Gems says it is the world’s largest private education provider with 130,000 students at 100 schools in 19 countries and $500m revenue this year

June 18, 2013 3:55 pm

School rooms for everyone

By Simeon Kerr

Desk work: Sunny Varkey keeps in touch with the ‘front line’ by regularly dropping into schools unannounced and talking to parents

In the library of Wellington International School, Sunny Varkey is chatting with a group of 20 or so five-year-old pupils about the books they read. The parents of these boys and girls in white and navy uniforms rifling the low shelves pay about $12,000 a year for them to attend one of the academically best performing schools inDubai.As the city’s foremost educational entrepreneur, Mr Varkey has built his business by opening schools that cater both to Dubai’s low-paid workers and its elite, and exporting the model overseas. About half of his schools in the United Arab Emirateseducate children from the white-collar Indian community, who for about $2,000 a year are all but guaranteed a university place.

Wellington lies closer to the top end of the schools market, a level at which the city’s wealthy residents can opt for schools with world-class facilities that charge annual fees of up to $26,000 for the senior years.

A slim, smiling figure in an immaculate suit and tie, Mr Varkey explains the business model across a library table, where flowers have been hastily presented: “We build different schools for different communities with different price points.”

Gems Education (originally Global Education Management Systems), now educates around one in three privately schooled pupils in Dubai. This number has risen alongside its host emirate’s transformation over the past decades into a global commercial hub.Gems was set up by Mr Varkey after he joined and took over Our Own English High School, a private school started in 1968 by his parents. “My parents ran a school with 350 students. I took over the business and made it global,” he says.

Gems says it is the world’s largest private education provider. With 130,000 students at 100 schools in 19 countries, it is eyeing the opportunities offered by the emerging educational markets of Africa and Asia, where Mr Varkey believes a growing and ambitious middle class is likely to spend its increasing disposable income on school.

When Mr Varkey arrived from India with his family in 1959, Dubai was a sleepy backwater. Sent back aged four – “much too young” – to Catholic boarding school in Kerala, he graduated from high school in the early 1970s and based himself in the emirate. At this time the city was building its post-oil economic base, investing in Port Rashid. In the morning Mr Varkey would be busy gaining work experience with Standard Chartered but in the afternoons he used his free time to start a trading enterprise, a maintenance company and a hotel.

Perhaps not surprisingly for an education entrepreneur, he says would-be founders should go to university. “My biggest regret is that I didn’t stay on in education after my A-levels – I went straight into business. I sometimes feel held back by communication skills and think ‘if only I had gone through higher education and had a decent degree’.” He eventually settled into the family’s fledgling education business. “There were times when I had to drive the bus.”

Lessons for leaders

● Be persistent when looking for investors.
It’s easier when you’ve got a demonstrable record, but until then you’ve got to think of yourself as a salesman. “Be pushy, meet as many people as possible and believe you can make it happen.”

● Make sure talented staff members stay by giving them opportunities. “We train staff in our company’s values and have a culture where a teacher can become a chief executive or move from country to country.”

● Judge family members in your business by the same standards as other staff. Both his sons “have to earn their bread”, says Mr Varkey. “They know, like everyone else in the company, that if I or the board feel that they’re not delivering, they would be asked to step aside.”

● Talk to key staff regularly. Use your mobile phone instead of email. “I use my phone to speak to the people who report to me directly. You get to know them better that way. And it allows you to focus on the big picture.”

● Don’t lose touch with what’s happening on the front line. “I drop in unannounced on schools – probably causing havoc – and walk round the school to see how projects are being taught, whether the school is clean and tidy . . .  Then I’ll talk to the headteacher. I also try to meet parents at social occasions and ask what we could do to improve the schools.”

By 1980 he had taken over management of the business, which he felt had huge potential to expand, despite constraints. Although there were government concessions on land for schools, funding was – as now – the main challenge for entrepreneurs in the Gulf, where banks still lend only 2 per cent of their balance sheet to small businesses. “Banks did not give us funding as we had no solid assets. It was a challenge all the time, especially in a commercial operation such as ours,” he says. “All the time, we were investing our own money.”

Gems no longer faces such challenges as it has become one of those large family-run groups whose proved business model is attractive to banks. It was able to raise a $545m loan this year to fund expansion. Revenues last year were $475m and are expected to reach $500m this year.

Over the next five years, Gems hopes to extend its operations to 40 countries. With a back-office team in Dubai focusing on curriculums, technology and campus construction, it has an overall blueprint that it adapts to different markets. His cheapest schools, for example, have whittled costs down to offer basic kindergarten education from as little as $500 a year.

Gems uses market research, including competitor profiling and parent attitudes, to determine how to adapt its model to the demographics of each country. It also uses local partners to ascertain the particular nuances of new markets. “I think good business deals have to be ‘win-win’,” he says. “We team up with local partners who understand local conditions when we expand into new markets. We’ve given those partners a consistent return of 23-25 per cent per annum.

“Our partners provide the local knowledge that may not immediately be obvious through market research.”

Perhaps because of its hardheaded market research and talk of synergies, Gems does draw criticism from some parents in Dubai who mutter that, unlike not-for-profit community schools, Gems milks them for money. But Mr Varkey is unapologetic. “The private sector tends to bring out better outcomes compared to government schools,” he says. “Why stick to an ideology?” The profit motive fuels expansion and charitable efforts, from funding free school places in Dubai to teacher-training programmes in developing countries. “Whatever surplus we make goes into more schools and charity,” he says.

Mr Varkey is now turning his time and money to philanthropy. The Varkey Gems Foundation has been helped by the sale of Welcare, a healthcare venture he founded in 1984 as a separate part of Varkey Group, last year. He channelled the $250m profits back into his education business and philanthropic work. Chaired by former US President Bill Clinton, the foundation is funding free school places and teacher-training programmes to broaden access for those who cannot afford the lowest fees.

Associating his philanthropic work with figures such as Mr Clinton and Tony Blair, the former UK prime minister, opens doors to charitable donations and broadcasts the foundation’s goals to a global audience. Mr Clinton is paid as honorary chairman and Gems has partnered with Mr Blair’s interfaith dialogue initiative.

Mr Varkey is also trying to turn Dubai into what he calls the “Davos of education”. The inaugural annual Global Education and Skills Forum of government officials and teachers was held earlier this year, with Mr Blair as the star speaker.

While Mr Varkey focuses on the foundation, his two sons, who were sent to British boarding schools when they were 11, have taken up leading roles at Gems, managing a generational shift ahead of plans to go public or bring in new equity partners. Dino runs day-to-day operations in Dubai, while Jay travels the world seeking new business opportunities.

Finally showing some of the steel that must underpin his career, Mr Varkey says he does not flinch in objective assessment of his sons’ professional capabilities. Normally smiling, a cool expression crosses his face as he adds: “Oh, I am very tough on that.”