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Education sector: IT's win-win bet

Aug 28, 2009

With a huge gap in the demand and supply for talent across all sectors and painfully inadequate school infrastructure, the education sector indeed has strong tailwinds. As the education enters the electronic age, a lot of opportunities lie ahead for the Indian IT sector in the market of nurturing talent. If the recent "Inside the campus: IT in India's education sector" study by Springboard Research is to be believed, the Indian education sector is expected to ramp up its IT spending particularly in the areas like networking, basic infrastructure and IT security solutions. The sector that invested around US $356 m in IT in 2008 is expected to step up the investment by a CAGR of 19% to reach US $704 m by 2012. According to the survey, presently a majority of the IT budget is spent in buying software and installing hardware, with IT services forming a small portion of the pie. However, the allocation towards the last segment is set to increase as education goes on-line and the mode of delivery changes.

There is little doubt that the Indian IT service industry is keenly eyeing the opportunity in this sector, be it in developing software for delivering education and IT security or in providing network and infrastructure support. TCS, India's largest IT service provider, conducted its first "Web 2.0 Generation" survey across 14,000 high school children in 12 cities during FY09. The survey concluded that students in the metros and mini-metros are 'digital natives'; highly tech savvy, immersed online having technology at hand all the time. The increasing preference of the young towards the online mode of education, bonding and social networking is a societal trend which has significant implications for parents, educators, policy makers, potential employers as well as companies that want to sell to this class of future consumers in India.

Apart from this, there is ample evidence to confirm this trend. Given this scenario there appears a lot in store for companies like NIIT, Aptech, Educomp and Everonn that are creating best-in-class products and services for these true digital natives. Lately these businesses have been affected by the global slowdown which resulted in a softening of the job market marked by the hiring freeze from the major recruiters. But given the government's emphasis on public-private partnership in the education sector for implementation of ICT (Information and Communication Technology) and probable ramp up in IT spending, things are set to change for good soon enough.

By its very nature, the education sector is quite immune to the vagaries of global business cycles and investors will do well to keep an eye on developments in this sector. It can emerge out as a big market for IT companies planning to ramp up their revenues from the domestic market. It is a win - win business for Indian IT as they can make money by nurturing their own future talent pool.

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