Good Times, Bad Times

Some flourished, some stuttered, some others disappeared overnight… But while most of the sector cried slowdown, the bigger players quietly consolidated their businesses and emerged stronger

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

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.