WR Hambrecht identifies several
trends that will impact learning. Among the trends are branding,
changes in strategy for the established training companies,
partnering, outsourcing, competition, and changes in other areas
related to the development of web-based training materials, such as
reusable learning objects.
Branding: Quality Is Key
With new content
providers, technology suppliers, and service vendors emerging on a
weekly basis, it is becoming more difficult for corporations to
decide which training provider to choose. Quality, price, and
sophistication of courses and technology vary widely. Today, a
corporate training department that wants to purchase an online
course on leadership, for example, has no efficient means to
compare dozens or even hundreds of leadership courses from
different vendors. Low market transparency and limited knowledge
of e-learning products will likely represent serious challenges
for corporate customers in the next several years. We
believe companies will increasingly prefer the "safe
choice" and retain providers with established brand names.
Brand is and will continue to be the most important factor
influencing the competitive landscape. Corporate buyers
will be willing to pay a premium for a quality product to avoid
even costlier mistakes. E-learning providers are currently
addressing the main factors constituting a brand, such as quality,
consistency, competency, reputation, and a loyal and recognized
customer base. We believe that the players that successfully
create a brand that implies trust with corporate buyers in 2000
and perhaps the first half of 2001 will be the winners in this
market.
Traditional Training
Companies Adding the "e" to Learning
Heavily
classroom-learning focused players, such as Provant, DeVry, New
Horizons Worldwide, ExecuTrain, Global Knowledge Network, and SMG,
have been adjusting their strategies and moving quickly into the
hot technology-based training market to secure a piece of the pie.
Companies that do not enter the e-learning business now will
become footnotes in the competitive landscape. Traditional content
providers are facing the problem of deciding how much of their
product line should remain in c-learning and how much should be
moved into e-learning, reflecting the change in learning habits of
their customers. While only about 20% of corporate training took
place electronically in 1999, the number is estimated to rise to
40% by 2003. 8 This development mirrors the dramatic change in
revenue sources of major players between 1997 and 1999. Until last
year, on-site training accounted for the lion’s share of
revenues for most traditional c-learning companies. For those who
decided to test new waters with both feet, however, revenues from
online training have caught up quickly and should rise further.
E-Learning Partnerships
Are Increasingly Common
Publishers of content
are entering into strategic alliances and partnerships with
education technology vendors, training services suppliers, or
other content providers to enhance their product offerings, expand
their distribution channels, explore new market segments, and
capture a larger share of the fast-growing IT and soft skills
training markets. Others team up with learning portals or even
diversified e-commerce sites, leveraging their distribution
capabilities in order to reach a broader audience. Since
partnerships are critical in growing an Internet business, we
should see many more of them in the year ahead. However,
part of the value of a partnership is its exclusivity. Currently
all the players appear to be partnering with each other.
Partnerships that are easily replicable do not necessarily carry a
significant value proposition.
Outsourcing – Slowly
but Surely
An increasing number of
companies are outsourcing part or all of their training activities
to outside consulting firms or training companies in order to
reduce their overall education training and administration costs.
In 1999, 24% of all corporate training was outsourced, with IT
training making up the largest share by far, accounting for 63% of
the total. 9 However, with only 5% year-over-year growth, the
trend towards outsourcing training is moving more slowly than
expected, most likely because of the lack of quality content in
the market. A study conducted by Training Magazine in the
fall of 1999 even concluded that the trend towards outsourcing
does not seem to exist. We view this as only a temporary pause
until supply and demand for training content, technology, and
services are more balanced. Competitive pressures and cost-cutting
should force corporations to continue outsourcing their training
activities, leading to the double-digit growth rates we have seen
in previous years.
Competition Should Pick
Up
We anticipate
competition in the corporate e-training market to heat up over the
next few years, especially in the IT training industry, where lack
of customized and high-quality content is not such an issue.
Strong market growth and relatively low barriers to entry are
attracting new market entrants in both product segments (soft
skills and IT training), including competitors from related
business areas such as the consulting industry. As new players
appear on the scene and more enterprises outsource their training
activities, we expect training suppliers to compete more
vigorously for market leadership on the basis of brands. We also
think that, in this early-stage market, prices for brand products
will be relatively unaffected by the battle for market share and
may even increase.
World of Training Is
Converging
The trend towards convergence in
corporate training can be observed in different areas: 1) Since
corporate customers no longer want to employ several different
content, services, and technology providers to meet their
educational needs, training companies have started to play on all
three fronts; 2) Many IT and computer-training vendors are
expanding their product lines with management and soft skills
training, while soft skills training providers are eyeing the
technical arena; 3) A number of major corporations have started to
centralize their training operations, which entails shutting down
their stand-alone IT training departments and integrating them
into their core corporate training groups; and 4) Corporate trainers report that e-learning
and c-learning are blending rather than one ruling out the other.
That is, the strongest use of online learning seems to be an
extension of rather than a replacement for classroom learning.
Development Cycles Will
Collapse
Not too long ago,
content developers had four to six months to create an average
two-hour learning program. Increasing competition and the velocity
of the new economy no longer allow e-learning companies to spend
six months or even six weeks on the development of a course. In
the IT and software industries, for example, R&D cycles have
accelerated with staggering speed, and user software has been
commoditized. Similar developments can be expected in the
e-learning industry. Development cycles are predicted to shorten
by 20% every year to two or three weeks by 2004. 11 This
imperative will drive more template-based designs and fewer custom
graphics. Learning objects will be created in smaller chunks and
reusable formats. As a consequence, the industry will become more
efficient and competitive.
Technology Making
Quantum Leaps and Standards Emerging
Technology
infrastructure, especially for bandwidth, varies widely in
corporate America. Lack of compatibility between existing learning
technologies and current IS infrastructure is one of the main
barriers to adopting Web-based training. We are convinced that the
move to define open standards is crucial to the continuing
successful adoption of e-learning, especially as it begins to
transition beyond early adopters into the rapid growth phase of
the market. Authoring tools will need to operate across different
platforms and communicate with other tools used to build learning
systems. Content and courseware must be reusable, interoperable,
and easily manageable at many different levels of complexity
throughout the online instructional environment. Enterprise
learning systems have to accommodate numerous and varied learner
requirements, needs, and objectives. Corporate customers need to
be able to easily track content created by multiple content
providers through one training management system and search vast
local or distributed catalogs of content to identify learning
objects or modules on a particular topic. The race for education
technology standards is on. Advances in a wide range of
technologies supporting diverse education and training tasks are
currently being made. Issues such as content interoperability,
metadata tagging, and bandwidth are being addressed. But the
industry still has some homework to do to create the flexible,
adaptive, and integrated learning systems needed to push
e-learning into the mainstream.
Market Share of Live
Web-based Course Delivery Expected to Surge
Less than a third of all
Internet-based training purchases currently include synchronous
course delivery. As new technological standards and
increasingly robust and interactive e-learning solutions emerge,
we expect to see the arena of live online collaboration move
forward dramatically. One reason is people’s desire to
interact while learning. Students want to sense the online
presence of their teachers and peers and to communicate with them
in real-time. Once such technology is widely available and
increasingly user-friendly, corporations are likely to make
increasing use of virtual classrooms for employee training.
Another likely reason for adoption is the cost efficiency and
convenience provided by synchronous content delivery. Real-time
collaboration technology offers many deployment opportunities
beyond employee training. Traditional in-person meetings, such as
executive briefings, new product roll-outs, client presentations,
and sales force briefings, can be held online without loss of
auditory/visual inputs and 360-degree interaction. We expect
companies that offer easy-to-use online collaboration technology
and integrate voice communication, content and application
sharing, conferencing, instant messaging, and other collaboration
tools supporting real-time interaction to enjoy strong growth in
the next few years.
Stronger Demand for
"Surrounds" of Instructor-Led Classes Should Spur Growth
One of the hottest growth areas
in online learning is the creation of Internet/intranet meeting
places ("surrounds") for instructor-led classes to
provide community, communication, and supplemental materials
online. An increasing
number of educational institutions and corporations are utilizing
online authoring and delivery systems to build surrounds
supporting the learning process. This new learning model
facilitates studying, note taking, class discussions, and
"catching up," all of which enhance classroom
instruction. Surrounds also help to overcome anxiety and
reservations, especially among older age groups, and build learner
acceptance and familiarity with online learning. In our view, this
step-by-step solution should make more learners willing to take
pure Web-delivered classes, contributing to the rapid growth of
the industry.
