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Online Education Takes Off in India

The business of distance learning on the subcontinent is becoming so big that foreign universities and venture capitalists are taking note

It's a Sunday afternoon and class time for 39-year-old IT worker Seema Shetty. Her feet curled under her in a swivel chair, she sits in front of a computer monitor, adjusts a set of headphones, and scribbles in a notebook. Shetty, who works for consulting firm Mastek in Mumbai, is in a virtual classroom in the Vile Parle suburb, where a dozen computers link students to some of India's elite management institutions. Today's class is a three-hour general management lecture, part of the online education course conducted by the Xavier Labor Relations Institute in Jamshedpur, in the remote northern Indian state of Jharkhand.

A consultant for various industries from insurance to banking, Shetty signed up for an online certificate course to "learn more about my clients' business requirements," she says. By enrolling in the 14-month, six-hour-per-weekend online course, at a cost of $4,600, she can further her education without having to take a two-year career break to get an MBA. Learning online, says Shetty hopefully, "will definitely boost my job prospects."

Shetty is part of a growing tribe of working professionals and students in India who have enrolled for online education certification. While it's difficult to determine numbers of students, the online education market in India today generates about $200 million in revenue, and industry experts expect it to touch $1 billion by the end of the decade. The winning proposition: Getting knowledge from top-notch professionals without disrupting fast-track careers.

Slaking a Thirst for Knowledge

Mostly it's courses in engineering, management, finance, human resources, and mass communications available to individuals who feel they need some polish and a deeper understanding of their chosen subjects. Institutions, too, are big users—most are short of staff and overwhelmed by the demand from students who want to be equipped with the best possible education to further their job prospects in India's rapidly expanding economy.

Online education addresses some of India's shortcomings: a dismal education system, limited reach, and a severe paucity of faculty. "Even students from smaller engineering colleges feel they can now access the same courses our top students are exposed to," says Kanan Moudgaliya, head of the distance learning initiative at the Indian Institute of Technology (IIT) in Mumbai.

The efforts to boost graduate education have begun right at the top. India is booming, and as new industries such as retail, real estate, and infrastructure grow, the talent crunch grows, too. In 2003, New Delhi made education a priority, boosting spending from 3% of gross domestic product to 5%. Upgrading the quality of higher education was key to its agenda. That's when the IITs and the leading business schools went online with their courses. There's both Web-based education, which puts course material online for students to download, and there's virtual learning—the kind that Shetty is undertaking.

Foreign Universities Heed the Call

The biggest and most popular providers of online education are the IITs, leading business schools like the Indian Institutes of Management (IIMs), and private schools such as Sikkim Manipal University in northern India. In addition there are private online education services such as Educomp Solutions, Everonn Systems, and TutorVista. Last year, Rubin Das, 29, a midlevel restaurant manager at Mumbai's Grand Hyatt hotel, was one of the 120 students who enrolled for the online general management course for young managers at IIM-Calcutta. The 52-week course, which will end later this month, has taught Das "revenue and marketing management, which I had no clue about." "It enhances my chances to be a department head sooner," he says.

This demand for online education in a hot market like India has also sparked the interest of foreign universities. In 2007, Carnegie Mellon University tied up with Shri Sivasubramaniya Nadar College of Engineering in Chennai, in southern India, to offer IT courses. The Massachusetts Institute of Technology is negotiating with the IITs. And Cornell University has struck a deal with South Indian service provider Easy Educate to offer courses in finance, management, and human resource to Indian students.

Here's how it works. Each IIT has 500 courses in all, but its distance-learning offering is 50 courses: a combination of Webcasts, live lectures, and prerecorded lectures. Courses range from the study of nanoelectronics to an introduction to biochemical engineering for both college and individual students. All the IITs are negotiating with Google (GOOG) video, which will help students download lectures for free.

Funding from Venture Capitalists

The IIT courses are also distributed to India's 1,500 state-run engineering colleges to spruce up their standards. This year, for instance, the College of Engineering in Pune, 200km from Mumbai, will host nine courses from IIT Mumbai, ranging from process instrumentation and control to software engineering, for 120 students. They are hugely popular. "These courses provide a quantum jump in the quality of our education for both staff and faculty," says Anil Sahasrabudhe, director of the college, who is on deputation from one of the IITs to boost education standards in the Pune institute. For instance, instead of developing many new courses, the institute can now pick and choose the courses taught by IIT professors.

The opportunity is so enormous that venture capitalists have begun to fund online education companies. In 2007, they invested more than $74 million in Indian education companies and say the sector will be among the hottest in 2008. Think about it: Although India has a large, young population, it is not the most productive. Boosting basic education with a current online education certificate helps make Indians more employable.

Education Companies' Shares Soaring

A 2005 McKinsey study on the Indian workforce concluded that just one-quarter of India's engineers and 15% of finance and accounting professionals had the skill sets to be able to work productively for multinational companies. K P Balaraj, a managing director at U.S. venture capital firm Sequoia Capital, has invested $2 million in TutorVista, an online tutorial company. "Employability is a big issue in India, and the immediate need is to cater to a very large job market that is not being met by school and college grads," he says.

Investors like Balaraj will do well. Despite the recent fall of the market, the share prices of some of the listed education companies have continued to soar. Shares of Educomp, India's largest education company, are up 340% over the past 12 months, while the Everonn scrip increased 61% since its listing in August, 2007. Brokerage firms Credit Suisse (CS) and First Global have also bestowed "outperform" ratings on three out of the four listed education companies.

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