Tuesday, June 13, 2006

Here Come the Indians!

Tutor Vista, an online tutoring service located in India, just secured an A funding round. Look for more educational software and service companies to come out of India. It's a trend, reinforced by some strong economics.

One of the major problems faced by educational software publishers, especially in content heavy areas like language instruction, is the cost of creating content. Usually it's substantially more than what it would cost to create a textbook, and since the major publishers have textbook development, manufacture and sale down to a science, there's been little financial incentive for them to replace textbooks with software. When they have built software, it has usually been lousy software that was expensive to make, and they end up giving it away with textbooks. In the late 1990s there were many experiments the majors did following this recipe. They ultimately stopped focusing on software.

Cheap content development in India (or elsewhere) obviously changes the economics. But few educational software companies have successfully jumped on the outsouring bandwagon, because, even with the good economics, it is difficult to manage an outsourced development project to success. The logistics alone are difficult: just ask anyone who has worked on an outsource project about the problems with time zones. But the real problem is interface development. This is the game in educational software, as crucial to the business as author recruitment and management was to book publishing. It is very difficult at a distance, because it requires the dev, the designer and the SME to iterate quickly. It helps--a lot--if they are working in the same room, and looking at the same screen. There are obviously ways of getting around this. But they are more difficult than you think. And the real solution is to have Indian companies develop the expertise, from start to finish.

It's already happening. Tutor Vision isn't alone. Companies like Zeus Learning, CareerLauncher, and Congruent that have established footholds in the educational software market in India are expanding into the United States. They still have a relatively hard time selling product here, so for the most part they are looking for American partners for development contracts. But sooner or later they will figure out how Internet-based marketing and sales can play to their advantage. And they already have strong businesses in India from which to underwrite their efforts. Consider for a moment the region chart from Google trends on the keywords "educational software."

In the next five years a major Indian educational software company will join Pearson, Reed-Elsevier and McGraw-Hill as one of the world's major educational publishers. You heard it here first.

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