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Training 4 Profit Profit 4 Trainers

Benefits 4 Society

Some reasons to promote

a vibrant training industry

Manfred Häbig

May 7, 2010

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Training 4 Profit – Profit 4 Trainers

• Profit-making has transformed India – why shouldn’t it transform the skills development landscape?

• So many ways to cash in on the skills crunch(4 tested business models)

• Yet, sometimes you need Government – but in which flavor: Subsidy or Partnership?

• Public Task - Private Delivery – Public Benefit:New Business Models Required?

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Unemployedseeking self employmentmicro-business start-ups

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Up-gradation training forindustry staff

Industry oriented courses for jobseekers

start-up training forwould-be entrepreneurs

projects/practical as part of degree courses

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So many ways to cash inon the skills crunch:4 tested business models

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1. Up-gradation training for industry staff

• Short duration(3 to 12 days), advance level, customized courses• High investment in real life machinery and equipment, commercial

price for software, high training fee, profitable but more difficult to

sell (takes time in building credibility)• IGIAT offered trainings to about 1000 Industry staff in first 4 years. Training price Rs 150 to 250 per hour .

2. Industry oriented courses for jobseeker

• Medium duration (4 to 24 weeks), advance level, standard courses• Medium level investment- mixed of real life machinery/equipment and prototypes, subsidized software, moderate training fee, less profitable but easier to sell (focus on employment)• IGIAT offered trainings to about 5000 Jobseekers in first 4 years. Training price Rs. 50 to 100 per hour

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3. Start up Training for would be entrepreneurs• Medium duration( 4 to 12 weeks), • Medium level investment- mixed of real life machinery/equipment and prototypes, moderate training fee, medium profitable, difficult to get interested trainees• IGIAT offered trainings to about 500 would be entrepreneurs in first 4 years. Training price Rs 100 to 150 per hour.

4. Students Training as part of project/value add to formal qualification

• Short duration (1 to 4 weeks), basic level, standard courses• Medium level investment- mixed of real life machinery/equipment and prototypes, subsidized software, low training fee, profitable due to large batch size and easier to sell• IGIAT offered trainings to about 4000 students in first 4 years. Training price Rs 40 to 80 per hourThe cost of training broadly is Rs 250 to 500 per hour depending on

investment in technology. Thus a batch of 6 trainees usually break-even the costs.

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Yet, sometimes you need Government• 2 reasons why a private training provider would need government

• Land: Paying market prices would blow up the business model

• High-value machines & equipment (e.g. CNC machines):depreciation would eat up all your profits

→ Initial VIABILITY GAP covered by public subsidy/grant

Subsidy or Partnership?• What´s the objective of Government involvement:

Subsidy (onetime or permanent) or Governance/Steering?

• If it´s just subsidy: Why bother with the pitfalls of clumsy PPP mechanisms?

• If it´s Steering:Why not steering through grant, subsidy and promotional measures?

A Business Case for Govern-

ment Involvment

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And, sometimes Government wantsto steer private training providers

• To guarantee access to disadvantaged groups or regions

• To promote specific sectors of the economy A Public Case for Govern-

ment Involvment

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Public Task – Private Delivery?

• Guaranteeing access (e.g. to disadvantaged groups) doesn´t require public delivery – private delivery can be more effective & efficient

• Steering & Promotion of private delivery as business

• Getting the framework conditions (business & investment climate) right

• Strengthen the supply side (e.g. credits, facilitate start-ups, etc.)

• Making the market work better (e.g. Information, benchmarking, acreditation, testing and certification, etc.)

• Strengthen the demand side (e.g. subsidising disadvantaged groups through vouchers, etc.)

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Improving the Business & Investment Climate

BIC (in the broader sense)

Access to productive infrastructure (water, energy, telecomm., transport)

Access to qualified labor

Access to business Know-how, BDS and technology

Access to loans and other financial services

Access to land and property

Improving the legal, political and institutional framework conditions

BIC (in the narrow sense)

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Promote a vibrant training industry!

• Training 4 Profit can transform the skills development landscape!

• Consider the Training Industry a priority sector – and promote it!

• Safeguard the public interest through smart subsidies and governance mechanisms!(there are many alternatives to PPP, which is NOT a magic bullet)