Data Science Information Technology Industry Consolidation

Earlier in May, edtech unicorn upGrad acquired the International School of Engineering (INSOFE) in a $33 million share exchange. A profitable company, INSOFE is an educational institution that focuses on data science, artificial intelligence, and machine learning courses. In the past year alone, upGrad has acquired a few major players in the data science IT space, including names like KnowledgeHut and TalentEdge.

This aggressive acquisition strategy is not limited to upGrad. Decacorn Byju’s has added Great Learning to its long list of companies it has overtaken via a whopping $600 million deal.

As is the case with most industries, after a phase of rapid growth, through a series of mergers and acquisitions, they progress through a life cycle of consolidation. Such consolidation often leaves the dominance of a few companies. Looking at how the field of information technology and data science is developing, could we anticipate such a life cycle of consolidation here as well?

The edtech boom

While other industries were busy catching up in the wake of the COVID-19 pandemic, one industry that jumped, sprinted and jumped to become arguably the most exciting and fastest field was edtech. The massive growth potential has also caught favor with investors. Ranking just behind e-commerce ($10.7 billion) and fintech ($8 billion), the edtech sector raised $4.7 billion to become the third most funded industry in 2021. According to data of Inc42, test-readiness startups won the bulk of the funding — 65% of total funding ($3.06 billion). This was followed by online certification (22% or $1.04 billion), K12 (5.7% or $270 million), and enterprise edtech (5% or $240 million).

Within the edtech sector, one area that garnered such interest was the data science edtech market. According to a report, the Information Technology and Data Science market is expected to grow from USD 103 Million in 2020 to USD 626 Million by 2025 at a CAGR of 43% during this period. The market for off-campus or online courses, which include executive programs and online certifications, is expected to reach $239.6 million.

This is hardly surprising, given that the demand for data scientists is constantly high, which translates into hefty paychecks and an exciting career chart. Analysts estimate that the number of jobs in data science and related jobs will reach 11 million jobs by 2026. India alone contributed 11.6% of the world’s total data science and related vacancies. Some of the factors that have played a role in this are continued investment by domestic companies in developing advanced data science/analytics capabilities; multinationals and IT companies moving their data science jobs in large numbers to India; increased funding for AI/analytics-based startups.

Credit: AIM Research

Major mergers and acquisitions

In 2021 alone, Byju’s acquired ten companies for a combined transaction value of $2.5 billion.

This propelled Byju’s to become the most active media and telecommunications (TMT) company in the global M&A market in 2021, according to a report by GlobalData. said.

After the much-talked-about billion-dollar acquisition of Akash Institutes, a name synonymous with competitive exam coaching, Byju’s next big hunt has been Great Learning. With Great Learning, Byju’s marked its entry into the professional development and lifelong learning space. In addition to the $600 million spent by Byju to acquire Great Learning, the former also earmarked $400 million for this short-term segment. In a public statement, representatives of Great Learning said that they will now strive to accelerate their organic and inorganic growth in India and overseas markets like North America, Canada, etc.

Interestingly, Great Learning recently acquired Singapore-based Northwest Executive Education in a cash and stock transaction. Founded in 2015, Northwest Executive Education offers management, technology, and other executive courses from MIT, UC Berkeley, Yale, UCLA, University of Chicago, and University national Singapore, etc., and expands to the United States, Europe, Asia, and Latin America.

Following in Byju’s path is another major edtech giant – upGrad. It recently acquired INSOFE (latest), TalentEdge and KnowledgeHut.

In an email interaction with Analytics India Magazine, Mayank Kumar, co-founder and MD, upGrad, said, “When we consider acquisitions, it’s not just about a business model, but about aligning our vision with the partner brand to drive impactful education at scale. Speaking of INSOFE and TalentEdge in particular, these strategic business moves will not only accelerate profitability but also allow us to reach a wider audience to further cement our leading position in the Indian lifelong learning market. of life.

He also mentioned that upGrad’s analytics vertical, with topics like data science, machine learning and business analytics, has grown 50% in revenue since the first wave of Covid-19 in Q2FY21 (JAS 2020) compared to the third wave during Q4FY22 (JFM 2022). He predicts that analytics as a field with data science at its core will continue to grow, preparing professionals for the upcoming Industry 5.0.

Scaler, which bagged $55 million in a Series B funding round in February, acquired learning platform AppliedRoots in a $50 million deal to bolster its offerings data science, AI and ML. This is the company’s third acquisition after Coding Minutes and Coding Elements in 2021.

Additionally, Manipal Group-backed education technology company UNext Learning acquired Jigsaw Academy to bolster its higher education offerings by adding specialized professional certification courses. In 2020, the branch of the National Stock Exchange – NSE Academy, acquired Talentsprint, a prestigious name in the field of teaching AI, ML and data science.

Relatively smaller companies are also making progress. Higher education and professional course development platform iNurture recently acquired professional skills development and placement platform Krackin.

Market consolidation

It is a general trend seen in all industries that after several mergers and acquisitions, many move towards consolidation. According to a study out of 1,345 mergers and acquisitions completed in 13 years, once an industry is formed, it goes through four stages of consolidation over 25 years. Research predicts that this duration will decrease in the future.

Credit: harvard business review

Last year, the Hero Group launched Hero Vired in April. Their first program launched in July, and the company has since launched many similar industry-relevant programs. According to a few sources, Hero Vired is working on an expansion strategy and may be planning to acquire similar businesses.

Speaking to Analytics India magazine on consolidating the data science edtech space, Dipayaman Sanyal, Head of Studies and Learning, said, “Like the fintech industry, the information technology and data science sector is also experiencing consolidation. We see big companies taking over small companies. One of the problems with this trend is that it can affect the risk-taking ability of acquired companies, as large companies tend to stick to traditional, time-tested ways of doing business. But that’s how the industry evolves. That said, I am convinced that this phase will also allow new competitors to emerge, thus filling the void.

On the implication of such consolidations, Mayank Kumar of upGrad, said, “We’ve seen some consolidation in the edtech industry over the past 12 months, and I think that might slow down now in the current environment. But the big companies in this space will continue to look for opportunities to grow their market share inorganically. They will continue to invest in developing their own delivery channels, offering hybrid learning solutions, expanding platform development and expanding globally to enter adjacent and associated markets. I also think that collaboration and partnerships will see a marked increase in the edtech sector. As we proceed from there, we can expect many younger companies to be in play, and the market will pivot to drive platform innovation at every micro level.

Subramanyam Reddy, Founder and CEO of KnowledgeHut, a company recently acquired by upGrad, believes that some level of consolidation may occur in the near term. He said, “The growth of the data science field is leading to a commensurate growth in the information technology and data science industry, which is also experiencing growth driven by various factors such as the pandemic and various government policies. The information technology industry should remain bullish on growth for some time to come.

As the amount of funding will decrease over the next few months, there will be some level of consolidation that may occur in the short term. However, speaking of the online higher education sector, the need for data science has never been more relevant, and we believe it will continue to drive the overall growth of this sector.

Paul Kim, the chief technology officer and vice-dean of the Graduate School of Education at Stanford University, in a previous interview said that India is in a much better position in terms of teaching data science. due to the presence of several technological innovation powerhouses here. He said that while the United States and China are big competitors, institutional funding and government support in terms of policy and regulation would ensure India’s rapid growth in this field.

Even if the world returns to normal and physical institutions begin to open their doors, these providers of online lifelong learning programs are unlikely to suffer a severe blow. However, as Professor Kim mentioned, traditional institutions need to transform to align with competing alternative education options.

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