Training

Training sector looks forward to sunshine in 2003-04

The post-bubble carnage did not spare the several hundred mom-and-pop training institutes that had mushroomed all over the country. While most of them have closed shop and bigger players have modified their business models to survive the slowdown, the training industry is now on the path to normalcy. Punita Jasrotia says that times ahead won’t be as disappointing

The last couple of years have been quite challenging for the Indian IT training market as it witnessed a decline in enrolments and the closing down of several training institutes, causing many to question their faith in IT as a career choice itself. However, the latter half of 2002 saw more optimism in the air, driven mainly by the increase in outsourcing work, resulting in close to a 10 percent growth in FY 2002-03.

The hype built around IT as a promising career option suffered a blow when companies took to laying off employees to cut costs. Considering that the primary reason for growth in the industry was the IT services market, when this segment stopped hiring, demand for courses—especially Internet-based courses after the dot com bust—was equally affected.

To achieve the $50 billion export target by 2008, Indian companies will require manpower with skill sets across high growth potential verticals and not just basic programming skills, says Sunil Mehta

On the other hand, IT companies were adopting cost-cutting measures—for instance, training budgets of companies were slashed—to deal with the slowdown, which took a toll on the IT training industry as well.

As the number of job opportunities came down, IT training companies in smaller cities and towns were adversely affected, which further impacted their franchisee partners. However, the worst hit segments were the Class A and B cities, simply because these areas had the highest density of IT training courses.

Year 2002 also saw the closure of mom-and-pop training institutes (with some well-known smaller players also going down), while others took to redesigning their business models and consolidating to save their skin. All this brought a change in market equations, with an increase in the contribution of the top three IT training players (namely NIIT, Aptech and SSI) while names like Boston, Datapro and Zee Interactive Learning Systems are now out of the reckoning.

Ray of hope
However, there were certain sectors that helped the industry get back on track. Multimedia, animation and gaming were seen as the fastest growing segments in 2002-03.

So, while the demand for short-term, high-end courses were affected due to the slowdown, there was demand for networking, enterprise application integration, .NET, and multimedia and animation courses. In terms of skill sets, Java, XML, wireless, e-Security, .NET, supply chain management and CRM gained precedence. Hardware and networking also registered sustained growth. According to experts, they are expected to grow at a rate of 25 percent in the future.

Besides this, ITES was another growth driver that took the IT training market out of the gloom. Companies like NIIT and Aptech made their entry into the segment by introducing courses for students in the BPO segment.

The e-governance sector became another bright spot for the training industry, with many IT training institutes bagging orders from state governments such as Karnataka, Tamil Nadu and Punjab for computer training in schools and universities. There were also a lot of initiatives to bridge the Digital Divide through mass IT campaigns by most of the top IT players.

Year 2002 was also the year when international players like New Horizons (a global player in the training segment), and ProSoft Training made their entry into the Indian IT training market. According to New Horizons India’s president Ajay Sharma, it also proved to be a perfect opportunity as it helped them assess the market situation before setting up operations here. The company has very aggressive plans and is looking at 15 percent marketshare in the next three years.

Training segment in 2003
While 2002 has been a disappointing year for the industry, 2003 looks much brighter and more stable. According to Nasscom, the Indian IT software and services industry is projected to employ 6,50,000 IT professionals by March 2003, reflecting a growth of 24.4 percent over last year’s figure of 5,22,250. Besides this, with the increase in offshore activity (at least six global IT product and services companies are planning to ramp up their staff in the country and are likely to add 20,000 jobs over the next couple of years), things look much brighter for India. Besides the US, which has been outsourcing from India in the software business, markets like France and Germany are also expected to follow suit and outsource manpower from India, says Sowmiya Venkatesan, analyst for IDC India’s Software and Services Research Group.

Pramod Khera is confident that with the IT industry showing signs of revival, the demand for IT training is also going to increase

Skills in demand
2003-04 should see enrolment figures increase substantially as the demand for trained IT professionals continues to grow. By 2008, Nasscom expects a shortfall of 8.35 lakh trained IT professionals. The focus would be more on re-training professionals in specialised skill sets to further add value, rather than training new professionals. The demand would certainly be higher from the corporate side.

But at the same time, students will also opt for job-oriented and specialised courses. As one expert points out, the change this time around is that people are approaching institutes with specific needs and not simply to do a ‘computer course’. The new skill sets that are emerging as key growth areas are in e-Security, CRM, e-governance and e-logistics. “These areas have attained high importance and would continue to garner interest in the near future as well,” says Sanjay Dixit, Prosoft Training’s regional manager for SAARC countries. Traditionally, the April-September half of the year is when enrolments pick up.

Says Rahul Thapan, who heads Tata Infotech’s Education Services Division, “We have seen demand primarily for Microsoft, Oracle and Cisco certifications. I feel that Oracle and Cisco/ Networking certifications will be critical and continue to grow.” Agrees chairman and CEO of SSI, Kalpathi S Suresh, who feels that at present students are equipping themselves with an array of skill sets ranging from Unix, C, C++ and Oracle. “We see some interest in .NET and C#. Going forward, we may see a revival of interest in certified courses as students would want to arm themselves with multiple certifications in a competitive job market,” he adds.

The skills in demand? Software analysts, domain specialists, information security specialists, integration specialists, database administrators, network specialists and communication engineers; data warehousing, and semiconductor design. One interesting trend here has been a shift away from hiring freshers to professionals with domain-specific skill sets and business analysts with programming skills, which shows that Indian companies are tapping high-value service lines. Thus, while maintaining their foothold in the existing market, Indian ICT industry professionals need to concentrate on making themselves adept in document management applications, middleware applications, process modelling, etc. These are the areas that will create opportunities in the future.

ITES training would be another growth driver for the Indian IT training industry. The sector has grown by 70 percent during the last fiscal and recorded revenues of Rs 7,100 crore. And going by the Nasscom-McKinsey report, this sector will be worth $21-24 billion by 2008, employing over 1.1 million Indians.

The multimedia industry, encompassing the animation and gaming segment is another booming industry—IDC projects computer and video game sales at $16.9 billion by 2003, excluding the estimated $1.1 billion that will come in as online gaming revenue). “This industry is attracting outsourcing on a large scale, with India being the most preferred destination,” says Aptech CEO and managing director Pramod Khera. It will continue its robust growth with wide acceptance in different industries like entertainment, film-making, publishing, advertising, etc, which should see good demand for multimedia training.

Hardware training will continue to see sustained growth. According to IDC, there will be a worldwide shortage of 1.9 million networking professionals by 2004. The Asia-Pacific skills gap will increase at a rate of 41 percent, resulting in a shortage of almost 3,00,000 networking professionals by 2004.

2004, however, is not a big year as far as online training is concerned. However, online training will be a major driver in the corporate training segment. Besides this, e-governance is another major segment where a lot of training requirements will emerge. There is a lot of demand for enterprise and business applications.

Sanjay Dixit feels that the new skill sets that are emerging as key growth areas are in e-Security, CRM, e-governance and e-logistics, which have attained high importance and will continue to garner interest in the near future as well

Challenges
However, all this growth is hampered by several factors. Khera emphasises that the need is to move out of the model where teaching is focused on technology and not on the applications of technology in a domain area. “The challenge for training institutes is in creating professionals who are able to apply technology to a domain area, and so the knowledge, skills and attitude gained is crucial. Higher-order cognitive skills are the key to ever more intelligent technology to extract and create the knowledge these technologies make available. The need for these skills is permeating literally all jobs, requiring everyone in the workforce to be bright, to be a knowledge-based worker and to be fed into the knowledge-based economy that increasingly predominates,” he says.

Considering that the student is more discerning and selective, the competitive edge would lie in having a good reputation with good content, infrastructure and faculty along with placement support. Therefore, it is essential that IT training organisations understand and analyse market trends and create courseware to create IT professionals suited to the market. Says Sunil Mehta, Nasscom’s vice president for research, “As organisations focus on not just developing technology skill sets of their employees but also business and domain expertise to maximise the employee’s potential, the quality of training offered will become more important. With Indian companies moving up the value chain to achieve the $50 billion exports target by 2008, they will require manpower with skill sets across high growth potential verticals such as banking and finance, healthcare, retail and telecom and not just basic programming skills.” At the same time, the industry will also need to equip itself with domain expertise across each of these verticals to service high-end work coming to India.

Another important need for the IT industry is to impart practical training along with theoretical training imparted by institutes today. The industry and training institutions therefore need to collaborate more closely to enable this. Training of this kind will enhance project management skills of Indian IT professionals. Thus, going forward, quality of education offered by the IT training institutes, along with the depth of services they can offer in terms of development of business skills will be the key driver for growth.

Government cooperation is another critical factor for training companies. Khera points out that while the government has realised the need for IT education at the grassroots level and is encouraging initiatives and projects in this direction, what is required is a thrust on government spending on IT projects in the government sector, public sector and education sector. According to him, this will give a boost to the requirement of IT-trained manpower and will also build a solid base for the domestic IT industry. The recent imposition of a service tax [of 8 percent] on IT training institutes, is another jolt for the recovering industry, which would be highly detrimental to the industry, as it would impose an additional burden on students and their parents. And lastly, the general economic turbulence, aggravated by the clouds of war, is creating a sense of fear among training players.

Changing Equations
However, in terms of market equations, the second quarter of this financial year will witness a lot of action. The proposed merger of SSI’s education and training business with Aptech, which is expected to be completed by June 2003 will bring a change in the marketshare of these leading training players. Once this happens, the newly formed joint venture will dismantle NIIT from its numero uno position. Presently, NIIT leads the IT training market with a marketshare of 23.7 percent, closely followed by Aptech at 19.2 percent. SSI is at third position with 7.8 percent. But the combined share of Aptech and SSI would theoretically amount to 27 percent.

According to industry experts however, it remains to be seen how well this merger will turn out, considering that there have been confusing reports about SSI doing away with its training business, to now buying out Aptech. There can also be the possibility of some centres closing down. However, Khera ruled out such a possibility.

In addition to this, there would also be a lot of movement in the IT training certification market. Considering that Vue has recently closed its Indian office and would be managed by the company’s APAC operations, this might give greater marketshare to Prometric.