To help learning & development teams understand the structural and operational distinctions between ‘proprietary’ and ‘vendor-independent’ managed service providers, KnowledgePool has developed a new white paper, which examines the strengths and weaknesses of each offering.
Called Independence Day?: Proprietary vs vendor-independent managed service providers, the paper defines ‘managed services’, in the context of learning & development, as an outsourcing engagement where an organisation hands over elements of its L&D operation to a third party, on an on-going basis, in order to gain cost savings and improve the quality and effectiveness of training.
According to NelsonHall, the outsourcing analyst firm, the UK market for managed services in learning & development is worth £110m and is growing at 13% per annum.
KnowledgePool’s research indicates that around 65% of large organisations are looking to outsource at least part of their learning function.
“L&D teams often don’t realise that there are two categories of managed service providers, offering two different approaches,” said Kevin Lovell, Learning Strategy Director at KnowledgePool and author of the paper. “The differences between them have a profound effect on their service provision and the value delivered to clients. This white paper aims to clarify any confusion about the options that are available.”
‘Proprietary’ service providers tend to be established training delivery companies that have diversified into managed services. They have subject matter strengths in certain areas and offer their own portfolio of training courses.
However they are incentivised to drive delegate volume through their own scheduled courses, to utilise their trainers, content and training centres as effectively as possible.
‘Vendor-independent’ providers have emerged with a different business model to meet the managed service need. With expertise in supplier management, administration, technology and consultancy, they act as an extension of the client’s in-house L&D function.
They don’t have their own trainers or training centres but instead they draw on a wide range of best-of-breed training companies and specialists to find the best solution to any training need.
They offer a single process for the booking, administration and invoicing of any training and they monitor and manage all training suppliers.
“A proprietary provider may be an option for small-scale outsourcing but the savings will be limited,” said Kevin Lovell. “A conflict of interest can be created as a proprietary provider will want to encourage as much learning as possible through their own training courses. In contrast, vendor-independent providers are incentivised to act in the clients’ interests. They offer more choice and have the flexibility to be able to switch between suppliers to optimise the training mix”.
He added, “They can reduce the total cost of learning by 20-30%, by passing on discounts on training purchases gained through economies of scale, using technology to automate the labour-intensive administration processes and running shared service operations.”