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Investing in e-learning is a big step and one that requires careful
planning. Good returns depend on the online solution meeting employee and
business needs, as Keith Rodgers reports

E-learning is becoming the fastest-growing sector in the HR applications
field. Promising to slash training costs and improve learning management across
organisations, a host of specialist providers have sprung up to offer IT
infrastructure, content services and user-friendly delivery over the Web.

More sophisticated systems have also emerged to expand basic training
services into the fields of competency management and enterprise-wide
performance measurement. Suddenly, HR departments are being offered a powerful
tool that promises to provide practical short-term benefits and long-term
strategic value.

However, reality doesn’t always match the hype. To begin with, while vendors
promise rapid implementations and fast returns on investment, the cost equations
are often far more complex than they first appear. At the same time, cultural
problems impede adoption of many systems. And despite the increasing
sophistication of much of the technology, the actual take-up of more advanced
applications in areas such as competency management is still relatively low.

It’s indisputable that e-learning has brought many companies tangible
returns in terms of both hard and soft benefits – to achieve them, however,
organisations need to approach the market with their eyes well and truly open.

Part of the difficulty in unravelling the full implications of e-learning is
that the market is broader than it might first appear. Although the term
"e-learning" is often loosely applied to the whole electronic
training sector, the sector actually consists of three distinct elements.

Learning Management systems provide the back-end infrastructure, managing
the online and classroom-based training processes, tracking participants’
progress as they embark on courses and increasingly offering performance
management tools.

Content is provided by a wide number of specialists, offering a mixture of
off-the-shelf courses and customised training modules. Delivery systems take
the content to the users, through media such as "virtual" classroom
training or self-paced learning, in which users access electronic systems at a
time that suits them.

To date, much of the cost-savings have derived from that third element, the
delivery system. By transmitting training courses electronically to users at
their office or in their homes, e-learning vendors are able to produce concrete
evidence of significant cost savings. Travel and hotel costs are slashed,
whether for individuals attending a classroom-based course or trainers visiting
corporate sites.

At the same time, productivity increases as travel times are reduced,
particularly in the case of self-paced courses where users can log on at quiet
moments during their working day. Some of these savings can be impressively
high.

The total cost equation of e-learning, however, goes much further. Content
needs to be purchased – or if it already exists in-house, may need to be
restructured to use over the new delivery system – and the LMS infrastructure
needs to be either built or rented from an external service provider. Each of
those elements requires investment, and the shape of the return differs
enormously.

Dave Podmore, a 10-year veteran of the IT training field, is no stranger to
the harsh realities of implementing an e-learning system. Five years ago, he
helped develop one of the first LMS on the market, a development project
co-designed by BT that linked up some 35,000 people.

Now, as head of e-learning at HR outsourcing company e-peopleserve, his team
is close to completing the second phase of a massive BT roll-out that will
embrace more than three times that many users.

Podmore has seen the realities of the cost equation from several different
angles. E-peopleserve, a joint venture set up 15 months ago by BT and
consulting firm Accenture, offers a range of HR services to its two parent
companies, and is close to signing its first deals in the wider public market.
Part of its portfolio is to offer hosted e-learning services – often referred
to as an application service provider model – that have required it to install
its own LMS from Docent, a leading player in the learning market.

His experience shows that the true costs of a learning implementation can
vary significantly. For one thing, savings are often stacked in favour of
larger projects because of the economies of scale they generate. Podmore
recently quoted a client for a 50,000 user system, offering access to a broad
range of content, and calculated that if every user did just one course
equivalent to a half-day classroom training session, the savings would pay for
the total project investment.

By comparison, a similar service provided to 5,000 users would still provide
good value, but the differences in baseline costs would be enormous.

Furthermore, content providers, says Podmore, often offer enterprise-wide
licences that give every individual in a company access to an entire learning
portfolio. If you calculate how many users theoretically have access to that
content, the price per title can come down to pennies.

The reality, however, is that individual users don’t access thousands of
titles – they might just pick five or six a year. Seen from that perspective,
the real return on investment looks very different.

Organisations that choose to install their own LMS rather than rent services
through an ASP face a further series of challenges. To begin with, the market
is highly fragmented – when e-peoplesoft began looking for an LMS provider a
year ago, it came across 106 different suppliers.

Although market leaders are emerging in the shape of companies like Docent
and Saba, the sector is set for a period of rapid consolidation that will see
many suppliers either acquired or going out of business – particularly given
that major IT vendors like SAP, Oracle, PeopleSoft, Siebel Systems and Sun are
either building or buying their way into the space. While due diligence in
practice can provide a large element of safety in the selection process, any
profit calculation needs to take account of the potential for service and
support disruption.

Additionally, there are a number of service costs that need to be factored
into the equation. In general, the features contained in the leading software
packages are broadly similar – according to Jan Vels Jansen, European marketing
director at Docent, the difference in functionality between the top 20 vendors
is probably plus or minus only 10 per cent.

The underlying architecture varies, however, and not all systems have been
designed to take full advantage of the Internet. This isn’t just an issue for
technology purists – systems built specifically for the Internet allow greater
flexibility in the way users access them, and minimise the time IT departments
spend upgrading and maintaining end-users’ machines.

Vendors also differ in their approach to installing applications. Some
encourage users to adopt their systems "out-of-the-box", limiting the
amount of software modifications carried out during the implementation process.
That strategy reduces the cost of set-up and the time to implement, but means
organisations often have to adapt their internal business processes to fit the
way that the application works.

By contrast, increasing the amount of customisation allows organisations to
personalise the software to meet their business needs, but it often complicates
future software upgrades and it comes at a price. Podmore believes that in
large LMS projects, the implementation costs can be as much as five times the
price of the annual software licence fee.

Many of these technology issues also have profound cultural implications.
Rob Lauber, executive director of learning systems at US mobile service
provider Cingular Wireless, points out that even elementary changes to working
practices can have an impact at both a local and managerial level.

Cingular, which has implemented Docent’s LMS for its 34,000 employees, made
26 enhancements to the system during the 100-day long implementation process.
One significant change was to allow staff to enrol in their own classes.

"In the past, management held the information about what training was
available," he says. "In the new environment, the employees have
access to that information. That’s a workflow issue, but it’s a pretty big
change."

These kinds of cultural issues arise in almost every e-learning
implementation and can have a major impact on success and take-up rates.

Andy Wilson, UK general manager at Hewlett-Packard’s education services
division, points out that adoption can be radically affected by the approach
companies take in implementing e-learning systems. The company, which provides
technical and business software training, has seen users adopt online content methods
and then ban employees from attending any classroom-based training in the same
fields.

Wilson says, "They’re effectively force-fitting the workforce into the
content. That’s one approach, but it doesn’t address the issue of cultural
resistance – people will condemn the strategy before it even gets off the
ground."

He adds, "We’re talking to lots of companies at the moment that rushed
into deals with online content providers, who said, ‘Load this on to your
intranet and you’ll save a fortune’. One year down the line, nobody’s using it
and the company’s still spending as much on external classroom training. There
has to be communication and marketing to the workforce, or it tends to end in
tears."

Podmore points out that these kinds of cultural issues span the entire
company. At a management level, that may require a rethink of their perception
of learning, which is often seen as a leisure or personal improvement activity
rather than a core part of an employee’s overall job function.

Employees, meanwhile, sometimes have clouded perceptions about the value of
a service which is lauded for its low cost.

Given all these issues, it’s probably no surprise that early adopters of
e-learning systems resort to a variety of different ways to measure their return.
Cingular Wireless’ Lauber says the company has achieved a
"tremendous" return on investment on its training administration
costs, which have been cut by some 30 per cent.

He says, "When I look at live e-learning, reaching 300 people across
the US at a time, the cost to deliver that is pennies compared to what we had
to do before."

In addition to these benefits, he points out that the platform gives
learners far more opportunities to learn for the same cost. That point is
reinforced by providers like KnowledgePool, a supplier of both instructor-led
classes and e-learning.

"The implementation of e-learning, linked to the utilisation of virtual
classrooms, provides a much richer environment for the trainee," says
David Welham, director of learning technologies.

"The media options are much wider, and the opportunity to pick and mix
much higher."

But while hard return on investment and employee satisfaction factors help
build a business case for investment in e-learning, for many organisations the
real benefits come at a more strategic level.

Lauber says the biggest impact for him has been in two "softer"
areas. "Most of the gains have been seen in speed of delivery and reach
across the organisation. To launch a new product used to take a couple of weeks
– now it’s a couple of days to [train] the salesforce."

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