Pre-recession, the nascent-managed learning services sector was evolving quickly, but industry watchers predict the economic downturn will accelerate this process – with far-reaching developments in training and learning outsourcing likely.
Recession changes everything, not least corporate priorities. The twin goals of growth and improvement have for many companies been eclipsed by an urgent need to pursue survivalist strategies.
How corporations choose to meet these strategic needs will be one of the key factors in shaping the learning and development (L&D) market in the coming years. It is a situation that managed learning services (MLS) suppliers are both monitoring and seeking to influence.
MLS deals are growing in popularity because they deliver affordable training, market expertise in training procurement and lighten the administrative load on L&D managers.
The UK MLS market is big business roughly 8% of companies are currently making their decisions through MLS suppliers, according to the Institute of IT Training (IITT). Outsourcing analyst firm NelsonHall, meanwhile, values the UK MLS market in L&D at about £110m.
These figures are set to increase, as organisations look to identify, then meet, the challenges posed not only by the recession but also by shifting corporate training trends.
IITT research consultant Alan Bellinger says the big growth area for MLS providers is new business: “[MLS providers] will be picking [business] up like crazy. I expect an MLS provider to be looking at a business plan that has a 15-25% upside on it.
“If a project is linked to survival and has skills impact, then there’s a tremendous focus on just getting it done, and ignoring whatever it was they’d been doing up to that point. That will lead to increased demand for MLS suppliers.”
A former IITT business development director, Bellinger says the IITT is well placed to gauge MLS trends. “Through the two wings of the IITT – the learning development managers and the training providers – we’ve got a good feel of what’s happening in the market,” he explains.
Outside of the need for survivalist strategies, Bellinger identifies a wider recession-driven trend of increased L&D outsourcing across all sectors. He identifies two classes of outsourcing companies – innovators and laggards.
“Innovative companies are outsourcing because their focus is the search for excellence,” says Bellinger. “They have a tendency to do everything that’s core to their business themselves, and put everything else outside. They go for an MLS approach on the basis it’s the most effective sourcing decision they can make.
“The laggards are going for outsourcing because they’re screwed up internally they’ve got rid of the internal team and so have put it out to experts who will make the decisions for them.”
Swimming with the tide
For their part, MLS suppliers are looking to maximise the benefits accruing from new business by swimming with the tide.
Cushing Anderson, project-based services research vice-president at IDC, a global provider of market intelligence for the IT, telecoms, and consumer technology markets, says: “They are seeking new clients with similar profiles to their existing clients to ensure a high degree of leverage and increased profitability.”
Anderson, whose areas of expertise are human resources, learning and business consulting, adds: “They aren’t changing their business model much, but are striving for leverage, reducing costs if possible, and increasing client engagement to help ensure renewals.”
Anderson says existing MLS clients now expect increased relevance and increased alignment of learning initiatives with business requirements. This need dovetails with a trend he says pre-dates the credit crunch: that MLS is coming to be viewed less as a standalone function and more as a component of broader HR relationships.
“MLS clients [are beginning to understand] that you can’t disconnect learning from talent management,” says Anderson, adding that how you hire, develop, deploy, promote and retire the workforce can’t be carved out.
Bellinger feels the prevailing MLS-provision model is ill-suited to the delivery of consultative services, but predicts this situation is set to change.
“MLS lends itself to a commoditised purchase,” he says. “If an MLS supplier is asked to source SQL Server training then the training provider, the MLS supplier and the L&D manager are talking exactly the same language, because it won’t matter much who provides the training, as the course is likely to be very similar. It’s a bit like deciding whether to buy baked beans at Sainsbury’s or Tesco’s.
“But if the L&D manager asks for leader development training then the misunderstanding between the three parties can be quite substantial, because different suppliers deliver different products.”
Bellinger adds: “MLS are very good at the commoditised sell, such as supplying PowerPoint training, but not very good when companies ask for project-based training, which is something that requires a consultative approach rather than being just a transactional purchase.”
Something else that appears likely to prompt more MLS providers to offer consultative services is a growing corporate focus on informal learning.
“One of the key areas at the moment is business intelligence, which naturally leads into performance management and better metrics within the organisation, and therefore a better understanding of skills issues,” says Bellinger.
“The skills transfer process in the future will be much more to do with informal learning than formal learning. An example [of informal learning] is creating opportunities for employees to learn within the organisation while doing their day job, rather than sending them off on courses. Trends like this don’t play well in the current MLS space because it’s largely about transactional plays.
“But there is a trend among MLS providers at the moment, whereby they’re trying to add a consultative element to what they’re doing, and that’s where I see them getting their longevity.”
Those MLS suppliers that will look to add a consultative function include what Bellinger calls “pure-play MLS providers”, such as KnowledgePool and ITPC. He says others, like QA – which already offers a managed services provision in tandem with being a training provider in its own right – are well positioned to meet the predicted upswing in demand for consultative services.
As more MLS suppliers begin to offer both commoditised and consultative services, companies will need to be extremely clear about what they require.
Yet in today’s MLS market – with operatives divided along vendor-independent and non-vendor-independent lines – companies also require clear-sightedness to make prudent MLS sourcing decisions. So what’s a good starting point?
Bellinger says: “My advice to companies who are unsure whether to source a vendor-independent MLS or one that offers its own training products is that they need to ask whether they are after a transactional play or a service play.”
“If I want to buy PowerPoint 2007 training I wouldn’t want to go to QA’s massive overhead to make that straightforward purchase. And if I were looking for a multi-change programme that would affect the survival chances of the organisation, I wouldn’t go to an MLS that continually talks about transactional offerings.”
Anderson says being clear about objectives and intentions is also crucial: “If the provider feels they are being asked to provide too much, they will find ways to execute the contract and bill for ‘additional services’ to make up the difference.
“If a client feels they aren’t getting their benefit, they will demand more services for current rates. Clarity and communication up front, and continuously, is the best way to ensure you are getting what you need from an outsourced relationship.”
And what of value for money? How do companies weigh the benefits of an MLS relationship against their outlay for it?
Anderson says this comes down to clarity of communication: “Cost overruns and diminished value come from scope creep and from expectation creep. Be clear about your objectives and develop a list of requirements that are essential to success, and work with the provider to ensure these are met.”
Case study: ITPC
Lancashire-based Independent Training Purchasing Consortium (ITPC) is unique among MLS providers, in that it operates a performance-based service on a no-savings-no-fee basis.
An example of how this business model works is provided by one of ITPC’s oldest clients, Vertex Data Science, a leading global business process and customer management outsourcing company.
“Vertex was looking to significantly reduce its training budget and administration, but still had 1,400 staff to train,” says ITPC managing director Jason McLean.
“It needed a solution that would assist in the administration and co-ordination of all training and bring down the cost of delivery and procurement.”
ITPC achieved a 22% annual saving on Vertex’s previous training deals, taking a percentage of these savings as its fee.
“ITPC does all the leg work to source the most appropriate training solution,” explains McLean.
“Companies stand to achieve far greater savings in all areas of training procurement, taking advantage of our consortium’s collective training spend, which results in better bottom-line figures.”