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Software Education: Ever burgeoning demand - Views on News from Equitymaster
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  • Jun 16, 2001

    Software Education: Ever burgeoning demand

    The figures released by ITAA (Information Technology Association of America) in April projected a demand for 0.9 m new technology workers in the year 2001, this figure is down by approximately 0.7 m (44 percent) compared to the figures for 2000. However, the talent gap still looms large. The shortfall of skilled workers is expected to be in the range of 0.4 m workers. And similar numbers of shortfall come in from countries like Germany, Japan and Singapore.

    It is this shortfall of IT professionals and the lucrative compensation packages of the IT industry that has fuelled the growth of the training and education business for software in the country. The industry has grown at a CAGR (compounded annual growth rate) of 30 percent in the last six years.

    In retrospection, software revolution that has swept the country in the last five years owes a lot to the private training and education industry— as the demand for Y2K solution grew exponentially it was the private sector that bridged the gap between demand and supply of skilled manpower. The formal education sector till date is far short of meeting requirements of the IT industry in India.

    The story began in the late eighties when the software industry was in its nascent state and growing. There was a need for skilled professionals, who had exposure to the latest technologies. There was no way the formal sector could provide the answer. Therefore, the onus fell on the private sector to seize the opportunity, which it did and there was no looking back.

    The demand from the IT courses comes from basically three categories of people. Firstly, students from non-professional courses, who not don’t have much of a career option once they complete education. Therefore, a course with the private education companies would help them develop skills essential for securing a career with the IT industry. Secondly, students from professional courses who would like to develop additional skills. For example, engineering graduates from areas like civil engineering or mechanical engineering, who, would like to work for the information technology sector or would like to have additional software skills, as software has become an integral part of the engineering industry. And of course the corporate sector that has people with inadequate computer skills and would like to train their employees.

    The industry is divided, like others, between the organised and the unorganised sector. The organised sector has strong brands that include NIIT, Aptech, SSI and Tata Infotech. These companies work through a franchise model and have centres almost all over the country. The corporates are in the premium segment and typically offer long-term courses that can last for duration of more than two years. The unorganized sector on the other hand is focused on the discount segment and on short-term courses.

    US$ m FY95 FY96 FY97 FY98 FY99 FY00 FY01E
    Revenues 107 145 183 263 302 400 524
    Growth - 35.5% 26.2% 43.7% 14.8% 32.5% 31.0%

    Considering that the education and training sector was of the size of Rs 17,500 m (US$ 400m) for the year 2000, the top three players (SSI, Aptech and NIIT) had a market share of 64 percent. While SSI has a market share of 7 percent (based on revenues for the year ended June 2000), Aptech had a market share of 22 percent (based on revenues for the year ended December 2000) and NIIT was the leader with a market share of 35 percent (based on revenues for the year ended September 2000).

    Brand Revenues Marke share
    NIIT 6,116 34.9%
    Aptech 3,918 22.4%
    SSI* 1,309 7.5%

    As the Internet revolution has opened up a whole new set of opportunities and one of them is online education. The software education majors have responded to this change in the delivery mode and have started to offer online education. While NIIT offers these services through netvarsity.com, Aptech’s services are offered under the brand of onlinevarsity.com.

    Other Branded players
    LCC Infotech
    Tata Infotech
    STG International
    Boston Education
    Jetking School (Hardware)
    IBM Global Services
    IIS Infotech
    SQL Star International
    Globsyn Technologies
    CADD Center
    Maars Software

    Source : Dqindia.com

    And now these companies are looking outwards, many of these companies have established centres overseas. For example Aptech has presence in 42 countries all over the globe. Currently, the market that has interested all the software education majors is China as the IT industry is on a growth path quite similar to the Indian industry. The number of students it has in China exceeds 3,000.

    The training and education industry has been hit by the slowdown in the US economy. This is due to the fact that as IT jobs have sharply declined in the US and those keen to enter the IT sector have delayed their decision to join institutes. But the training and education companies feel that the decrease in demand is largely due to the hype created by the press about the grim job scenario in the US. Infact, NIIT has come out with advertisements informing about demand for software professionals in Europe and Japan.

    As per estimates, the private training industry has trained over 2 m students in the year 2000. Definitely, there is a large role that the private training industry is playing in making India an IT superpower.



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