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IT Education: Tough times - Views on News from Equitymaster
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  • Jun 26, 2001

    IT Education: Tough times

    Information technology training and education business is traditionally a seasonal business with the second quarter (April to June) of the year being the best for the companies. This is due to the fact that during this part of the year most of the schools and colleges are closed for vacations and students opt for computer courses. Also, with colleges starting in June students simultaneously enroll for long-term software courses. However, it seems this year the quarter has been below par for the software education majors.

    The signs of trouble were apparent quite early as NIIT declared its result for the quarter ending March. The company hinted that it had seen a dip in inquires. Sometime after that Aptech too admitted that there was a drop in registrations. However, these companies have not given out specific numbers.

    The companies claimed that the drop registrations were due to the slump in the IT job markets and more so due the hype created by the media about its implications. With the slowdown in the US economy, recruiting in the IT sector has been cut down. According to the figures released by ITAA (Information Technology Association of America) in April the demand for new technology workers in the year 2001, is down by approximately 0.7 m (44 percent) compared to the figures for 2000. As a result aspirants were having doubts about choosing IT as a career option.

    (Rs m) Sep-Dec Jan-Mar Apr-June Jul-Sep
    1998-1999 710 1,234 1,293 1,571
    Growth (QoQ) -41.0% 73.8% 4.8% 21.5%
    Growth (YoY) 49.5% 28.7% 14.9% 30.6%
    1999-2000 981 1,272 1,856 2,143
    Growth (QoQ) -37.6% 29.7% 45.9% 15.5%
    Growth (YoY) 38.2% 3.1% 43.5% 36.4%

    NIITís global revenues from learning business

    According to these companies, the trend was quite surprising as most of the students of the career oriented courses were college students who would take at least a year or more to complete these courses and would not be looking for a job immediately as they would have to complete their college.

    The drop in the demand could be attributed to the non-formal education sector being unable to assure a placement to the candidates. Another very critical reason could be the fact that the students who complete these courses need additional training when they join the industry therefore, the industry in weary to offer jobs. It is also quite possible that seeing the uncertainty in the job market students are looking at cheaper courses from non-branded institutes. All this is adding to the woes of the industry majors.

    The companies in their own way have fought back. NIIT came out with an advertisement that was aimed specifically at allaying fears about getting a job in the IT industry. The advertisement gave numbers on the demand for IT professionals in countries other than the US. NIIT is also introducing courses in emerging technologies that it feels will help it counter the slowdown. And of course, there is the effort to increase reach of the company to bring in additional revenues.

    However, with uncertainty prevailing, the tough times for these companies are expected to continue. The cue the companies could take from the slowdown is that there is still lot to be done when it comes to deliverables in the learning business. These companies have created brands that have attracted students, have they created brands that attract companies for placement, even in a tough environment? This is one hard fact they need to look at that in a country like India the success of a course is linked to the kind of placement it offers.



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