The Men Behind NIIT

"In 1985, seven young men got together to write 272 words–words
that would go on to become the foundation of their business objectives, ethics
and strategies. It took them six months to do it. They wrote this ‘Rule Book’
three years after they set up the company, for they felt they needed one–they
were growing rapidly, and needed central defining principles and guidelines to
chart the future. In the three years before those 272 words were written, not
much changed, except company size. Today, 17 years after, everything has changed…
those words are the only constant. They are among the straws that they hang on
to in stormy waters. Increasingly, in troubled times–in the last two years–they
have gone back and looked at those 272 words to take some very tough decisions.
Those words are the cement that keeps them and their vision together"

Vijay Thadani

chief executive officer, NIIT, on the company’s mission statement, Our Vision

It’s a ship that’s been cruising along for 20 years now, but ask the men
at the wheel to put their finger on the turning point–the one defining moment
when the rudder shook itself free, the corkscrews bit into the water, and the
bow rose above the water, propelling them into business fast-forward–and it’s
flashback to Year 1990.

"The country was facing an acute foreign exchange crisis and the oil
pool deficit was crippling. When the crisis hit, the first thing the government
said was ‘export or perish’. We joined the band of corporates who decided to
chip in, and targeted the US and Singapore–the US because it was the biggest
market, and Singapore because that was a country where everyone had access to
hi-tech devices, but few knew how to put them together. That also marked our
entry into the solutions space," says NIIT chairman Rajendra S Pawar.

CEO Vijay Thadani remembers that it was around this time that the management
realized that there was a world "outside the little well called
India", and tried to figure out what to export. "We had two core
competencies we could sell–the obvious one was software development and
services. The other, which we discovered that we had built ourselves, was a
pleasant surprise–knowledge solutions. In those days, we used to call it
educational SW development. We had unique capabilities–we had been building
courseware for years, and CBTs helped us tremendously. The market gobbled it
up."

The market is still gobbling it up, notwithstanding the hiccups of the last
year-and-a-half of the slowdown. And the same ‘training company’ status that
saw it bear the brunt of the slowdown much before the rest of the industry, is
not helping pull NIIT out much sooner than other segments of the industry.
"It’s a typical ‘In First, Out First’ syndrome. The slowdown and the
resultant general lack of interest in IT saw us take a fast and big hit, but the
intrinsic training strengths and expertise we built up over the years are
helping us ride out the storm well before others," says Pawar.

NIIT, the exporter

There were three stages that saw the domestic training major metamorphose
into a global training and software services player. First, NIIT set out by
becoming an exporter. Second, it did what an MNC does, and for a few years even
called itself an Indian MNC–where things are centralized back home, and the
overseas body works like the foreign station of the mother company. Third came
the stage of being a global company with a local flavor–with products
customized to suit that particular market’s requirements, a local company with
a global presence. "A local company with a presence in 32 countries is what
we like to call ourselves, and that’s really helped us, even in these tough
times," says Thadani.

	Rajendra S Pawar Chairman “Our larger goal has remained unchanged over the years–to redefine the market and our reach in it. For over five years, our goal has been to become the ‘World #1’ in training and the ‘World's Best’ in software services”

And just before the onset of the slowdown, NIIT entered what is perhaps Stage
IV of its evolution. "In the first 18-19 years, we had organic growth.
Every brick had the blood, sweat and tears of NIIT-ians attached to it. We built
the company brick by brick by brick. It was in 1999, when we were looking at
moving faster into the international terrain, that we realized that our
single-largest challenge would be customer acquisition, and the fastest way of
doing that would be inorganically. Buy the company, bag their customers, attach
our value-add, and start servicing them–it would be good for us, good for the
acquiree, and good for the customers. The challenge here was the integration
process, and the need to prove that it was good for the acquiree as well,"
says Thadani.

Cash was not a problem–the company had built up a strong balance sheet over
18 years and was sitting on over Rs 300 crore in cash. What needed to be worked
out were the math, physics and chemistry. The numbers had to work (math), the
two gears had to mesh together and work smoothly (physics), and the people’s
aspirations and hopes had to be lived up to (chemistry). These parameters were
hard to come by in any one given company, especially the math. It was when the
slowdown hit and valuations crashed that the company went ahead and acquired
three companies in quick time (see box, Math, Physics and Chemistry).

	Vijay K Thadani President & CEO “In the early 90s, we realized that there was a world outside the little well called India. That’s when we tried to figure out what to export, and it was at around that time that our core competencies came to the fore”

"In the heydays, we were making steel. In the slowdown, we have been
tempering that steel. And like all good steel, if it isn’t tempered, it doesn’t
have the strength to withstand pressures. As a company, NIIT is coming out
stronger after the slowdown," says Thadani. "It’s also given us
direction to chart out a roadmap to get to our long-term goals–that of
emerging as the world’s #1 IT training company and as the world’s best
software services firm," adds Pawar (see interview, Target World #1 in
Training). "And throughout, it will be acquisitions that will be the real
growth driver," he adds. So are there more quick acquisitions around the
corner? "History proves that 70% of all acquisitions fail. We have been
lucky thrice. We don’t want the fourth to join the failed list. We will buy
when the mix is right," says Thadani.

In the organic part of the NIIT spectrum, there’s a curious twist to
product fortunes. The geographies where software services sell more are the same
geographies that the education services sell less. Thadani explains–"In
the developed world, development has already happened, and therefore, software
services sell… but since they are developed, education services do not sell
well. The reverse holds true for the developing world.

The fall and the resurgence

Chief operating officer P Rajendran explains how the reversal first boxed in
the company, and then brought it around to coin stronger strategies for the
future. "After 18 years of getting ready for next year’s growth, NIIT, in
the slowdown year, was suddenly forced to think of how to turn around.
Registrations fell and that was dramatic–in July last year, we started dealing
with the bad times. Our strategy was clear–reach out to the world. We had to,
for a student customer is different from any other. Our customers never bought
"off the shelf". It was obvious that students were delaying their
decision to join courses–instead of just counseling those students who came to
us, we became proactive, went to schools and colleges and talked to prospective
students. Initiatives like technology seminars were revved up. We also managed
to reduce costs by 29%. Changing the marketing strategy boosted confidence in
the system."

	P Rajendran, Chief Operating Officer “Though China and the rest of the world account for just 15% of revenues, with 85% of our numbers still coming from the domestic market, it is these new markets that have immense potential and need to be attended to closely by our thinktank”

 For the first time in the history of NIIT, operating profits in the
April-June quarter of 2001 were negative. "By JAS, this was revved up to
just below negative. In OND, we were just above board. JFM was positive, but
nothing to write home about. Finally, in AMJ 2002, we could really start talking
to shareholders again," says Rajendran. Going ahead, the company is
planning to play the geography card very carefully. "It is true that our
Indian operations account for 85% of overall revenues, but China and the rest of
the world (though just 15% of revenues) have immense potential. We already have
a presence in most of the developing world–centers in Nepal, Bangladesh, Sri
Lanka, Vietnam, West Asia and Indonesia. We have three centers in Columbia as
well. The white space is the developed world–in about a a year from now, we
want to explore that space, perhaps with the corporate training market in Europe
and the US to begin with.

Managing software services

Moving away from the bought out, a look at the newly-created–NIIT
Technologies, the company’s recent move clearly targeted at establishing it as
a serious software player. And that, in a year in which software revenues
exceeded those from training for the first time, ever. "In order to
differentiate ourselves from other players, we focused on increasing the
effectiveness of end-users. We had a headstart–we were already focusing on
end-users insofar as our training business was concerned. We tied up with IBI
and brought in the technology of 4GLs," says NIIT president Arvind Thakur,
and the man who manages the software services business.

Tracing the path that led to NIIT Technologies, Thakur remembers–"This
goes back years and years. Many companies that we did software deals with liked
the concept of implementing executive businesses, but some had their own data
processing organizations. They asked us for our tool–Focus–and we had no
problem with sharing that, and that’s how we started SW product distribution.
Most recognize NIIT as a training company, but few do as the pioneer in the SW
product distribution space." But SW product distribution was extremely
difficult–in the late-80s, people were not used to paying for software. The
reason was simple–hardware vendors dominated the industry and when people
bought machines from them, they expected them to do what they wanted them to do.
Software was already installed–bundled–and no one had a clear perception on
its value.

	Dr Sugata Mitra, Chief Scientist and Senior V-P “Being literate is not about being able to sit and take a test and clear it. Being literate is all about being able to do”

In 1995, NIIT’s software services division went in for a more robust model–as
a software company, it was dealing with emerging technologies; and as a training
company, it became more focused on new technologies. But this saw the company
ill-equipped to deal with legacy. "When the Y2K phenomenon happened, we
stayed out of it–we saw Y2K as a temporary phenomenon, while enterprise apps
and integration was seen as the hot thing of the future. In hindsight, we missed
out on a brand-building opportunity. On the whole, the 90s went off pretty well
and we were moving globally, investing in the front-end and giving a local
flavor to all our geographies. It was around this time that we were confronted
with a series of external events–economic recession, dot-com meltdown, 9.11,
geo-political instability," says Thakur.

To deal with these events, NIIT’s software services division

n Expanded its portfolio to
include legacy and build an annuity scheme–so far dormant as an activity in
the organization;

n Brought in a sharp focus on
specific domains and verticals–clearly, customers valued domain competence
more than technology expertise;

n Put into place a significant
cost-reduction program–even going through the process of
"rightsizing" the organization; and

n Put into place an inorganic
program for growth.

	Arvind Thakur, President “NIIT Technologies was a move toward establishing us as serious software players as well as the leader in IT education. Our software revenues exceeded those from training for the first time this year. This is the real opportunity, and we have strategies in place to tap into this potential”

Currently, NIIT Technologies is involved in four service practices–legacy
modernization and maintenance, knowledge management solutions, customized SW
development, and enterprise integration. As for the hot focus areas, there are
three–financial services, transport and retail. "We aim to target
under-penetrated geographies, verticals and service lines, for instance
insurance. The reason we bought Osprey was because it would give us a lead in
the package implementation space in the US. DEI gave us domain expertise and
customers in the US. Pieces of the larger strategy are falling into place."

B2B2C: The new push

The acquisitions are also targeted to help out the knowledge solutions
business. Ashish Basu, senior vice-president and global head of the knowledge
solutions business, reveals how the Click2Learn division buyout brought in 12
customers–sic of these were inherited along with the deal, three came in as
repeat business for Click2Learn, and three were signed up after the acquisition.

The acquisitions are also targeted to help out the knowledge solutions
business. Ashish Basu, senior vice-president and global head of the knowledge
solutions business, reveals how the Click2Learn division buyout brought in 12
customers–six of them inherited with the deal, three came in as repeat
business for Click2Learn, and three were signed up after the acquisition.

	Ashish Basu, Senior V-P & Global, Head, Knowledge Solutions Business “Let’s face it.E-learning is hot with corporates today. And with no real transactions as such, security in also not much of an issue. It is only the low level of Internet penetration in India that rankles”

"With KM, the need was to offer a wider range of services and multiple
solutions. In keeping with that need, we operate in the customized space, and
not off-the-shelf. We are working on alliances, but our central strategy is to
tap the B2B2C (business to business to consumer) space. For instance, we have
developed training modules for Microsoft, which it uses to cater to its own
clients. We have done game design work for AI Online and have a partnership
agreement with Riverdeep–both these deals are valued at over $4.5 million
each. Other clients include Edutech, ITT ($13 million), Novell, PeopleSoft,
General Electric, Reliance Industries, P&G and Bharti Enterprises,"
says Basu.

Rajeev Narayan in New Delhi

Math, Physics and Chemistry

NIIT’s strategy in past years has been to increase marketshare through
initiatives like technology enhancement, new product introduction and
brand-building. But behind all this, the company has also been buying into
domain expertise–inorganic growth walking along the acquisition or partnership
roads. Here, the maxim of math, physics and chemistry has been put to work–the
numbers have to work (math), the two gears have to mesh together and work
smoothly (physics), and the people’s aspirations and hopes have to be lived up
to (chemistry). But these parameters were hard to come by in any one given
company.

So the company took another route–the EDGE program. Here, it would take a
minority stake in a company developing a unique product or service, around which
there are services required. The larger picture here–the stake gives NIIT a
stronger partnership, and the target company gains a strong implementing,
integration and alliance partner. NIIT gains access to technology that’s
exclusive, and gets to participate in the development of the technology. And
here’s the added benefit–part of that development can be done offshore, and
there’s clear revenue streams for both NIIT and the partner (or acquired
company). NIIT has so far made six such acquisitions or partnerships.

Plus, happy tidings from the slowdown–in prior acquisition deals where the
math was not right but the other two factors were meshing, low valuations saw
the math becoming very attractive post the IT meltdown. Here, NIIT has made
three acquisitions:

Click2Learn: A Paul Allen product company that also did services. When
Click2Learn decided to do only products (the services business was losing
money), NIIT bought the services business. "They got some money for a
loss-making business and we got instant access to 200 customers, and their order
books," explains chief executive officer Vijay Thadani. "We got their
losses too, but since we brought everything offshore, the business turned
profitable, instantly. So everyone was happy, and continues to be." NIIT
acquired the custom development business of Click2learn and now uses Click2learn’s
well-known Aspen enterprise learning technology platform to offer knowledge
solutions. The acquisition gives NIIT’s knowledge solutions business access to
a large market requiring custom learning solutions.

Click2learn is expected to bring in revenues of $15 million over the next two
years.

Osprey: An SAP implementation company and NIIT’s self-professed
"proud catch". "That’s because 10,000 miles way, in the
wilderness of America, sit 60 people who are now born NIIT-ians. The street
itself is called Osprey Drive. NIIT began talks with Osprey in 1999 itself, but
the price was high… till the slowdown hit. And when the VCs asked the
management to go and look for a suitor, they contacted NIIT. The acquisition
fits in with NIIT’s enterprise integration offerings. The Nasscom-McKinsey
study shows that packaged solutions implementation and support will be one of
the largest exports area for the Indian IT industry. Osprey is an end-to-end
solutions provider in SAP. NIIT Technologies’ enterprise application
integration focuses on packaged solutions and the acquisition gives NIIT
Technologies the range of capabilities in SAP that it can take to customers
globally as a key offering. Osprey’s capabilities, combined with NIIT’s
reach, make this acquisition an important step forward.

Osprey is expected to bring in revenues of $35 million over three years.

DEI: The acquisition was targeted at gaining domain expertise in the
insurance space, and has worked well. Today, more than anyone else, we have
experience in the insurance business. DEI is a group of consultants with
expertise and understanding of the insurance space in the US, and the buyout is
expected to give a boost to NIIT’s FIB practice.

Life is All About Being Together…

In 1988, Asiaweek called NIIT the biggest computer trainer this side of the
Suez. In November 2000, the Far Eastern Economic Review called NIIT the
"McDonald’s of Software Business", based on the strength of its
franchise network. The past two decades represent a journey that’s been packed
with challenges, trials, tribulations and moments of elation and satisfaction.
DATAQUEST presents NIIT, through the eyes of some of its franchisees

"We have grown with NIIT–from a single center in
Chandigarh in 1988, to over 60 centers now. Over the years, NIIT has enlarged
the scope of our relationship, entrusted us with freedom to expand our network
and participate in strategy building. The entrepreneurial ambition that NIIT lit
up in me has helped me develop to a level where I am helping local entrepreneurs
grow in my territory. My team size has grown to 400, with a 30-person strong
team offering services to NIIT’s global customers in the e-learning
space"

–Pratap Agarwal, worked as a software engineer
in the US before becoming NIIT’s business partner for Chandigarh in 1988.
Today, he handles 60 centres

"The high point of our ten-year-old relationship
is the intensive interaction with NIIT that has helped design the future of
thousands of young IT aspirants in our territory. The inputs that we get during
regular interaction and the annual conferences help us service our customers
better. I am looking forward to the second conference later this quarter to see
how we can bring more cheer to our students"

–Preetinder Singh Brar, worked in Zuari Agro
and Punjab Agro Industries before becoming NIIT’s business partner for
Ludhiana in 1993. Today, he handles 21 centers

"As an NIIT partner, my satisfaction comes from
building a committed team, especially faculty members, who are excited about
imparting world-class IT skills to young career-seekers. A number of them are
doing India proud in their global assignments. Many faculty members have taken
on a much larger responsibility, in the same way as I have got an opportunity to
deliver a larger part of the education delivery value chain"

–Alok Tandon, worked as a corporate executive
before becoming the NIIT business partner for Dehradun in 1990. Today, he
handles 9 centers

"Continuous evolution of new methodologies,
including the recent MCLA methodology changes, and curricula puts us miles ahead
of our competitors. The NIIT practice–to use only genuine branded software–is
being followed by the partners. The cost of ownership of software is factored
into the business model and TIRM costs. The 2001 Punjab ‘Independence Day
Award’ to me for contribution to computer education and IT literacy bears
strong testimony to the power of the brand and its deep impact on society"

Gurjeet Singh Sekhon, worked with Indo Gulf
Fertilizers and Indian Potash before becoming NIIT’s business partner for
Amritsar in 1994. Today, he handles 10 centers

"A series of initiatives that helped NIIT grow its
marketshare included a slew of new products, inputs on marketshare strategy and
cost management, and shorter-term renewal and easy payment plans. A small number
of franchisees with a personal agenda tried to brew trouble, but most of us
stuck to our guns–after all, life is all about being together"

Maulik Patel, NIIT’s business partner for
Baroda since 1996

"The quality vision and actions of NIIT, across
all levels, have helped grow the richness of my relationship with the company. I
am proud to be extending the NIIT quality vision by shaping the future of
youngsters in Rajasthan"

Mukesh Bansal, managed his own data processing
center, before becoming the NIIT business partner for Jodhpur in 1996. Today, he
handles 10 centers

"My experience in the field of HR, coupled with
NIIT’s inputs, has helped me build a vibrant team of like-minded
entrepreneurs. Developing my channel, my team and launching bright youngsters on
the road to IT gives me a tremendous sense of satisfaction"

Capt Virendar Singh,
Worked in the HR teams at TCS and Wipro before becoming NIIT’s business
partner for Faridabad in 1992. Today, he handles 40 centers

Tapping into New Segments

The hottest words in the domestic market are ITeS (IT-enabled services) and
BPO (business process outsourcing). Here’s what NIIT is doing on these two
fronts

SmartServe

R Venkatesh Iyer, president and COO of NIIT SmartServe, perhaps sums up the
ITeS rush best–"Around a year back, with both software services and
training going through a rough patch across the country for all companies, we
looked at ITeS, and recognized a huge opportunity. Everyone was talking of
outsourcing to bring operational costs down. We talked to some companies and
realized that business itself was changing–the heydays were over. We wanted to
expand our services offering, but carefully. While Spectramind and Daksh
eServices had done great work, there were also cases like medical transcription,
which had died–and lessons had been learnt by industry there."

So it was that after conducting some studies, NIIT decided to avoid
voice-based operations. "Third-party service providers were very, very few,
and this is where we wanted to come in. By that logic, even our late entry was
well-timed, for this is when companies were talking about outsourcing critical
functions."

First, the education business beefed up the proposition, interestingly.
Ramp-up capability was the key, and having a large student set-up helped. Having
already placed huge numbers in the industry (thanks to its education wing),
ramp-up was no problem for NIIT. Second, software being a project outsourcing
business, the top brass in targeted client companies was more comfortable
outsourcing to established names. Third, being a technology company was the
bonus–NIIT had set up call centers for clients and knew exactly how to go
about it. NIIT SmartServe is targeting the financial services and insurance
segment, and while it hasn’t struck any large deals yet, it is in "the
closing stages of negotiations". The geographies being targeted are the UK
and the US. The company already has a 120-seat facility in Kalkaji, while
another 600-seat center is coming up in Gurgaon. Total investment over the next
year is pegged at around Rs 50 crore. Bung in revenues of around $20,000 (Rs 10
lakh) per employee per year and you are looking at revenues of around Rs 100
crore in the first year of full operations.

Planetworkz

In 1999, a bunch of youngsters from iSeva approached NIIT and told officials
that all its employees (100-plus) were NIIT students. While they all spoke
English and had no issues with technology, they were not trained to meet iSeva’s
requirements. While NIIT politely declined to custom-train them to suit iSeva’s
needs, word of this exchange filtered up to the management. "And that’s
when we realized that there was an emerging need for training of people for the
ITeS space," says senior vice-president Suren Singh Rasaily. "We
carried out a few captive projects for companies–we would take in their
prospective employees, train them and they’d get absorbed by the company once
they got their certification. The students paid for the course, and would get
reimbursed by the company once they got the certification and joined,"
Rasaily adds.

Soon, other corporates started approaching NIIT, asking for training of
employees for the ITeS space. In the meantime, representatives from the
government of Andhra Pradesh visited NIIT and talked of ITeS manpower.
"They figured that the #1 factor for success in the IT-enabled services
space was not just about having deep pockets, but getting the right quality of
human resources–people. We liked the idea too and put one of our senior
managers on the project. This was October 2001," says Rasaily. NIIT has
already approached contact center companies like Daksh and General Electric and
signed alliances with some others. Under the agreement, call centers will take
in NIIT passouts and provide them with jobs.

Friday, the Thirteenth…

Some time after NIIT set up the Center for Research in Cognitive Systems,
chairman Rajendra S Pawar called in Dr Sugata Mitra, who was heading the R&D
set-up, and asked him when he would be giving in his regular project development
reports, considering the large amounts of money that NIIT was sinking into
R&D. "I told him there was no way I could get nature to comply with me
and provide me with results at regular intervals, and therefore, I could not
give him reports at any specific intervals," says Mitra. And as the
decision was left to him, he promised to submit reports every Friday the 13th.
"That was a safe date to commit–the longest gaps between any two Friday
the 13ths is 180 days and the shortest 28 days. I told him he would get his
report every Friday the 13th."

And over the years, this has been a tradition with the center. And in that
time, Mitra has been responsible for remarkable technological innovations such
as the world’s first hyperlinking software, developing an interface for the
visually impaired, India's first wireless Web cameras, guided robotic Internet
vehicles and India’s first infra-red speech delivery device among others. He
leads in the area of cognitive systems, information science and educational
technology, with special focus on the use of cognitive multimedia in education.

Apart from these path breaking achievements, Mitra is involved in studying the
learning habits of people and using them to design new courseware or teaching
practices at NIIT. "Some issues have been very interesting–for one, women
seem to look at computers from a pure utilitarian point of view, as opposed to
using them to create careers." The challenge then, according to him, was to
create a program for women that was practical, with an emphasis on day-to-day
life, and one that showed up the human side of computing. "Women also
seemed to prefer an environment where they could interact with other
participants," he adds. So he helped design a special course for women,
Swift Jyoti, created on the principles of andragogy and with a series of
modifications to suit women’s tastes and liking.

But about his greatest experiment and achievement has been in telling that
the schools of the world have got their teaching wrong for thousands of years!
"People do not naturally learn the way that teachers think they do. Schools
teach and then show how this applies to real life. The natural way is to start
with real life, count the change and work backwards to an understanding of the
basic principles," he says. He calls this natural approach ‘minimally
invasive education’–and to prove his point, he put a computer screen in the
wall next to NIIT’s headquarters. It worked. Without instruction, children
living in a slum learned to operate a computer–within minutes. Within days,
they were teaching others... Word of this achiement reached World Bank president
James Wolfensohn and he visitged the site at Kalkaji. The rest is history. World
Bank associate IFC has helped fund 42 more experiments like this.

For Mitra and his team of 20, each day at their lab in Delhi’s IIT campus
is filled with such experiments, and each day a new discovery, each day is the
same... till the next Friday the 13th, when he delivers his next project
development report!

RN