SSI: On the Franchisee Trail

Recent stock market figures indicate that IT education majors are in for a

bad run. There may be some exceptions though, if SSI’s plans for FY July

2001-June 2002 succeed. The company hopes to consolidate the gains of the

previous year and has also chalked out a three-pronged strategy to stimulate

growth. It aims to expand the network without compromising on existing partner

profitability by expanding its market share and by containing cost.

On the technology business front, SSI has recast the organization. Under the

new structure, wholly owned subsidiaries will spearhead the software business in

North America, Europe and Asia-Pacific and the India operations will serve as an

ODC (offshore development center) servicing these subsidiaries. It also expects

to benefit from the acquisition of North America-based AlbionOrion LLC. The

mission: to grow as a local company in each of its target geographies.

Meanwhile, the Chennai-based company is already going full steam ahead with the

franchisee-led growth model.

A global perspective

The company’s franchisee-led growth model is the result of international

management consultants–KPMG. The model assumes significance for SSI, given the

current slump in the IT education industry. The model is expected to bring in

significant cash inflows and uniformity in terms of its delivery, which has

become a critical component in the IT education business.

According to BG Menon, CEO, SSI Education, "The franchisee model was put

into place to reduce the capital intensity that goes in owning the centers.

Ultimately, our aim is to own the brand, the content and the supply chain .We

have around 327 franchisees, 232 educational services providers (ESPs) and 42

SSI-owned centers. In a span of five years, all SSI-owned centers and ESPs will

become franchisees.

The franchisee model will also broad base the company’s footprints in terms

of its reach. For instance only 18% of SSI Education revenues come from the

North, and the company is pitching hard on the franchisee model to expand the

number of centers in the northern region. Around 100 centers will be established

in the coming months.

The adoption of the franchisee model is the second major initiative by the

company, the first one being its ESP model launched last year. ESPs combine the

qualities of both company-owned centers and franchisees. In the ESP model, the

company identifies entrepreneurs and provides the seed capital to start a

center. ESPs typically cater to upcountry areas where infrastructure is

incubated with local expertise. ESPs had provided SSI critical mass and

penetration into non-metro regions of the country. Says Menon, "The ESP

partners will be encouraged to own the assets in their centers and evolve into

franchisees".

Quality matters

When companies go aggressive on the franchisee mode, quality is the key

element that has to be monitored. Any lapse by the franchisees on that front

will upset the company’s brand. According to Menon, "A couple of years

ago, the education industry saw the sudden emergence of small players who cashed

heavily on the Java boom. Today, most of them have vanished due to the extended

slowdown. On the other hand, the rise and fall of small players had left a

negative mindset in the market because these companies offered courseware that

was not recognized by the industry and adopted to unethical means like placement

offers in US to lure in students. Perception today plays a key role in students

and professionals choosing an IT institute. The key differentiators here are the

type of courses, courseware, and quality of the delivery. We excel on all these

fronts and the franchisee-led model will further enhance our delivery

capabilities."

G Shrikanth in Chennai