Jan 22, 2000|
New lessons for training companies
The training industry is fairly fragmented with a host of regional and only a few national players. The total market size of the training industry is in the range of Rs10 bn, which includes 10%-15% from the corporate segment and the rest from the individual segment.
The industry's value chain
Even the training industry has a maturity pyramid. Generally, training or computer education business starts with instructor-led training. In such a model, centres either own or franchisees, are opened across the region and growth is driven by network roll out, price increases and course launches. Technology Based Training (TBT) is a stop higher and involves new high margin delivery methods such as self learning through the Internet and CD ROM. Computer-based training (CBT) includes CD ROM titles where the training company productises its teaching process and can earn higher margins if volumes comes in. Currently, most companies are in the instructor led model.
Margins grow in line with the popularity of the course. Also popularity gives the company a chance to productise the course material thereby attracting the benefits of higher margins and low variable costs.
This is one of the most dynamic variables in the business. Generally most companies run 12-14 hour classes a day with each batch lasting two hours. The resources available to the students are PCs and classrooms.
Institutions can range from those which offer very high end courses such as Globesysn and Syspro, to those that cater to the entry level such as NIIT and Aptech. There is also a vast majority from the unorganised sector that offer low end courses.
Nature of ownership:
These centres can be owned by the company or by the franchisee. In a franchised centre only 15-20% of the total course fee is given to the franchiser. There are two ways of accounting for the franchisee's revenues. Either the net fees are taken to the sales or the gross fees are shown as sales, with 80-85% shown as centre expenses. Aptech follows the gross sales route while NIIT uses the net sales route.
Average course duration:
Courses that cater to computer awareness/literacy last for three to six months, while career courses last for 1-3 year's. Skill upgrading courses could last anywhere between six to nine months. However, it is the average duration of the course that decides the average revenue per outgoing student. Higher duration courses are more profitable. A full two year course at NIIT costs anywhere between Rs 60,000 to Rs 80,000, against Rs 6,000-8,000 for a two month course.
For the training segment the first quarter of FY2000, (historically the first quarter is the best business period) has witnessed a slowdown. Besides an existing large network of centres for both NIIT (total centres: 1002, own centres: 114) as well as Aptech (total centres: 1240, own centres: 26) limits the scope for further expansion. Therefore, for future growth both need to improve their revenues per centre, a factor, which is likely to be tested in the next two year's.
Second an innovative mix of courseware has become far more critical than ever before. This is because first the demand for the awareness courses has started to slowdown since these are now being included in the school curriculum itself and second the longer duration courses are no longer a lure as students prefer placements within a year.
Third the computer education and training segment have to tap government orders in a big way as well as the overseas market. NIIT has to some extent demonstrated success in the overseas market by setting up 55 centres. It also conducted an education programme for 371 schools in Tamil Nadu and is designing a course for schools in UP. The training (or should it be retraining?) for government employees could be another big avenue for the industry.
All in all, a change of course for the computer training institutes is on the cards.
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