By Dr. Anand Joshi
Advisor, Welingkar B-School, Mumbai/Bangalore
Ex. Founder & Vice Chancellor, CMR University, Bangalore
Private Equity in Higher Education: Changing the Phase of Indian Education Dynamics
“Already traditional universities are showing the strains of a broken business model, reflecting demand and pricing pressures previously unheard of in higher education,” Clayton Christensen, Harvard Business School.
In India, Education is considered under social sectors of the economy, but the thrust is not on the priority sector. Only 0.7 percent of India’s GDP is spent on higher education (NKC 2009), which is lower than countries such as the US (2.9 percent), UK (1.3 percent) and China (1.5 percent).
Harvard’s annual budget was 4.2 Billion dollars in 2013, even at 61 rupees to a dollar; it is about INR 25880 crores, while India’s higher education outlay for 2013-14 was INR 16,210 crores. It includes technical education of INR 7300 crores - of which 2200 cr is for IITs, 1300 cr for NITs and 330 cr for IIMs. So, Harvard University’s annual budget is more than that of higher and technical education expenses for the whole country. It is unfortunate that even public funded institutions like IIMs fee structure is based on market dynamics and not cost cased. But the Government regulates the fee structure of private Institutions!
In India, 35% of Universities are in Private Sector. With the emergence of private equity in Indian Higher education, there is a changing dynamics with reference to Governance, Design and development of the curriculum, Technology driven academic delivery process, Development of the Intellectual capital, Institutional vs Knowledge branding and pricing strategy.
To stay in the competition, the private Institutions emphasis better language skills in parallel with “Five Cs”- Creativity, Collaboration, Communication, Curriculum and Critical thinking- as these interrelated proficiencies have a multiplier effect on innovation and competitive growth.
Indian Institutes are not in Global Rank list, but India is an emerging patent destination with R&D Centres of major multinationals. 24% of World R&D happens in India, 650 Global R&D centres in India. Analysis of patent data indicates that only 24% registered are from academic institutions mostly IITs and other Govt. research institutions and 76% are from Industry R&D centres.
Institutions fail to nurture the faculty to plan wisely and invest strategically to integrate the research output in curriculum design and classroom delivery. The research output is limited to publishing papers and on paper only. The Research Intelligence does not reflect in academics.
It is increasingly difficult for academic researchers to find the funding opportunities, analyse the funding environment, and as a result optimise their likelihood of winning funding awards.
Technology Driven Education
“The way we learn should be our most personalized experience because of no two people process information the same way” George Siemens, Associate Director, Technology Enhanced Knowledge Research Institute.
The Center for Digital Education of the Institute reports that Blended education models improve comprehension and test scores for 84% of the students.
With changing models of “right and relevant education”, these models blend elements of “brick-and-mortar“ in person instruction with self-paced learning, online learning platforms and blended learning flipped classrooms.
Private Equity and Pricing Strategy
With decreasing public financing in Higher Education, there is a mismatch between stagnant revenue and an increasing cost in Institutions. The pricing strategy (fees fixation) should be based on a scientific determination of the cost, optimising the revenue with a fair amount of surplus created for the development.
The pricing decisions impact customers (students) and competition. Since education in India is under social sectors of our economy, the pricing should not be a sales decision, but a decision based on Market, Economics of Education and service decision.
Education Industry is a knowledge industry worth of 100 billion in India and Govt. should provide fiscal support to private edupreneurs like IT start- ups. There is a growing trend of corporate promoted Universities in India out of CSR funding. It is time to permit the corporate university to bring practitioner’s perspectives to classroom in the teaching- learning process.
The major promoters of Institutions under private sector are Trusts and Societies established under respective laws, which bars them from receiving funds from foreign investors/donors. This is creating a financial stress to the private sector to encourage Public Private Partnership model for the development of the education sector.
In conclusion, with changing perceptions on “what constitutes the quality of education” from the parents, students, employers, the answer will be different depending on the priorities, preferences, and positioning in the market place and values. In Indian context, it is marks/grades or placement package. But with changing perspectives, it is the best value for price paid for education i.e., value for the money.