However, industry alliances, differentiation and marketing will play a key role in success of education venture. These are the highlights from Ernst & Young report on Higher Education sector, released at the Edge Forum in New Delhi on February 9, 2009.
Amitabh Jhingan, Partner Ernst & Yong India and author of the report, notes, "The private sector is a key constituent of the higher education segment in India, accounting for more than a third of all higher education institutions and more than two third of all professional higher education institutions. Strong macro-economic and demographic drivers coupled with the gap in public spending will only further increase the relevance of the private sector in higher education in the country. Thus there is a clear imperative for established players to participate in this growth story by building higher educational institutions of scale."
The report focuses on the market dynamics of the Indian higher education sector and presents some perspectives for private enterprises operating in this segment.
Higher education in India has experienced significant growth over the last two decades. The report notes that University and Colleges in India have grown at a CAGR of over 5% and 6% respectively, since independence. This growth has been powered by steady increases in enrolment. Student enrolment in higher education has grown at a CAGR of approximately 6% over the past two decades. With approximately 13 million students being enrolled in higher and technical education institutions in 2007-08.
Enrollment varies across stream with arts dominating the rest. Out of a total enrollment of 11 million in 2005-06, approximately 5 million students enrolled on arts, followed by 2.3 million students in science and approximately 2 million in commerce/management.
Inspite of macro-economic concerns, the growth of Indian higher education sector will continue. Favourable demographics is a key factor influencing the Indian higher education story, notes the report.
With over 50% of the population falling in the age group of 15-64 years, with a median age between 20-23 years, India presents an attractive market of the higher education sector. The population of people in the 15-24 years age is expected to be about 235 million by 2010, around 19% of the total population. This also supports the view that there is a huge potential in higher education in India.
By 2015 India is expected to witness a sizeable reduction in the lowest income earning section of the society, which will be replaced by a much larger urban middle class, creating a favourable market for the education sector. Between 2005 and 2025, average household disposable income is expected to increase at a CAGR of 3.6% for the rural sector and at 5.8% for the urban sector, acting as a catalyst for growth in the education sector.
The report concluded with recommendations on "Eight-Fold Path to Growth". These eight paths have been taken by some of the leading education institutions in India, and new players can learn from their successes.
1. Achieving Scale from Monetisation intellectual Property
Indian HEIs, in their Endeavour to attain scale, have used two key models:
- Distance learning: Established institutes can easily leverage their well developed content and established brand equity to enter the distance learning space. This allows them to substantially enhance their reach nationally at a low investment, notes the report.
- Franchise Model: having developed content and training methods over the years, many institutes are entering revenue managed by the partner. Such a model provides educational groups a capital efficient route to align themselves with local requirements, says the report.
2. Partnering with the industry
BITS, NIIT, Manipal and ISB are excellent examples of educational groups that have grown by collaborating with leading Indian companies. Most of these models for partnership have a strong employability focus, be it the ICICI-Manipal Academy, the NIIT Institute for Process Excellence or BITS tie up with Patni Computers. Such models provide an incentivized framework within which the employer, the employees and the education provider stand to again, says the report.
3. Acquiring growth
With the Manipal Group and NIIT showing the way, many players are considering inorganic means for expanding their offering and Apollo have relied largely on acquisitions for growth.
4. Differentiating the Value Proposition
Successful HEIs have ensured a high degree of differentiation, in terms of positioning themselves vis-à-vis the target market. BITS as the private technical institute that offers flexible dual degree programmes, NIIT as the employer oriented vocational trainer, ICFAI as offering management education at various price points and ISB as the global management education institute in India.
5. Collaborating to create value
Players in the Indian Higher Education industry have actively sought alliance that can bolster their value proposition. A recent example is ISB, which has established a more involved partnership with Wharton, Kellogg and LBS has reinforced the ability if such a model to deliver value to Indian consumers, says the report.
6. Addressing the "premium" gap
The evolving profile of consumers, aided by increased purchasing power, has created a demand for premium education. This is apparent by the sheer size of the student population going abroad for higher education.
7. Targeting Global Opportunities
With the rise of India as a global power and the establishment of education brands, players in the higher education segment have realized the potential for targeting global markets. Report notes the Manipal Group, NIIT and Symbiosis can emerge as global education brands.
8. Innovative Marketing & Brand Building
Most of the education players who have succeeded in India, have realized the power of branding and marketing. Branding and Marketing are key to success, notes the report.
