Learn and Let e-learn

In April 2004, IBM, the biggest outsourcing company in the world, acquired
Daksh eServices, a Gurgaon, India, based customer service company with more than
5000 employees, at close to $160 million. Just a month earlier, Convergys, the
number one customer service company in the world, bought another India-centric
offshoring services company called Digital Think, that is into developing
e-Learning content. The company with major facilities in Hyderabad, India, had
just about 375 employees at that time. And guess how much Convergys paid for the
company? A whopping $120 million.

By just comparing the valuations, and the corresponding sizes, one would get
a fair idea of the value difference between the two areas-call center services
and e-Learning. A close to 15 times employee base, fetched Daksh just about 33
percent more in valuation.

Yet, as we discuss national agendas and strategies, we shy away from this
low-profile but high-value opportunity. Both the apex industry body NASSCOM and
researchers on India market have virtually ignored it, covering under a more
generic and blanket phrase "content development".

The Opportunity Beckons

In a research by IDC, training emerged as the most important function which
the corporate executives would like to outsource, ahead of such functions as
marketing, HR, finance, and accounting. Gartner went to the extent of saying
that e-Learning is a recession-proof opportunity as demand rises when training
budgets are tightened.

According to IDC, global market for corporate e-Learning will grow nearly 27
percent compounded annually over the next four years, from about $6.5 billion in
2003 to more than $21 billion by 2008. IDC also calculates that US-based
companies will increase their offshore outsourcing contracts from $5.5 billion
in 2001 to $17.6 billion in 2005.

If an opportunity is there, can offshoring be far behind? Companies are
beginning-just beginning-to offshore some part of this huge opportunity.
India, the mecca of most offshoring, expectedly, has emerged as the most favored
destination, replacing the earlier hub, Ireland.

Though exact figures are hard to get, different estimates put the Indian
offshore e-Learning industry to be about $150 million in 2004-05, up almost 200
percent in the last two years. It is expected to grow by more than 60 percent in
2005-06.

With about 7000 people working in the industry, it is today a significant, if
not large, an offshored activity.

The Passage to India

Ireland has traditionally been the hub of e-Learning content development
with big players like NETg and Skillsoft having large development centers.

The advantages to companies wanting to outsource their learning content is no
different from the reasons which saw countries like Ireland, India, and
Philippines emerge as the BPO hub, that is, competitive cost, educated English
speaking manpower, and improved IT and telecommunications infrastructure.
Talking about India advantage, Shuvon Mukherjee, Partner at IBM Business
Consulting Services says, "India has an advantage of having a huge base of
communicators and teachers to create any kind of content."

Geared up to Face Challenges in e-learning
Subrat Mohanty CEO, Hurix Systems	Nicholas George Senior VP, Knowledge Solutions Business, NIIT	Vineet Narang VP Offshoring Services group of FCS Software	Anupam Srivastava President, Training Solutions Group, InfoPro

Low billing rate is obviously the most important advantage for these
companies. The average rate of learning content development in the US is about
$75 per hour, which is a huge amount for companies who are trying to cut cost.
The average cost of developing the same quality content in India hovers around
$20 to $25 an hour which can go as high as $40, given the type of content. It is
estimated that for every one hour of training content that is generated, about
500 hours of work has to be pooled in.

The Global Leaders

Some of the leading global e-Learning giants who are outsourcing a major
chunk of their business are Accenture Learning, Convergys, Exult (acquired by
Hewitt), General Physics, IBM, ACS, Intellinex, Intrepid Learning Solutions,
KnowledgePlanet, Raytheon Professional Services, and GeoLearning, Inc. Accenture,
IBM, and General Physics are on full learning outsourcing model. Sun
Microsystems and HP Services are also in this space.

Players like NETg and Skillsoft fall into a category which have been sub
contracting a large chunk of their work into India, Ireland, and other countries
for quite some time now. These companies in turn depend on leading IT companies
like Microsoft, Oracle, Sun, Cisco, etc, for sourcing the work.

Geared up to Face Challenges in e-learning
Arun Anand Chief Operating Officer, Knowledge Platform India	Albert Lewis Head, Product and Technology strategy and Business Excellence, Tata Interactive System	Rajesh Rege Director-Sales, Sun Microsystems	Robert Todd practice lead, Convergys Learning Solutions

GECIS Learning is also one of the leading players in the field in India. But
after the acquisition by Gen Atlantic Partners and Oak Hill Capital Partners,
the company is bound to go in for external clients. IBM also has a center in
Bangalore which develop e-Learning content.

The Pure Plays are here too

Apart from the global giants, there are several pure play offshoring service
providers who have mushroomed in countries like Ireland and India. There are
more than 50 companies in India itself who claim to offer e-Learning content
development services and the market has also seen some consolidations. To NIIT
goes the credit of successfully laying the foundation of e-Learning outsourcing
in India.

However, Subrat Mohanty, CEO of Hurix Learning has a different explanation
for this increasing number. He says "Most of these companies which have
mushroomed in the e-Learning space are the ones that went bust during dotcom
days and they are trying to cash in on the content and graphics capabilities
they had acquired during that time to create learning content."

Most of the Indian players such as NIIT started off with sub-contracting work
from large e-Learning content companies in the US. NIIT's offering ranges from
Learning BPO, custom training content, to corporate training. The nature of work
during this time is primarily centered on developing learning content for
software training. A typical example is creation of help files for a Microsoft
package. But that seems to have changed now. According to Anupam Srivastava,
president, Training Solutions Group, InfoPro India Limited "Most of us did
started with some sub-contracting work but now we are building up the capability
of total solution in the international arena."

Adds Nicholas George, Senior Vice President of Knowledge Solutions Business
at NIIT Technologies, "companies need to explore newer segments to survive
and grow in the market." But the fact remains that most of these companies
are yet to carve out a niche for themselves in a particular vertical and all of
them are offering services across verticals. Emind is one company which offers
compliance automation services for the financial services industry.

Lionbridge's offerings are centered around e-Learning and Training Content
Development, user assistance information development, eSupport content
development, and globalization-at-source. Noida-based InfoPro has been one of
the early starters in the e-Learning space and has been able to hold ground
despite tough competition from NIIT. Of late, it has got into some of the
hitherto unexplored domain of avionics and pharmaceutical verticals.

FCS software, another Noida based company is very aggressive on the product
training front and has 3 state-of-the-art centers of excellence. One of these is
the Canon Center of Excellence which has about 100 people working exclusively
creating training content for the products launched by Canon. Vineet Narang, VP,
Offshoring Services group of FCS says "We are trying to create a niche for
ourselves in the product training space which we think is a huge market
opportunity for us." George of NIIT adds "There is a huge amount of
knowledge that has to be transferred about products that companies launch across
the value chain, from retailers to own sales force to implementation partners
and consumers. "

Hurix systems, a Mumbai based company too saw a big opportunity in the
e-Learning space. It, however, is positioning itself to take advantage of the
change in focus from multimedia computer-based training applications to
technology-based training applications.

Sensing this opportunity, a leading IT publishing house in India Cyber Media
made a silent entry into the e-Learning space through its subsidiary CyberMedia
Services. Similarly, Jashubhai Digital media through their company typei has
also got into the e-Learning bandwagon.

While most of these e-Learning companies are located across different metros
and NCR, Pune is emerging as the new e-Learning hub with several companies
including Maximize Learning, BrainVisa, and others setting up their shops.

Global Trends

The phenomenal success of outsourced BPO business in India has established
the outsourcing trend globally. So outsourcing of e-Learning content is just a
logical culmination of the need to cut cost and outsource the areas which are
not core competencies for companies.

Some leading players have trimmed their operations in high cost countries in
Europe and are continuously shifting learning content development to India and
other countries. Skillsoft, laid off up to 140 staff from its R&D operation
in Dublin. This happened after SkillSoft, merged with Smartforce in September
2002. Similarly, NETg also had laid off 50 people in Limerick and put its
further investment in Ireland on hold. More recently, according to media
reports, Lionbridge, after the acquisition of Mentorix laid off 75 employees in
the United States, Europe, China, and Brazil.

Geraldine Kelly, the chief technical officer and vice-president global
product development, NETg, had then said in a statement "The company needs
to adjust its current business model to adapt to the rapidly changing demands of
the marketplace," said Geraldine Kelly, chief technical officer and
vice-president global product development."

One more visible trend that throws up challenges for both big e-Learning
players of the international markets and Indian e-Learning companies is that big
companies that were fueling e-Learning market so far, instead of outsourcing
their learning to external partners, are getting more and more interested in
having their own e-Learning divisions. The challenge, however, is not that the
demand of e-Learning from these companies will go down, it is just that Indian
companies will have to come out of content development box and focus equally on
designing e-Learning solutions tailored to suit various clients.

Shovon Mukherjee, Partner, Human Capital Management, IBM Business Consulting
Services, said "Learning is converging with knowledge management and being
embedded into workflow. Collaboration tools like web conferencing, instant
messaging and application-sharing are gaining traction and becoming integrated
with automated workflow technology."

The Challenges

It is not a cakewalk for learning content developers in India. Many of the
companies, more so the Indian companies have struggled to get work in the global
marketplace. Arun Anand, Chief Operating Officer, Knowledge Platform (India),
says, "Indian e-Learning companies are not yet seen as global market
players or are being recognized for the innovation they bring into e-Learning.
This is largely because Indian companies are not viewed as original content
creators. Most companies serve as large content conversion houses for US or UK
based corporates or academic institutions."

Managing human resource is the most important challenge that companies are
grappling with. There has not been any concerted effort from the industry to
work with governments and universities to formalize the introduction of
Instructional Designing as a curriculum. There are hardly any institutes which
offer e-Learning courses.

Adds Arun of Knowledge Platform "Lack of formal e-Learning professionals
is a great disadvantage for us as the rest of the world views Indian e-Learning
companies as low-end content conversion houses, though in fact there is a lot of
innovative design coming out from some companies." He further adds
"With increased offshoring, the Indian e-Learning industry has witnessed a
boom in 2004 and people retention has become a bigger challenge for
companies." Srivastava of InfoPro agrees with Arun and says, "I
definitely see a shortage of people who will be abreast with the technology
which is needed."

Robert Todd, practice lead, Convergys Learning Solutions, which competes
primarily with e-Learning and outsourcing firms such as IBM and Accenture says
"Finding and retaining top talent and developing self-sufficient teams with
business and technical experience remain at the top of the list, as does the
ability of our staff to continually learn and adapt to new competencies to meet
our customer's changing needs."

Albert Lewis, Head, Product and Technology strategy and Business Excellence,
of Tata Interactive Systems has a similar view. He says "Key challenges
facing e-Learning providers in India are the attraction and retention of good
people, growing profitably and achieving international brand awareness."

Ironically NIIT, a pioneer of e-Learning in India used to have courses in
Instructional Designing some years back but they discontinued. Here, there are
big opportunities for training companies who have not entered into the arena.

Another potential challenge is to build and improve capabilities in
delivering e-Learning content and solutions in such a way that clients can focus
on the strategic level of their business and can take care of their own final
clients while vendors in India can wholly own operations side of development.
The reality of outsourcing is that the clients have a small management team
working with large outsourcing partners in India and other outsourcing
destinations. It is in the interest of Indian companies to leverage this
opportunity by attaining maturity in being able to deliver high-quality output
by process excellence. Thus, there has to be a strong focus by the Indian
e-Learning companies to fine-tune their developmental processes so as to ensure
quality delivery with high productivity. This will not only add to their own top
line and bottom line and go up the value chain, it will also help their clients
create better value by outsourcing.

Talking about the need for a clean process to handle clients' demand S M
Nafay Kumail and Gaurav Chadha, authors of 'e-Learning: An Expression of the
Knowledge Economy' published by Tata-McGraw-Hill conclude by saying this:
"The internal vendor process should be such that the client can easily be
satisfied that the required steps were done and the input and output at each
phase of the development met the acceptance criteria drawn for a quality output.
If this process builds this kind of a visibility and order, the client will not
have to review each deliverable from all perspectives."

The process capability of India companies can be judged from the fact that
most of these companies have industry recognized certifications and frameworks
such as ISO and CMM implemented.

Interoperability of standards is also an issue. According to Rajesh Rege-
Director-Sales, Sun Microsystems "One of the biggest problems that plague
the e-Learning industry today is lack of recognized standards for
interoperability and content development. Although there are a few standards
that are emerging, they are yet to gain widespread acceptance. "

The New Areas of Opportunity

Some of the e-Learning content companies are strategizing to move beyond the
e-Learning space. Many companies are also seeing a tremendous increase in global
mobile penetration as big opportunity to deliver learning content on mobile
devices. Another area where companies are getting into is localization. InfoPro's
Anupam Srivastava prefers to call it "Glocalization-a combination of
globalization and localization."

Newer opportunities also mean a sustained growth for the players in the
domain. According to Subrat Mohanty, CEO of Hurix, "We have seen tremendous
growth in the last 12 months and hope that this momentum will continue for the
coming years." Naren Nayar, CEO Globarena says "Much of the potential
is yet to be translated to actual revenue as organizations are still piloting
the early projects to convince their management on the investment."

European Commission has announced that it will allocate 10 per cent of all
funds available in its education and training programs to e-Learning. This
figure itself comes to around 300 million euros.

Opportunities for Broad-based BPO Companies

For India-based BPO companies offering call center and other transaction
processing services, e-Learning is a big potential area. They can leverage on
their expertise of operating an outsourced business and get into the totally new
high revenue generating area.

While IBM, Accenture, and ACS are major players in this industry, the
broad-based India-centric BPOs still are not there. Till how long-is the
question.

Sudesh Prasad