The growth of the IT training and education sector is directly proportional to the ups and downs of the software sector. But though the IT and ITeS markets have been growing, the training industry has not been able to keep up. Will 2004 prove to be any different?
AFTER the brouhaha of the previous years, the dust is finally settling in the Indian IT training sector. A quiet calm of sorts has descended following the rite of passage from those euphoric days when the industry rode high on the Y2K and dot-com wave to the resonating crash that followed. The last couple of years have been especially difficult for the IT training industry. Beleaguered by the IT slowdown and the global economic recession, plus 9/11 and its aftermath, not many could survive the carnage. But the thoroughly-shaken industry is now witnessing a coming of age. The last year saw the industry enter a phase of consolidation.
This, in addition to the ouster of fly-by-night operators, means that there are far fewer players left in the arena today. For instance, Aptech as we know it today is a conglomeration of three of yesterday’s leading brands—Aptech Computer Education, SSI Education and Arena Multimedia.
While this has strengthened the market share of leading players, the realisation has also struck that only those with a focus on research and adherence to quality standards stand any chance of surviving the stringent demands of the new IT industry.
The smaller companies, on the other hand, seem to have decided to adopt the strategy of their brethren in the IT industry, with most of them focusing on niches in which they have developed certain strengths. This not only guarantees them a dedicated clientele but also the promise of better margins since they don’t have to compete with global majors.
While this may have arrested the downward spiral, margins are still lower than in previous years, and the pressure on pricing is at an all-time high. According to a report released by Nasscom, the IT training market rose to Rs 1,500 crore in 2002-03 from Rs 1,468 crore in 2001-02. Though this may seem like a positive sign, large players are witnessing lower revenues and margins.
In perspective
2003 was heralded as the year when the IT training industry got back on the recovery track. The fortunes of the players in this space are intrinsically linked to those of the software sector. And with the global economy witnessing a slow but steady revival, the growth graph of the IT training and education sector was expected to see an upward swing. But businesses had learned from the mistakes of the past, and had taken a more cautious note.
Falling IT spends and altered IT priorities had a direct impact on the IT training industry in 2003. Though IT majors have bagged several new orders, the pressure on margins due to a lowering of billing rates per hour, and the increasing scrutiny of new investments in IT, have proved to be a dampener. There has been a rationalisation of salaries of IT professionals, and a demand that IT workers increase their productivity.
The sector saw priorities shifting from ‘build for the future’ to seeking optimum value with quick returns. Thanks to this trend, the training sector saw sluggish growth in the first three quarters of the last calendar year. The CTO/CIO has been under immense pressure to cut costs while showing maximum value; this has resulted in a reluctance to adopt new technology. The unorganised sector was the most affected since many couldn’t handle the challenges posed by the introduction of new technologies.
Growth in 2003 was mainly driven by the ITeS and e-governance sectors, followed by high-end certifications from established players like Microsoft, Oracle, Red Hat and Sun Microsystems. The concerns over information security also contributed significantly to overall growth. Explains Pramod Khera, chief executive officer and managing director, Aptech, “The growth of the ITeS segment fuelled the demand for trained manpower in allied industries. Even the software sector showed signs of revival. In addition, there was an increase in demand for multimedia training and institutional training, mainly from the government sector.”
According to Jeetendra Nair, vice president, Karrox Technologies, “2003 can be marked as the year of upgradations and new technology launches. We saw an increasing demand for specialised courses. But as is the case with anything new, we expected there to be few takers since anything new takes time to stabilise before it is accepted by the market.”
Emerging scenario
Despite the not-so-positive market situation, there is enough potential for IT training institutes to survive and grow in the coming year. If the growth in the software industry is anything to go by, we are headed for a huge shortfall of skilled professionals over the next five years. This fact is reflected in the findings of a Nasscom survey. According to it, the Indian IT services industry is headed for a potential shortfall of 2,35,000 people by 2008, something corroborated by Pradeep Narayanan, head, NIIT Education Business in India. Says he, “Global IT spending is expected to grow by 6-7 percent in the next three years, giving a much-needed boost to the IT sector and in turn, the IT training industry.”
Early indicators suggest there is going to be an increase in IT spending followed by an uptake in IT recruitment. Sharma expects this to help restore confidence in the viability of IT as a career. According to an IDC report, India currently represents 21 percent ($216 million) of the total spending on IT training in the region, and is expected to be the leading contributor in future. This is expected to be driven by a worldwide demand for software development exports. India currently accounts for 60 percent of the total Asia-Pacific demand for IT professionals.
Corporate training is another emerging growth area in the IT training space. The current emphasis on enhancing employee productivity is expected to give a spurt to IT re-skilling as companies endeavour to extract the most out of their IT investments. At present, the corporate training market is estimated to be worth about Rs 100 crore, and is likely to touch Rs 500 crore over the next three years. The e-governance initiatives launched by the central government and various state governments are expected to drive growth in this space.
This trend has also encouraged demand for customised curriculum design and course development. Corporates view training solutions that integrate proprietary processes or work knowledge as more valuable than off-the-shelf content. In addition to the ability to provide customised training, the vendor should also have the ability to deliver content using several delivery methodologies. A vendor with blended offerings of consistent quality provides the broadest opportunity for service and leverages the work product most effectively.
There has also been a perceptible shift from long-term career courses to short-term high-end certifications. This has led to an increased focus on hiring professionals with expertise in specific domains, and business analysts with programming skills. Says Nair, “The current fiscal year is very interestingly positioned since after a gap of three to four years we are seeing the demand for software-related courses and networking-related courses move hand-in-hand. The software segment has, as expected, bounced back very strongly thanks to the outsourcing wave that has been heavily in favour of India. Hence the demand for software professionals has risen exponentially.” The demand has largely been for .NET and J2EE professionals, mainly because most of the projects that have been bagged require expertise in these areas. On the networking side, network storage, WAN solutions (like Cisco’s) and Linux is gaining momentum.
Enabling services
The information technology-enabled services (ITeS) sector has special requirements in terms of training. With the boom in the ITeS segment—coupled with the high level of attrition—retention of manpower has become one of the major challenges facing any call centre. Says Nair, “Despite the high salaries and perks that call centres offer, the problem continues to persist. This has resulted in call centres having to recruit and train manpower on a regular basis.” In an effort to retain manpower, most call centres have a growth path for their agents, i.e. agents to team leaders to team managers to manager operations and so on. Since every profile demands different skill-sets, it is not economically viable for call centres to have their own trainers. Moreover, their core competency is not training but servicing the customers of a client.
Training institutes cover courses like call centre management, advanced interpersonal communication, customer relationship management, e-mail etiquette, professional selling over the phone, business English and social skills. Other than this, training institutes like Karrox also provide specialised modules on accent neutralisation, telephone etiquette and cross-cultural training.
Careers in IT
The BPO sector has been the biggest growth driver in the last year. Most software companies, including the likes of Wipro, Satyam, Cognizant, HCL and Adobe have been conducting massive recruitment drives in this space.
In the software space the demand has mainly been witnessed for experienced software professionals with domain expertise. These include software analysts, domain specialists, information security specialists, integration specialists, database administrators, network specialists and communication engineers.
Database management is another area that is slated to be in demand for the next couple of years. Vendors such as Oracle and Microsoft have been coming up with continuous innovations in this field, and with databases getting implemented across a large number of organisations, the demand for skilled professionals in this area is predicted to be sizeable.
The banking and financial sector has begun adopting Linux, and companies such as Oracle have begun to sell to their client base the benefits of Oracle on Linux. A recent market study by Red Hat estimates that at least 2,00,000 professionals will be required to work on Linux projects in India by end-2004.
One area where we can expect serious skill-set shortfalls is networking. Over the last few years networking has become an essential aspect of IT implementations irrespective of the size of the organisation. This has led to an increased requirement of networking professionals throughout the world, with a huge shortage expected in the coming years. Says Nair, “Networking professionals with multi skill-sets on Windows 2003, Linux, Cisco and UNIX-based operating systems will soon be in huge demand. Experienced networking professionals can look forward to upgrading skills in network storage and network security.”
Information Security (IS) is another area that has been growing at a rapid rate. According to Sharma, IS has shown a lot of potential in the past year. With most organisations developing a strategic focus on systems and IS, this area is poised to grow rapidly.
Information security
Network security has been a point of discussion in boardrooms across enterprises, thanks to the spate of network breaches. More and more organisations have realised that information forms a vital part of strategy. Businesses have understood the importance of a security manager who can help the company identify its security needs and develop policies and adapt systems to ensure smooth functioning of the business.
According to IDC, the worldwide demand for IS services was approximately $8 billion in 2001, and is estimated to grow to $23.6 billion by 2006. Correspondingly, there has been a growing demand for IS professionals. Nasscom pegs the current demand for such professionals at over 18,000 in India and over 60,000 worldwide. This is estimated to grow to over 77,000 in India and 1,88,000 worldwide by 2008. At this rate, by 2008, IDC expects a shortfall of over 1,00,000 IS professionals globally. Thus IS demand, which today accounts for about 3 percent of overall IT workforce demand, is expected to rise to around 5-6 percent by 2008. Informs Nair, “We are observing an increase in demand for network security among IT professionals, and we envisage that non-IT professionals will obtain user-level training at a latter stage.”
The growth has fuelled demand for various specialised security professionals—firewall analysts, incident handlers, cyber law experts, security trainers, crypto analysts, PKI and even cyber insurance analysts. According to Khera, there has been high demand in areas like creating IS policies, configuration of firewalls, administration of operating systems, conducting IS audits, disaster recovery and planning.
This has not been matched by a corresponding increase in the availability of trained IS professionals. The chasm between demand and supply is so wide that in the last one year, 70 percent of IT recruitment classifieds have been for security managers. The phenomenon is not unique to India alone. In the United States, there is expected to be a shortfall of about 25,000-50,000 IS professionals over the next few years. It is estimated that in India less than 2,500 professionals have specific IS skills; this represents a minuscule 0.5 percent of the IT workforce. Further, less than 10,000 professionals have a working knowledge of IS.
All this has made IS one of the best-paid careers. In the US, an entry-level IS professional can demand a salary of $75,000-$80,000 per annum, with those at the higher end earning around $150,000.
Notes Sharma, “India can well leverage its growing expertise in IS provided we ramp up the number of IS professionals in the country; not only to meet our own requirements but also to build a surplus that can be leveraged for global requirements.”
Training modes
Today, instructor-led training is being supplemented by e-learning. A combination of instructor-led, CD-ROM-based and online training is slowly but steadily becoming the preferred mode of content delivery. According to Nair, comfort levels for IT professionals are relatively higher with ILT. While this may be the case, studies have shown that results are much better when they are blended with training aids like course delivery slides, session-wise courseware and market-relevant examples.
Integrated learning is also slowly emerging as the de facto standard. The system combines classroom and e-learning products and services to create an effective learning experience. This model provides individual learners and training managers various advantages because it allows both groups to tie learning solutions to business objectives. The model enables the option of selecting the methods of training that work best within the determined budget.
In the classroom, the instructor provides familiar learning methods such as lectures, discussions, media access (Web, reading, video, audio), activities (labs, experiments, teams, problem-solving), and access to experts. The concept of technology-based blended learning environments has made collaborative learning a reality today. Blended learning environments attempt to bring together aspects of classroom teaching with the technology elements of e-learning to emulate classroom instruction. Blended learning solutions typically present a course of study that is serialised between technology-based and traditional (or virtual) classroom delivery, supported with additional technologies that facilitate interaction between students and instructors.
Concerns
The challenge for training institutes is to create professionals who are able to apply technology to a domain area. An ad hoc approach to training, unclear quality focus, long decision-making process and lack of conviction within the organisation about the role of training in enhancing RoI from IT are issues that have affected this sector. With the rapid pace at which new technologies come up, it is an increasing challenge to offer the latest at the earliest possible time. This has become a matter of market leadership and survival. Also, with the market opening up, there is an increasing trend of employees preferring a network deployment and software engineer’s job. Hence, if an enterprise’s standards of recruitment are high, it can be difficult to absorb good talent as trainers and even more difficult to retain them. This is a crucial element since trainers form the heart of the business. But Khera feels that as long as players can provide value and remain relevant to changing needs, long-term players will continue to thrive.
Imperatives
Most training service providers have now adopted the strategy of growing market share through new product launches and aggressive marketing. NIIT, for instance, has invested in product development, thereby creating a much finer segmentation of its products and customising them to address a much wider canvas that includes the IT and the IT-assisted education arena.
On the other hand, New Horizons believes in partnering with its customers and delivering value-based training. The company constantly conducts surveys of the Indian job market to identify training needs in various segments.
Aptech has been making forays into universities, colleges and education research. Another key opportunity that Aptech has identified is in the area of content development. The company has been offering these services to third-party clients for developing their content, customising them, or conversion into digital content. Khera believes good opportunities exist in this space since international companies can outsource their content development work to India. Aptech is currently setting up a dedicated offshore development factory for content conversion and development at Chennai.
According to Nair, there are certain imperatives to be met by Indian players if they wish to survive in the long run—quality, best trainers, best infrastructure and courseware, certification and after-training support. Unless players have this in place, no other strategy will count for much.
Expectations for 2004
The IT training industry has emerged as a mature one with a market that is demanding but growing. The market is looking at turnkey solutions for fulfilling the customer’s need for quality-trained manpower. Consequently, the industry will need to look beyond the immediate student as its customer. The employer of the student is the buyer of the product from the training industry. Organisations will have to re-orient themselves with a solution-selling approach. Products and offerings will have to be customised to individual client requirements, and the performance of the product will have to be guaranteed.
While this may appear to be a tall order for the relatively young training industry, there can be no short-cuts. Says Khera, “There is a huge demand for quality manpower in the IT industry; the training industry can either transform itself to grab this opportunity or get relegated to an insignificant part of the IT industry revolution that is sweeping the country.”Growth will basically centre on high-end training and short-term certification courses, especially in the areas of security, networking and development. 2004 should emerge as a year where the impact of job growth and booming software sales will finally impact the IT training industry positively.
| Trends in the training space |
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| Global outlook |
| The global IT training industry is growing at a steady pace. According to IDC forecasts, worldwide IT training revenues will increase at a compounded annual growth rate (CAGR) of 12 percent, from $19.4 billion in 1999 to almost $34 billion in 2004.
The European, Middle Eastern and African markets saw a slight reduction in the IT training and education outlook for 2003-04. The economic downturn and the perception that spending on training is discretionary are the key challenges in this market.
In the Americas, the training forecast has been reduced to low single-digit growth from the 2004 estimates. In North America, dramatically reduced tax receipts have inhibited spending in the government sector, while e-governance initiatives offset some reluctance with a shift towards Web-based service delivery (a content opportunity) and e-learning (a delivery opportunity). There is an anticipated gradual recovery to sustainable levels by the end of 2004. In Asia/Pacific, the corporate market is the primary force driving IT education and training.
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The China syndrome |
| The hype surrounding the Chinese market finally seems to be settling down. Indian IT companies have realised that the Chinese market poses numerous challenges though it still holds a lot of potential for Indian IT training and education service providers.
According to IDC, in 2004 the Chinese market will consume nearly $30 billion in IT products and services, and will continue to grow at about four times the global rate. Notes Sharma, “Chinese businesses have finally built enough basic IT infrastructure to drive very strong growth in software and services. In 2004 and beyond, each segment will grow at double the rate of hardware spending.” Last year, software and services totalled just 28 percent of all IT spending, but the coming year should see this figure jump to over 30 percent—and to almost 40 percent by 2007.
Narayanan seconds this: “The software and services industry in China has set an ambitious target to propel the current $1.5 billion in exports to $5 billion by 2005. To meet this ambitious goal, China will need to step up the number of IT professionals from 5,90,000 to 8,00,000 by 2005.” NIIT, which started operations in China in 1998, already boasts 130 centres in 25 provinces in that country.
Nair thinks that the key is to identify the right partner and establish operational efficiency taking into consideration the delivery mechanism, linguistic barriers, translation of courseware and the domestic environment. This is exactly what some players have done. Aptech, for instance, initiated operations in China in 2000 through its joint venture Aptech Beida Jadebird IT, an affiliate of Beijing University.
The Chinese market is different from other markets since apart from the language issue, the training provider has to take into account the background of the students and the culture of the country so as to make the course relevant to the market. Aptech not only had to translate its courses into Mandarin, but also had to include modules for teaching English to students since this was expected to help them get jobs in multinationals and in organisations outside China.
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Certifications bonanza |
| Surveys show that information technology professionals holding certifications make more money than those who are not certified. According to Sharma, there is no greater influence in an IT professional’s career than certification, especially when one is just starting out in one’s career, and needs external ratification of skill-sets and capabilities. “It is a foot in the door, a differentiator that can act as a validation for promotion.”
Information managers have realised that certifications take a more practical approach compared to theoretical training. Also, certifications are based on the requirements of the industry and hence provide more clarity to participants. According to Shankar Iyer, head, Learning Services, Red Hat India, this year a wide range of new certifications is expected since the industry itself is undergoing a major change to meet quality standards.
Red Hat, for instance, expects to see 100 percent growth in demand for its certifications. The main reason for this is that Red Hat expects to see demand for training on open source to increase exponentially over the next 12 months. This can be attributed to the adoption of Linux and open source products. Many large organisations and individuals have been increasingly requesting training on clustering, migrations, kernel internals, etc.
Certification hopefuls can choose from e-learning, multimedia, boot camps, videos, flashcards and book-based learning. There has also been a phenomenal increase in professional certifications like MCSE-Win 2003, MCSD on .NET, CCNA, CCNP, PIX Firewalls, Linux and Java, to name a few. The main concern that still remains is maintaining the quality of delivery and meeting the expectations of the participants.
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This article first appeared in Express Computer.
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