TRAINING AND EDUCATION: Good Times, Bad Times

What happens when dot-coms riding high on an Internet freak wave go bust and

a couple of major IT training institutes that have been painting the country red

with aggressive marketing campaigns suddenly vanish into thin air? If that weren’t

enough, what happens when the US–the only major importer of IT manpower from

India–is hit by its first-ever tech-led slowdown and starts benching bloated

workforces? Panic is the word that springs to the mind, when one remembers what

the Indian IT training sector underwent in FY 2000-01. But before we paint this

gory picture of all-pervading gloom, there was the upside too, as the bigger

players kicked off the process of consolidation. Training companies posted an

overall growth rate of 48%, much in consonance with the growth of the IT

industry itself.

The IT training industry has been growing at over 35% during the last five

years (only 1999-2000 was the exception, where growth was 31% and revenues were

Rs 1,753 crore). The overall segment has posted a CAGR of 41% between 1995-96

and 2000-01, while the domestic market grew by 49%, showing revenues of Rs 2,326

crore, compared to Rs 1,561 crore–a growth of 30.73% in 1999-00. However, the

IT training sector maintained its export growth at 38%, clocking revenues of Rs

265 crore, compared to Rs 192 crore in the previous fiscal. Also, as much as 90%

of revenues came from the domestic market, with exports accounting for the

remaining part. In 2000-01, the share of the export market fell to 10% of the

total revenues with Rs 265 crore, compared to Rs 192 crore (11%) last fiscal.

The dot-com fiasco

During Q1 and Q2 of FY 2001-01, the realization of the importance of India’s

intellectual capital and its possible shortage was the key factor driving growth

of the domestic IT training market. With more than 19 states pursuing bullish IT

policies, the demand for software professionals within the country was immense.

Outside, the US had increased the number of H1B visas, while countries like

Germany, France and Japan also offered incentives to woo Indian IT

professionals. The world, particularly US enterprises, realized the importance–in

terms of cost savings and value–of moving work offshore to India.

The underlying note of urgency, led by the booming dot-coms, was because of a

demand for e-commerce, Internet and Java professionals. This resulted in a

flurry of e-commerce courses being offered by all institutes. By the second half

of the year, dot-coms had become the buzzword, leading to an unprecedented

mushrooming of institutes hawking Web-related courses. It wasn’t that

certification courses were taking a beating, it was just that the best

paymasters were not looking anymore for just a Microsoft certification. Sure,

technology skills as evidenced by a certification were also in vogue, but an

understanding of solutions and systems skills–all these around the Web and

commerce–was burning hottest.

Slowdown out of the blue

While the US had been talking slowdown since early 2000, nobody–either

globally or in India–dreamt that it would lead to a recession. The first

profit warnings were issued only in late October and suddenly, the great IT

dreams of an average Indian came tumbling down. This was an end to a party of

short-term vertical courses and for small-time fly-by-night operators. Perhaps

there modus operandi was to make a quick buck and run, or perhaps they went on a

massive nationwide campaign just to build the brand and reap the benefits at

their IPO, or perhaps still they were bleeding so bad they could not continue to

survive. Whatever the reason, the fact of the matter is that such closures–like

those of Wintech and Zap–happened at a time when the market had gone bust. The

impact–there was overall panic.

While the Indian IT professionals in the US was either being benched or

forced to return home, a worrisome trend emerged–professionals who had just

picked up specific skill-sets like Java and ASP were among the first ones to

lose their jobs. As the news spread, inquiries started falling; smaller

institutes being the worst hit, with students looking for brand-names as an

assurance. And as realization settled in, most IT training majors went on a

media blitz to reaffirm their position as market leaders. The right time for

consolidation, they said.

Another major change post-dot-coms and slowdown has been a definite swing

towards fundamentals-oriented IT courses.

Corporates become bigger buyers

Despite a majority of India Inc looking to retraining and re-skilling its

workforce, it remains the individuals who are the prime drivers of the training

sector. Of the domestic IT training market, estimated by DATAQUEST at Rs 2,326

crore, individual demand stood at a solid Rs 2,148 crore–a share of a massive

92.3%. The corporate training segment, however, gained by 1%–from 6.5% last

year to 7.7% during this fiscal.

However, things are changing and despite the fact that a majority of the

industry prefers in-house training to outsourcing, the year witnessed a surging

demand from middle-rung companies that could not afford huge campuses and

dedicated teaching staff.

Not surprising, then, that the domestic corporate training market posted a

massive growth of 74.5%, compared to a meager 4% growth last year–the segment

garnered revenues of Rs 178 crore during 2000-01, compared to Rs 102 crore in

1999-00 and Rs 98 crore in 1998-99. On the other hand, exports revenue for

corporate training grew by only 12.9% (Rs 70 crore), compared to 40.9% (Rs 62

crore) in the previous year. Also, the domestic individual training market grew

by 47% while export orders excelled with a 50% upswing. The growth rate for the

two segments during FY 1999-00 was 33.12% and 36.84%, respectively.

The e-tool

The spiraling demand for corporate training saw the emergence of e-learning

as an increasingly competitive weapon–the dynamism of the skill enhancement

requirements forced training managers to evaluate and adopt virtual classrooms.

This meant a clearly visible paradigm shift in the methodology and acceptance of

new modes of training.

While online training has been led by the two responsible for initiating IT

education in India–NIIT’s netvarsity.com and Aptech’s

aptechonlinevarsity.com–others like H-P, Zee Interactive Learning Systems and

SSI have also launched their variants. Globsyn Technologies also introduced the

‘knowledge pub’–a place where training could be imparted both through CBT

and on-line modules. Interactive distance learning (IDL) emerged as a new

concept and ZILS became the first Indian company to start this in March 2001 at

its Noida-based studio, using VSAT technology. Hughes Escorts Communications (HECL)

is also on its way to creating another such facility.

The pack leaders

* Includes Aptech, Asset

International and Arena Multimedia

When it comes to major players in the training market, one thing that stands

out is the dominance of this segment by experienced players. These two account

for the largest number of centres–self-owned as well as franchised–in the

training segment. Other prominent players having a significant number of centres

are SSI, LCC, STG, CMC, Pentasoft, Boston, Datapro, Tata Infotech and SQL Star

International.

Enrollments also show a similar trend, with NIIT (500,000) and Aptech

(400,000) leading the pack. Players like CMC, CMS, Boston had enrollments last

year in the 30,000-plus range. In terms of faculty, besides the 6,000-plus

faculty at NIIT and Aptech, CMC, LCC, Pentasoft, Jetking had training staff in

excess of 1,000. In terms of number of courses offered, NIIT emerged as the

clear winner with 750 courses, followed by Aptech (110) and LCC (108).

On the performance front, the top five of the training segment–NIIT, Aptech,

SSI, LCC and Pentasoft, with combined revenues of Rs 1487 crore–contributed

57% of the overall industry revenues and a combined growth of 54.6% over the

previous year. The top 15, on the other hand mopped up 70% of the marketshare,

posting revenues of Rs 1,814 crore and a growth of 48% over previous year

figures of Rs 1,224 crore.