In 2011, People Matters defined the emerging industry for employability education which has given birth to one of the larger entrepreneurial opportunities of today – a (projected) USD 100 billion ‘Skilling Industry’ that is attempting to bridge the humungous skills gap which needs serious closing down if the nation’s economy were to continue on its growth path. The February & June 2011 issues of People Matters tracked the progress in this sunrise industry over the last year and how private players have taken giant strides forward in spite of a weak and myopic policy backdrop

The genesis of the sheer audacity of numbers in the skilling industry first stemmed from Dr. C.K. Prahlad’s prediction in 2007 that double-digit growth in India will see light only if the country is able to make available 200 million graduates and 500 million skilled people by 2022. This has created an undoubted necessity to scale up vocational education to cater to India’s demand for higher economic growth, demographic changes, and the obvious demand-supply mismatch in available skills in many sectors. 

Union HRD Minister, Kapil Sibal* at a recent skills summit predicted that by 2022 there will be 150 million people out of these 500 million who will actually go to colleges while the rest 350 million will not.

This skilling challenge is further magnified by the fact that 70 percent of this population falls in rural and tribal India. The numbers being huge, Kapil Sibal explains that solving the same is impossible unless there is integration of skill development and the formal education system. Moreover, it demands a collective effort by government initiatives like MES (Modular Employable Skills), PPP (Public Private Partnership), National Vocational Qualification Framework and large and small scale private players. The scale and speed at which action must be taken in this regard makes this one of the larger entrepreneurial opportunities on the planet.

The National Skill Development Council (NSDC) has been set up to promote skills development by providing gap funding and equity investment to build scalable, for-profit vocational training initiatives. As projected by the Human Resources and Skill Requirement in Education and Skills Development Sectors in 2022 Report by NSDC, the existing skills gap is slated to increase the demand for vocationally skilled people and that about 12 to 15 million people are expected to join the workforce every year. NSDC has mapped skill gaps in 20 high-growth sectors and the unorganized sector till the year 2022 which will add to the demand for skilled people anywhere between 25 percent and 85 percent depending on the nature of the industry.

Given India’s existing skill development capacity of about 3.4 million, the urgent need to enhance skilling and technical education capacity is evident. Dilip Chenoy, CEO & MD, NSDC confirms, “NSDC has approved 36 projects which would skill roughly 55 million people in the next 10 years. They would create a capacity of 11.2 million when they come into full scale, which will happen in about 4 to 5 years. The total estimated turnover of the 30 projects (plus 6 are sector skill councils), is estimated to be Rs. 78,000 crores.”

Estimating the size of a nascent industry can be a thankless, but an exciting exercise. People Matters’ estimates of the skilling industry are based on economic realities, as expressed by industry participants, and by the larger macro-economic requirements. If NSDC’s 36 approved projects are slated to skill 55 million over the next 10 years with an estimated turnover of Rs. 78,000 crore, then the projected challenge of skilling 500 million could create an approximate industry size of $100 billion. Such a massive opportunity is enough to spur the level of activity that the industry is witnessing with an increasing influx of players of all sizes and backgrounds entering this space (refer People Matters story “India’s New El Dorado”, February 2011 issue).

Over the last couple of years, the non-formal skilling industry has seen the entry of a variety of private players - coaching institutions like FIITJEE, IMS, TIME, Career Launcher, as well as broader players in the education space like Educomp, Everonn, etc. which initially began as teaching and training content providers, but have expanded into K-12, and the higher education space. Larger industry players like Bharti‘s Centum Learning have also jumped onto the opportunity to cater to their specific organizational skill gap, and in turn contribute to reducing the larger skill gap experienced in their respective industries by turning their scalable capabilities into successful business units through the captive model. Even TeamLease, a temporary and permanent manpower solutions company, which had been hiring one person every 5 minutes over the last 5 years, decided to enter the skilling space and recently bought large stakes in IIJT (Indian Institute of Job Oriented Training). There are also many education products and service providers which create expert solutions that can be embedded into the existing K-12, higher education and college systems. In spite of the (still) fragmented nature of this industry, the confluence of multiple, diverse private players is slowly forming a structure. There is an emerging construct based on the specific skills, industries and population sets that these organizations are looking to address.

Is there a method to the madness?

While players in the non-formal skilling industry are many and increasing, and each has identified its specialized area of expertise, this story probes further to understand if these service providers have been able to identify their place in the larger context of the industry. And also, whether or not there is a possible structure evolving in this new space, although the early growth stage of the industry, which is barely 2 years old, makes such an analysis difficult. For each player, the attempt has been to get the equation of cost, scale and quality right when identifying which piece of the larger industry they want to address.

To simplify the industry construct for better understanding, the proposed structure looks at the system from the point of view of one of its end-users, that is, the unemployable but eligible youth. Going by the minimum age stated in Convention 138 of ILO (International Labor Organization), this group includes anyone who is 14 years and above, including school dropouts, graduate-dropouts and graduates, who join the employment market every year. Their opportunity for skill enhancement is two-fold, i.e., they can either enter the vocational market (for school dropouts) or the conventional college education. While the vocational market in the last 2 years has seen tremendous activity with increasing impetus from the government, this space has seen an influx of private players as well as the government’s PPP model through the creation of the NSDC. The combined efforts of these three ownership models are working together to bridge the prevailing technical and soft-skills (together referred to as employable skills) gap. On the flip side, those who successfully pass the K-12 level, again have the option of either choosing between college education and the vocational schemes. So this structure shows the wide range of options available to a student to make him/herself employable by acquiring the right skill. And as we move ahead on the 10 year journey, this space will perhaps see some consolidation as private players in the non-formal skilling industry identify their core competencies and build a sustainable business model around that.

Further, the collective initiatives of various large and small private players in this space form the intersection of employment and employability where the required forces work in tandem to afford people (whether school/graduate dropouts or graduates) the required skills that will make them eligible for employment.

Quality, cost & scale - the impossible trinity

To capitalize on the opportunity, skilling companies must get the cost, quality and scale equation right. There is a need to skill in scale while maintaining training quality for the candidate to be eligible for a job, at a price that is affordable by the Indian masses. Manish Sabharwal of TeamLease elaborates, “If you raise quality then you raise cost, but you need scale; if you raise scale, you have the danger of lowering quality while you lower cost. It is a type of linear programming between cost, quality and scale.” The traditional equation of cost, quality and scale where cost is directly proportionate to quality and scale, will not apply here. Therefore, getting the recipe right is crucial as this is not a training problem alone, but the challenge is one of effective execution and implementation of training mass employable youth in multiple geographical locations.

To make this possible, the first imperative is for companies to identify whether they can scale up or not. They can accomplish this either by raising equity, by adopting the franchise model, by embedding solutions in the existing formal education system, or by specializing in a given area. Different players have adopted various methods which are working for them. TeamLease (IIJT) has raised equity funds to the tune of 100 crore for developing vocational education, while Centum Learning chose to work on a captive model. In case of large organizations which are already in the business of employing large workforces like in retail, insurance, etc., the captive model helps in skilling people for their own business, and also has the opportunity to transform it into a SBU to skill people for the entire industry. The third model is the franchise model where the company concentrates on building the right curriculum and process, and builds franchisee partners to deliver the same across locations.

Many players have also chosen to restrict themselves to the development of content and products for skill enhancement, which can be embedded into the existing formal education system, thereby enabling them to scale in the absence of any infrastructure investment. Yet another way to scale is for players to specialize on one skill and concentrate on enabling speed and scale of execution in that particular area.

But are these efforts enough?

While the private players in the skilling industry see this opportunity and are working towards increasing skilling capacity, they have a natural inclination to zone in on the proverbial low hanging fruit. However, the current capacity so far does not still look promising enough for the industry to reach the 500 million mark by 2022. The reality is that collectively India was able to skill only around 25,000-30,000 people last year which poses a question on whether the current speed and scale can meet the skilling target of 50 million per annum for the 75 year old India of 2022. There are a number of policy issues that will need serious consideration if the skilling eco-system should to be able to reach that kind of scale.

Firstly, there is no roadmap for integrating vocational training into the formal graduation system and for students from the vocational system to enter into the formal system at a later date. Also, the current formal educational set-up is not flexible enough to accommodate students from vocational backgrounds. Further, industries with skills deficit will need to create standardized arrangements with training services companies to bear a part of candidates’ fees and be re-paid over time. Finally, there is need for financial impetus through access to loans from financial institutions for vocational training with efficient collection mechanisms to ensure sustainability and scale.

If the government fails in creating a well-orchestrated environment for skills development, it will boil down to the familiar Indian story of “not because, but in spite of government”. And still the question remains if employers and skilling companies can meet the humungous skills gap of 500 million in 10 years, without a pro-active shift in education policy.

The next wave lies in execution
Manish Sabharwal, Co-founder & Chairman, TeamLease

The next wave in India’s skilling policy does not live in ’poetry’, but it lies in ’plumbing‘. It has moved from strategy or ideas, towards the need for execution. And that is where we are stuck. Most people are still lecturing on what needs to be done and discussing India’s demographic dividend. The government already knows what needs to be done but the problem is how to do it and how we can take advantage of the demographic dividend and turn it into an opportunity. The three key aspects - education, employment and employability - are the single biggest entrepreneurial opportunities in the next 20 years. It is not only the flow of the one million students that gets added every year, but there is also a stock of 400 million who need to be transitioned now with re-skilling and re-education.

In TeamLease, we have been hiring one person every 5 minutes for the last 5 years but we hired only 5% of the candidates who came to us for a job. Therefore, the first response was that we need to work with public policy. That is why I started spending 30 percent of my time in influencing public policy. There is a need to work with the government, and the planning commission. We are doing so through our collaboration with IEJT. Our attempt at creating a university is to be able to set our own curriculum and be able to offer vertical mobility to people, by creating a ladder between a 3 months certificate, a 1 year diploma, a 2 year associate degree and a 3 year degree.

While it remains unclear as to the exact business model for skilling, skilling companies that will be able to stay alive long enough, will stand to win. The opportunity lies at the intersection of employment and employability. On one hand, employers seek trained candidates and are not open to invest on training candidates to make them employable. While on the other hand, candidates are also not willing to pay for training alone, but they are keen to invest if the training leads to a job. Therefore, training companies that do not work towards facilitating employability will not be able to fill up their classrooms even if they spend 60 percent of their revenues on marketing. A sustainable model will be that which gets the cost, quality and scale equation right.

At the macro level, what needs to be addressed is the regulatory cholesterol that partitions the college and university world from the employment world.