Slowdown begins to impact IT training industry

Rosemary Arackaparambil & Robin Elsham

MUMBAI: It's very much like the difference between a bad headache, cold and
pneumonia. The global tech slowdown has hurt profit growth at most Indian
software service companies, including global operators like Infosys
Technologies, Wipro and Satyam Computer Services

But it's caused profits to plunge at major Indian computer training
companies, and could drive thousands of smaller firms out of business, said
Dilip Mahapatra, president of the Mumbai-based National Association of Computer
Trainers (NACT).

"The 5,000-odd fringe players could be in serious trouble because of the
lack of demand for short-term IT courses," Mahapatra told Reuters in an
interview. Yet Mahapatra, who also heads Zee Interactive Learning Systems Ltd,
one of the big companies in the industry, said all the media attention showered
on the slowing IT industry obscured the fact the field still offered solid
career prospects.

"If you look at the future, there will continue to be strong demand from
users like insurance, finance, medicine. They will all be high users of
IT."

Vanishing profits

Be that as it may, right now training firms are scrambling to cope with
declining enrolments and a huge drop in profits. The industry's top two firms -
Delhi-based NIIT and Mumbai-based Aptech, both with more than 2,000 training
sites - reported profit in the April-June quarter plunged more than 90 per cent
from a year earlier.

Chennai-based SSI, another large operator with about 600 training centers,
fared worse, posting a loss of Rs 144.58 million ($3.07 million) for the period.

The Indian IT-training industry, valued at Rs18-20 billion is extremely
fragmented. Estimates of the number of institutes vary hugely, from NACT's
estimate of 12,000, to 70,000 estimated by the National Association of Software
Services Companies (Nasscom).

By NACT's reckoning, the 10 largest operate about half of the training
centers nationwide, while many of the rest are "mom and pop"
operations, some one-room operations with just one or two computers.

Going for Plan B

Indian students unable to gain admission to colleges offering professional
IT courses have flocked to private centers to gain even rudimentary skills to
get jobs in the software sector. Private institutes trained nearly 1.8 million
people last year, mostly in courses ranging from four weeks to a year, though a
few courses take up to four years to complete, Mahapatra said.

Institutes mushroomed when dotcoms were in vogue and students were flocking
to Web-oriented courses, often opting for those that lasted less than a few
weeks. "Last year even if a student did a two-month or three-month course
in Java, he could get a job paying Rs 5,000 (a month)," Mahapatra said.
"Today he is not sure whether he wants to commit Rs 20,000 for a course
that does not guarantee a job."



The US-tech sector has announced more than 100,000 job cuts this year, while in
India companies like Himachal Futuristic Communications, Trigyn Technologies and
SSI have reduced staff. Recent cases of some institutes suddenly shutting shop
and leaving students in the lurch have also unnerved students though Mahapatra
cites these as isolated cases.

Domestic opportunity

The outlook for training institutes is not as bad as made out to be,
Mahapatra said. "Long-term software engineering courses are in
demand". High-end, niche software courses, to retrain or enhance skills of
software professionals were also very popular, he said.

SSI's chief executive Kalpathi Suresh said in an earnings conference call on
Monday that overall education market had shrunk by 20-25 percent, and would not
decline much further. "We believe that though there is still a little bit
of settling happening in the market, it has more or less bottomed out in
July."

NACT says the courses in demand these days are those offering training for
IT-enabled services like call centers and customer relationship management. Also
sought after are those focused on training experts in networking, and in
embedded systems software like those used in intelligent devices like ATMs,
printers, copiers, fax machines.

(C) Reuters Limited 2001.