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TRAINING: Hitting an Air-pocket

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DQI Bureau
New Update

Year 2001 is one that IT training vendors would not like to forget for only

one rea son–it is good future reference for how every calculation and forecast

can go wrong at times! Long used to heady growth year after year, the slowdown

threw up a doubly nasty shock for IT training firms. Not only did demand for

re-training and skill upgradation slump, but a general lack of interest in IT

sent normal new enrollments crashing to all-time lows. And as layoffs became

common news, things got even worse, hitting both the topline and bottomline of

the bigger vendors, and driving some smaller ones out of business.

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Pop goes the party!



After witnessing some of the best years in terms of performance, the

training industry watched with dismay as the dream went sour. The nightmare that

began with the slowdown in late 2000 resulted in cautious students adopting a

wait-and-watch policy and delaying their decision of enrolling for IT courses,

preferring to wait and evaluate industry prospects. This trend had an instant

fallout on the IT education and training market, with most players facing a

severe drop in sales. The IT education segment shrank by 38% to Rs 1,595 crore

in 2001-02, down from Rs 2,591 crore in 2000-01. This brought about significant

changes in composition and focus. It also brought a semblance of sanity to a

market where low entry barriers had made it easy for non-serious players to make

a quick killing and disappear overnight, giving the entire industry a bad name.

The slowdown triggered a massive drop in revenues, down 37% over the previous year
Consolidation and acquisition period for top players, while the middle-level and small players closed shop
Corporate and institutional training picked up

A shakeout occurred in IT education, eliminating smaller training institutes.

The larger players, though hit, used the opportunity to consolidate and enhance

their marketshare. By the end of the year, the industry had lost a large part of

the low-quality, short term, fly-by-night players in the ensuing melee. This is

also evident after an observation of the contribution of the top 15 training

vendors to the total IT training industry–their share increased to 75% in

2001-02, from 67% in the previous year.

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And they all came tumbling after...



The timing of the slowdown could not have been worse. As news of a tech-led

slowdown in the US broke in early 2001, wary students held back on enrollments

in IT courses in the peak season–April to September. The result was that

training centers, usually full of activity with packed schedules, suddenly

looked empty. Enrollments took a massive dip and training majors issued profit

warnings, especially as it became clear that revenue targets would be missed.

Revenues from the individual training segment in 2001-02 were down 41%, against

the previous year.

A

MASSIVE SOCK:
Accustomed

to steady growth for years, the IT training industry was in

shell-chock—as it slid from a dizzying 48% growth in the

previous year to a negative 39% in FY 2001

Even though NIIT has been announcing a huge growth in enrolments during the

third quarter–up by 200% year on year–this cannot be used as an

industry-wide yardstick, or a sign of renewed interest in IT courses. While NIIT

weathered the storm better than most other players, most of this jump in numbers

came from its low-priced Swift program and its ‘Million Registrations in a Day’

campaign in December 2001, to commemorate its 20th anniversary. NIIT’s Swift

accounted for 130,000 of its 160,000 enrolments for the quarter. Also, thanks to

the slowdown and the accompanying whiplash on IT workers, India had a surplus of

12,000 IT professionals in 2001-02. FY 2002-03 is expected to prove a borderline

year, with a drastic 85% drop in surplus numbers. The rationale behind this was

the sharp drop in registration for long-term IT courses since 2001–the same

time that IT majors officially issued profit warnings and the media started

painting dismal pictures of Indian IT’s condition.

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According to a Merrill Lynch report on the top IT education companies,

"The key takeaway on Indian education industry, based on the results of

both NIIT and SSI, is that the contraction of the industry in FY 9/2002 (year

ending September) will likely be higher than originally anticipated. While both

NIIT and SSI have forecast a contraction in the education industry to the tune

of 20% for the period, early signs indicate a significantly higher number,

considering the 51% and 44% declines seen year on year by both companies in the

December quarter."

Innovation on the rise



Within the training segment itself, corporate training emerged as an area of

hope. Corporate and institutional training actually increased its share of the

total training market to 13.6% in 2001-02, up from 9.6%. There was an increased

effort on corporate and institutional educational initiatives, and e-governance

initiatives were seriously pursued, considering that a large amount of funds had

been allocated for these projects. The tougher environment necessitated a change

in image and product offerings. Vendors were forced to come up with innovative

business models. Vendors learnt to expand business in phases while continuing

their focus on safeguarding the existing revenue streams. The period also saw

gainfully improved internal systems, efficiencies, drive in quality, and

consolidation. The slowdown instilled a sense of urgency among the training

vendors when it came to implementing decisions. Various processes and systems

were put in place to improve operational efficiencies. Cost reduction measures

were also initiated. Suddenly there was no time to be lost.

Revenue

Per Centre
Rank Vendor Rs

Lakh
1 SQL Star

International
111.5
2 C-Dac 35.2
3 NIIT 28.3
4 IIHT 26.6
5 SSI 23.4
6 CMC 19.4
7 Aptech 15.8
8 CMS

Computers
15
9 IBM India 7.7
10 Tata

Infotech*
4.8

*DQ

estimates

GOING

STRONG:
SQL Star retained its top

slot, with the highest revenues per centre

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Most came up with innovative business models to prevent revenues from

tumbling. Tata Infotech introduced the concept of ‘Blended Learning’ where

they used a combination of instructor led training and computer based training.

STG introduced the dial a trainer scheme to take IT training to the doorstep of

students. Cisco decided to emphasize their network education program. Aptech

settled for a hybrid model of delivering education, which was christened Aptech’s

Multi-modal Education Delivery Architecture (AMEDA) which would simultaneously

help in cost-optimization due to faculty de-skilling and use of technology. ZILS

added corporate training and learning solutions for institutions to its

initiatives.

Back to basics

Back to basics

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Given the thrust on fundamentals and ‘back to basics’, the trend has

been an increase in enrollments for long duration courses over short-term crash

courses. The skills in demand were in the areas of software engineering;

database administrators; business applications of software development;

networking applications; data warehousing; client networking; project

management; quality assurance and legacy systems. There is a growing trend of IT

professionals wanting to supplement their existing IT skill base. This is in

direct co-relation with the speed of change in technology standards. It is

expected that there would be a visible shift in the number of certifications per

individual, which will mean on an average every individual, will have a minimum

of four certifications to begin with. There is a demand for networking,

enterprise application integration, and .NET short courses. The demand for

designing, multimedia, and animation has also been on the rise. Other growing

areas will be web-based technologies and Web-based programming.

IT

Training Rankings
Rank Company No.

of Centre
1 NIIT 2577
2 Aptech

Training
2214
3 Tata

Infotech
706
4 SSI 650
5 CMC 253
6 IBM

India
174
7 CMSÂ

Computer Institute
138
8 Onward

Novell Software
125
9 Microsoft

Corporation
125
10 C-DAC’s

ACTS
105

*As on

December 31, 2001

MIXED

BAG:
While

NIIT is the clear leader in terms of the total number of centers,

including 371 school centers in Tamil Nadu and 700 in Karnataka, Aptech

emerged as the leader in the domestic retail market segment, with 1,712

centers (against NIIT’s 1,506 centers)

Lessons learnt



Fiscal 2001 was clearly a period of consolidation for the IT training

segment, which differentiated the serious players from the others. While the

serious players used this period to consolidate and gain marketshare, it was

also a time for some innovative thinking. Vendors tinkered around with different

business models in order to target hitherto unaddressed segments, such as

housewives and working executives. NIIT’s Swift campaigns on ‘World Literacy

Day’ and SSI’s "Dial-a-Trainer" scheme were examples of such a

push.

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Another trend that marked this phase was the attempt by some of the top

training companies to gain acceptance in the global markets. NIIT and Aptech,

for instance, wnt all out to establish businesses in other geographies where the

need for IT manpower was acute, in order to acquire a stronger foothold in those

markets.

Numbers

Game: The Big Guns
 Rank Vendor Revenue

(Rs Crore)
Growth



(%)
2001-02 2000-01
1 NIIT 429.2 691 -38
2 Aptech Ltd 270 413.5 -35
3 SSI Ltd 152.3 219.8 -31
4 CMC Ltd 44.5 59.3 -25
5 Pentasoft

Technologies
44.4 79.4 -44
6 Jetking

Infotrain Ltd
43.5 30.6 42
7 C-Dac 37 NA NA
8 Tata

Infotech*
34 57.8 -41
9 IIHT 26.6 22.2 20
10 CMS

Computers
20.7 NA NA
11 SQL Star

International Ltd
14.5 13.3 8
12 IBM India* 13.5 24.6 -45

*DQ

estimates

NIIT was in

first place despite a 38% drop in revenues. It was followed by Aptech and

SSI. CMC moved up the charts at the expense of Pentasoft. An interesting

observation is that hardware training vendors like Jetking and IIHT

actually showed healthy growth and improved their rankings

Light at the end of the tunnel

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While the global slowdown had an impact for the short term, the importance

of IT is beyond doubt. The general lack of interest among prospective students

resulted in declining registrations in 2001-02. An industry wide explanation of

the number game in 2001 is that the lack of interest is that it is a short-term

phenomenon associated with job squeeze. Students have become more discerning and

selective. A technical certification is recognized as a self-investment that

provides a tangible and relatively immediate return. IT professionals are now

vying to obtain more than one technical certification to boost their existing

skill set. This will continue to propel demand for IT courses.

The

Revenue Mix (Rs Crore)

  2001-02 2000-01 1999-00 1998-99
Domestic
Corporate 147 181 102 98
Individual 1,321 2,148 1,459 1,096
Exports
Corporate 50 70 62 44
Individual 57 195 130 95

There is a clear shift taking place. While retail training is and will

continue to be dominant in the near future, institutional training is picking up

rapidly across the country, and across the training companies. Also, many IT

training and education vendors already have or are putting together a software

solutions division, which, in most cases, is growing at a rate much faster than

the traditional training division. The industry will witness a demand for

specialized courses in newer categories. The upgradation of IT skills will not

be restricted to IT departments alone, but will pervade all walks and

departments.

TEAM DQ

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