Finding process efficiencies is a more urgent directive for the outsourced learning marketplace. Employers need to be sold on the value providers can offer.
Outsourced learning is attracting more attention these days, in part due to concerns about rising costs, efforts to raise efficiency in the training and development of employees, and a deluge of offerings in the marketplace. It would seem, then, employers are shifting more of their training dollars to external providers than on internal capabilities.
A closer look, however, shows that it’s unclear if a trend is emerging. For many providers, these are indeed rich times, but it may be due to their own investments in training technologies and new products rather than to growth in the broader market. On the other hand, learning business process outsourcing (LBPO) is posting strong results, according to TrainingIndustry.com, an advisory and information clearinghouse for the outsourced learning industry. Doug Harward, the CEO and founder of the site, estimated that the LBPO segment is worth about $2.1 billion and is growing about 25 percent a year—a relatively small portion of the overall $130 billion total learning spend in North America (of which $55 billion is through external suppliers).
So if LBPO is growing rapidly, why isn’t it clear that the outsourced learning market is expanding? In its 2007 State of the Industry Report, the American Society for Training & Development found that the percentage of learning budgets spent on external services fell slightly in 2006 from 28.87 percent to 28.07. Among its high-performance members (BEST Award recipients), the amount spent on external learning services also fell slightly from 2005 (23.9 percent) to 2006 (23.47 percent) but much more precipitously since 2004 (27.4 percent). On the other hand, a benchmark forum used by the ASTD reported a sharp increase in external spend from 24.83 percent in 2005 to 30.6 percent in 2006. So given all the conflicting numbers, where is the market going?
Harward said while the entire learning industry is expanding, the fastest-growing segment appears to be LBPO. That’s because learning activities can be divided into two camps: administrative and content. Many buyers in the past have looked to content creators as their primary provider of learning solutions, but these vendors lack the process efficiencies that traditional HRO providers can offer. As a result, he added, there is an increased focus on realigning learning processes to deliver greater savings to buyers. He pointed out that some outsourced contracts have failed to materialize simply because content creators are unable to deliver an economically attractive solution to potential clients.
“We’ve got some important improvements that need to be made in the next few years,” he said. “What we’re not getting is the savings that companies are looking for.”
It’s a point on which others in the industry agree. Dave Letts, the general manager of Raytheon Professional Services, pointed out that many employers still aren’t sold on the value of outsourced learning, even though a number of organizations have been able to document the business case for outsourcing. However, many HR leaders are still somewhat skeptical, he noted.