Rajendra Pawar Chairman, NIIT: Thanks to his new strategy NIIT has managed to up its share in a shrinking market

Hi, I am Raji, and I am building NIIT'' reads the name-badge NIIT Chairman Rajendra Pawar wears. This financial year (NIIT's year ends in September) has given Pawar the opportunity to not just build the company's education business, but also rebuild parts of it.

For the first 19 years of its life NIIT was seemingly on a roll. For instance, in 1999-2000, the education business generated revenues of Rs 625 crore and returned operating profits of Rs 138 crore, up from Rs 481 crore and Rs 106 crore the previous year. Then, the US economy went into recession, companies there cut their it-spends, and Indian software services companies focussed on that market went into maintenance mode. Bench-strength swelled across India's finest software companies. And they reduced their intake of fresh software professionals.

Suddenly (for the first time in a decade) the market had a surfeit of software professionals (a mere 12,000, but still a surplus; see Demand For Software Pros).

''The slowdown had hit all major exports but it was most visible in it because of the preceding hype,'' says P. Rajendran, NIIT's Chief Operating Officer. That perception, says Raju (as Rajendran is known within the company), ''led to wrong decisions and one of these had to do with (people) putting off their decision to imbibe it education.''

Expectedly, NIIT's revenues from the education business dipped from Rs 625 crore in 2000 to Rs 509 crore in 2001; its operating profits from Rs 138 crore to Rs 20 crore.

Even before September 2001, though, NIIT had firmed up on its strategy to tackle the slowdown. From developing the market, a task it had taken upon itself in its role as the market leader, NIIT decided it would focus on grabbing share from its competitors.

That wasn't an easy decision to make, but as Pawar puts it, ''if you are walking upstream, and there is a cloudburst, it is best to run for cover faster than others.''

Tackling The Slowdown

Translating the strategy into action necessitated launching a marketing blitz. NIIT introduced four new technologies between May 2001 and January 2002; launched six new programmes between February 2001 and December 2001; expanded its network from 2,228 centres in March 2001 to 2,497 centres in December 2001; increased its reach among schools; focussed on a slew of customer-centric initiatives such as education loans and money-back offers; and increased its spending on branding, advertising, and marketing.

The results have started appearing in statistics: enrolments are up (See How NIIT Weathered The Blues), even in career-oriented courses (registrations seen in the July-September quarter of 2001 were the highest ever); and among the top three it education companies-NIIT, Aptech, and SSI, in that order-NIIT gained relative marketshare.

Detractors-and this includes several equity analysts-point out that NIIT's increasing marketshare doesn't count for much in a declining market. A report put out by the Business Consulting Group estimates that enrolments shrunk by 17 per cent in 2001-02 over 2000-01, and revenues by 35 per cent.

And even a recovery in the US economy, says one investment banker will not improve the sector's fortunes in a hurry. ''We believe a demand upturn in education will emerge,'' he says, ''but it could come with a lag, and a long one at that in current oversupply conditions.''

NIIT disagrees with both sets of analyses. It points to the 2002 edition of Nasscom's annual survey of the Indian it industry to prove its point. According to this report (See Demand For Software Pros), the ''oversupply'' was a mere 12,000 software pros in 2001-02.

Better still, Nasscom projections at their most optimistic put demand exceeding supply by 533,500. Even the least optimistic estimate has demand exceeding supply by 64,000. Interestingly, these numbers do not include the demand for software professionals in it-enabled services in India-a business that actually grew by an estimated 70 per cent in 2001-02.

In the light of these numbers NIIT's take about 2001-02 being an one-off bad year rings true. Ergo, IT education does seem to be on sound ground in the long-term.

"The slowdown had hit all major exports, but it was most visible in IT because of preceding hype" P. Rajendran, Chief Operating Officer, NIIT

Marketshare Matters

The numbers in the Nasscom survey are also borne out by the feeling among analysts that the worst is over for the Indian software sector. Raji (both he and Raju are alumni of the Indian Institute of Technology, Delhi) is actually willing to venture his estimate on when the IT education business will be able to get back on track-the middle of this year.

While waiting for that to happen, NIIT is busy innovating: it has focussed on e-learning and pared wasteful expenditure in areas like travel and communication.

Much like GE, says Pawar, which once upped profits by $1.5 billion despite stagnating revenues, NIIT is focussing on getting the most out of its operations.

And if the market moves out of its doomsday-perception of the future of the software business, he adds, ''there will not necessarily be a lag (between the revival in software services and that in the information technology education business).''

Does marketshare matter all that much in a bad year? Actually it does, especially in a business like it education.

Most companies operate through franchisees and the permanence of these centres makes the business highly capital intensive from the franchisees' point of view. That means capacity utilisation is critical: a low capacity utilisation could force franchisees to defect or exit the business altogether.

That, says Pawar, is one reason behind NIIT's introduction of shorter term beginners courses like NIIT Swift Jyoti (targeted at housewives). The revenue from these courses may be low, but they do keep the capacity utilisation high.

In effect, NIIT seems to be using the slowdown to make its own operations more efficient, and gain marketshare at the expense of its rivals while the rest of the industry goes through a catharsis of sorts with some smaller companies being forced to down their shutters. Already, the presence of the unorganised sector in the it education business has shrunk.

Consequently, when the revival does happen-and no one, not even the most Cassandra-like among analysts denies that it will-NIIT will be better placed to leverage the resulting boom.

Meantime, the company continues to focus on market development in the global arena.

In China, for instance, where it has alliances with six universities and three software technology parks, NIIT recently crossed the 50-centre mark.

So, does all this mean it education is alive and kicking? Ask Raji, and a trace of vehemence creeps into his voice: ''it education is dead if education for humans is dead. I'd like someone to convince me that education for humans is dead.''