Meet Sanjeev Khanna. He's 21, a graduate in History from one of the lesser colleges affiliated to Delhi University, and was aware, even as he enrolled for his degree in humanities that his qualification wouldn't take him very far in life. Reluctant to be part of life's flotsam, he signed up for a three-year programme at NIIT. The ads looked good, the brochures, even better, and the company held out the promise of a job abroad with an Indian software major, possibly with a multinational. Today, a year after he completed both his bachelor's degree and the three-year programme, Sanjeev is still in search of a job.

Sanjeev isn't alone. Every year close to 10 lakh software-hopefuls enroll for programmes at education-centres run by 30-odd companies. In money terms, that's a Rs 2,000-crore industry-one that grew at an average of 36 per cent over the past five years; and one that may well be dying now.

It's a death that's manifest in the stock prices of software education majors such as NIIT and Aptech (between them, they boast a marketshare of 56 per cent). At the time this article was being written, the first was quoting at Rs 234, a staggering 94 per cent off its February 2000 peak (Rs 3,800); the second at Rs 63.65, an equally staggering 96 per cent off its February 2000 peak (Rs 1,540).

It's a death that's evident in the financial statements of these companies. NIIT's 2000-01 turnover (its year ends in September) was 8 per cent lower than the corresponding figure for the previous year; its profits, 29 per cent lower. Aptech's numbers give no cause for cheer either: the company's turnover for the year 2001 (its year ends in December) was 39 per cent lower than that for 2000; its profits, 29 per cent lower. Even SSI, which, with its focus on specialised programmes, was expected to be insulated from the market chill-its 2001-sales increased by 76 per cent; its profits by 4 per cent-saw its revenues for the last two quarters take a hit.

And it is a death that is apparent in the projected growth of the IT education market. According to one study by the Mumbai-based Business Consulting Group, the industry will shrink by 35 per cent in 2002. As Ryan Lowe, the senior consultant at BCG who authored the report puts it, ''Several franchisees now want to sell out because they don't think the business has a future.'' In Mumbai, for instance, NIIT's Matunga centre and SSI's Bandra centre have shut shop. And Aptech's Santa Cruz centre has changed hands.

Franchising, in case you are wondering, was the route adopted by most IT education majors to grow. They'd design the curriculum, set the standards, and let the franchisee run the business. So, when the business suffers, IT won't just be the companies that will go down: they'll take with them an estimated 6,000 entrepreneurs who rode a decade long software boom.

The Coroner's Report

All was well as long as Indian IT services companies felt the need for warm bodies that could code. In the 1990s they couldn't have enough. The creation of a market economy, IT education companies were better equipped to meet this demand than engineering schools. The nineties were also a decade of transformation for Indian companies that realised the imperative to endow their business processes with an information technology backbone. That spurred demand for middle-of-the-road IT-pros who could serve as network administrators, infotech managers, and all-purpose trouble-shooters.

By the turn of the century, though, engineering schools (there were more of them now) had got their act together. More significantly, the Indian software sector found itself caught in the grip of a downturn (its first ever). Exacerbating things were the great dotcom bust and the fact that much of corporate Indian seemed to have had its fill of IT pros-there are only so many network administrators a company can hire. Today, few software services companies hire software engineers from the likes of NIIT and Aptech. As Hema Ravichandar, Senior Vice President, Human Resources, at Infosys Technologies says, ''We (only) hire from the best institutions like the IITs and IIMs; we also hire people with a masters degree in computer applications.'' Adds S. Mahalingam, Executive Vice President, Tata Consultancy Services, ''Most of our new hires are from engineering colleges.'' To back those quotes with a number: of the 2,000 entry-level software jocks hired by TCS, just two were from NIIT. Why, even smaller IT services companies don't settle for anyone who isn't an engineer. ''This year, we have already hired over 50 people and all of them are engineers,'' says Vishnu Dusad, Managing Director, Nucleus Software, a Delhi-based company that operates in the banking and financial services vertical.

The change in recruiting-focus can be easily explained: Indian software companies are no longer content to provide low-end IT services. Some, like Ittiam Systems and Sasken Communications aspire to be in the product space; others, like Infosys, wish to enter the business transformation domain and compete with large consulting firms; and still others, like Wipro and HCL Technologies see a lucrative niche for themselves in high-end technology services. Coding is infra-dig and coders, not very much in demand.

Another reason for the fix the IT education industry finds itself in is simple tunnel vision: most companies focused their efforts on franchisees and students, ignoring their real customers, recruiters. Admits a former NIIT employee: ''All of us, NIIT, Aptech, and the like, used to view students as our customers; only when the industry starts viewing the companies that employ their students as customers will things change.''

Rigor Mortis Or Still Warm?

So, while some companies-''Eighteen of India's top 20 IT companies hire our students,'' claims an NIIT spokesperson-put up a brave front, others aren't as bullish. ''In the past one year, the market for students graduating from IT training institutes has disappeared,'' confesses Pradeep Tripathi, the Chief Executive of Edutech Informatics, which runs 250 such institutes across India. Adds Ganesh Natarajan, the CEO of Zensar and the former CEO of Aptech's education division, ''The window of opportunity for entry-level programmers, who would typically enter the market after a year or more of training at one of these companies has closed now.''

The result is a shakeout in an once-stable industry: Aptech has decided to separate its education and software businesses (both entities will be listed); NIIT has been selling its company-owned centres (and has managed to find buyers for four, out of a total of 30) in an effort to reduce its operating expenses; Edutech is considering moving on to bioinformatics; the West-Bengal-based George Telegraph Training Institute, which runs a chain of 14 centres has already made the shift to what it calls ''call centre training''; and the market is abuzz with rumours that Chrysalis' bid to acquire a 15 per cent stake in NIIT (See The Chrysalis Deal) is a pre-cursor to a two-, even three-way alliance between the company and others in the same space.

While the retail-end of the business has suffered, the corporate training part has managed to hold its own. For instance, Tata Infotech saw the corporate training division's contribution to its revenues swell from 5 per cent in March 2001 to 35 per cent in December 2001. ''We believe corporate training is a far more stable business,'' says the company's head of education services Rahul Thapan, who is scripting a new corporate-focused business model.

If Tata Infotech has sought to move up, others have moved down. Both NIIT and yesterday's stockmarket favourite SSI are focusing on the Rs 360-crore computer-literacy market, which is estimated to grow almost 20 per cent this year.

Indeed, NIIT is confident that the consumer business won't disappear anytime soon. For the quarter ended December 2001, it actually saw a 35 per cent increase in enrolments, courtesy discounts that that were proffered for the first time ever. It is also forging relationships with schools for basic programmes and has already signed on 1,200 of them. ''Things are looking up for us, even in the retail segment,'' says Pradeep Narayanan, Senior Vice President, NIIT.

The others aren't as confident: Edutech has pruned its rolls by an even 100; SSI has cut its workforce by 30 per cent over the last two quarters; even NIIT has slashed the workforce of its education business by 30 per cent, although it refuses to either deny or confirm the figure. ''As we are moving to a more franchisee-centric system, more people are being transferred to the centres,'' says an SSI spokesperson.

For companies in the IT education and training business, 2002 could well mark the death of the lucrative middle-courses targeted at wannabe programmers. To survive, says Ganesh Natarajan, former CEO, Aptech, they'll have to ''focus on short-term and high-end training courses, and leave the consumer courses to be taught in colleges''.

-Additional inputs from Vinod Mahanta