takes longer to realize fund inflow,
though margins are higher. “Therefore, for small and medium-sized
companies, it makes sense to adopt the training methodology too as quicker cash
inflows help build up the service business. Admittedly, the company needs to
spend heavily on brand-building. We know the kind of money NIIT and Aptech spend
on advertisements and brand enhancement,” says Dasgupta.
Will it succeed?
That’s the Rs 21-crore question. No doubt the concept is
different but branding will still be a
key factor to success. While Technocampus will find easy takers, scalability
will remain a key problem for Globsyn. Also, the key revenue driver will be the
knowledge pubs and, here, the company has a tough battle in hand in taking on
the mighty NIIT and Aptech and other established companies. The new business
model will help out here, but whether students bite the bait and make Globsyn
one of the top players in the Indian IT education business remains to be seen.
Yograj Varma in New Delhi