LSO is alive and well. It’s just changed shape.
By John Higgins
The title of a once famous musical “A Funny Thing Happened on the Way to the Forum” is often modified to form a sort of pithy saying to describe a change in direction. Well, this month, “A Funny Thing Happened on the Way to the Magazine.” June was to be the month when I launched a series of topics around learning innovation. When I ask people in our industry to tell me why they seek an LSO arrangement, I often hear “the desire to remain fresh and current on the latest innovations in learning is one of the reasons we outsourced learning.” So hold that thought, and we’ll return to it in July.
Here’s the funny thing that happened. During the past month, I’ve had the opportunity to speak with several thought leaders about a phenomenon that I’ve observed over the past 12 to 18 months. There seems to be a complete absence of significant LSO arrangements being announced in the market. Several years ago, it was commonplace for us to read “Acme Co. announces multi-year learning outsourcing contract with provider so-and-so . . . . The deal is valued at $10 million annually.”
So I asked myself the central questions: Has the LSO market shifted? Is the day of the big deal dead? Has the “new economic normal” fundamentally changed the definition of the “big” deal?
Not one to be left with more questions than answers, I commenced my quest for the truth. And what an interesting quest it has been.
As I took stock of what we know about the LSO market, I reflected upon a conversation I had some years ago with an advisor to our industry. This advisor had conducted a study that assessed the size of the global LSO market, examined the frequency that buyers sought a full end-to-end LSO, and defined the buyer value levers. The headline from the study read something like “outsourcing providers, especially the larger providers (e.g. Accenture, ACS, IBM), are operating in an ‘out-tasking’ market.” At the time, I thought given all the press about big LSO deals this was an interesting finding. As it turns out, that headline has indeed defined the very nature of our LSO industry.
We do indeed operate in a market that is driven by out-tasking LSO arrangements. These deals tend to be more modest in scope—perhaps more regionally focused than globally focused, more focused on learning for a single workforce, i.e. sales, than the entire workforce of the enterprise, and deals that are more focused on single learning process streams, rather than on the entire learning value chain.
Here’s another thing I’ve learned. The range of credible LSO providers that have emerged in our industry has widened considerably. While the larger providers were focused on the mega-deals, a new class of providers has continued to mature and grow. Some of the current providers were also working diligently to service their government sector clients. Those providers have now brought their capabilities to the commercial sector.
We now regularly see providers such as General Physics, Intrepid Learning Solutions, NIIT, Raytheon, and RWD successful competing with the more traditional and larger providers. Several organizations, HRO Today included, publish their annual list of top LSO providers. Here at the magazine we call this our annual “Baker’s Dozen.” As you examine the trend of these lists, you’ll note new players have emerged, and one or two legacy providers are now absent from the list. This isn’t to suggest the traditional larger providers are absent from the scene. Indeed, providers such as Accenture and IBM have reinvented themselves to successfully compete in our new normal.
And here’s my final observation for the month. The nature of learning content has shifted toward a buyer that demands rapid content development, developed with engaging, media-rich elements, which can be built once and then modified multiple times. It’s taken the larger providers longer to acknowledge that reality. While our industry continues to thrive and grow, the days of taking five, six, or seven months to create a learning program are rapidly being put behind us. Who among us has that kind of time?
So, readers, I submit that LSO deals are alive and well. They might provide less of a splash in terms of size or buyer name than before. They might be more modest in scope. They might be inked between buyers and providers that have been working together for years. Indeed, in our economic new normal, buyers still seek the opportunity to optimize operations and leverage the know-how of leading LSO providers. And as I promised, next month will commence our examination of that know-how, with our series of columns on learning innovation.