Outsourcing can have significant economic value to the enterprise. Many strategic business drivers encourage learning organizations to outsource specific functions. A recent survey from Bersin &amp; Associates looks at several of these business dr
August 18, 2004
Outsourcing can have significant economic value to the enterprise. Many strategic business drivers encourage learning organizations to outsource specific functions. A recent survey from Bersin & Associates looks at several of these business drivers.
Josh Bersin, president and founder of Bersin & Associates, compiled information taken from 106 companies that discussed many of the business drivers that motivate or encourage outsourcing in the enterprise. “It’s interesting that the word ‘training’ has become such a buzzword because training as an industry, a lot of it, has been outsourced forever,” said Bersin. “Training, by its very nature, is very, very multi-disciplinary. In a corporate environment, the training organization is essentially responsible for training everybody on everything. Many of the topics and skills and the training content has always been outsourced to external providers. Companies have always had consultants doing sales and management training. They’ve always had books, guest lecturers, seminars and all that. The term ‘outsourcing,’ although it’s a new term, is not new to training. What is new is that companies are beginning to realize that the training function itself, and how it’s actually run, can be outsourced.”
First, most companies have gone through the recession and felt an enormous crunch. Training is one of the functions that gets squeezed the most in economically tense situations because it’s usually the hardest to measure. Therefore, training managers look to outside providers to do a lot of the administration, logistics, vendor management and technology.
The prevalence of e-learning in the training function is a second reason that outsourcing has gotten so popular. Training organizations lack expertise in running software and developing content; to gain it, they outsource. “A lot of the drivers for outsourcing start with technology. Historically, training organizations were basically teachers—people who enjoyed educating others and learning about different business processes and figuring out how to improve them,” said Bersin. “Once e-learning started, training organizations had to invest a lot of money in software and tools, developing content for online training and so forth. That investment basically pushed training organizations into an area they’re not very familiar with. A lot of the technology that they’re now dealing with, which is critical, is outside their comfort zone.”
Enterprises also outsource because training as a function has a hard time holding itself accountable to direct business impact. “If you’re the VP of sales for Cisco and you’re announcing some massive new product, you know that your salespeople need to be trained,” said Bersin. “You go to your head of sales and say, ‘OK, I need everyone trained on this new product in the next three months,’ and that person runs around like a maniac and gets all that training done. You don’t always know if he did a great job. It’s hard to measure directly. So, the training organization is asked a lot of questions that it can’t answer: How much impact did you have on this? On that? Did you do that on time? The CFO or the line managers sometimes say, ‘Well, we can’t hold the training guys accountable. No matter how many times we ask these questions, they never seem to give us quite enough information. Maybe if we outsource it, we can hold the outsource firm accountable, and since we’re paying them, they will respond much more quickly to our needs.’”
Additionally, Bersin said that companies don’t like having fixed costs that they can’t change easily. “If you take an aerospace firm, for example, where they’re in a very cyclical industry, they might have a period when they need a massive amount of training,” he explained. “Then for a couple of years, they need very little. They don’t want to have to lay all those people off and then rehire them. If they outsource, they can just say, ‘Next quarter we need 100 more courses; the following quarter we don’t need any,’ and let that other company worry about the hiring and firing of those people. This allows that organization to take the fixed cost and turn it into a variable cost.”
While saving money is usually the biggest reason organizations outsource, faster response time is another. Training is frequently a time-sensitive problem, and many training programs change rapidly due to new product rollout and a host of other factors, which means that the challenges faced by training departments are constantly changing. “They’re constantly in the process of building content and training programs,” said Bersin. “The companies that they might outsource to are very, very sophisticated and efficient at building content. You can accelerate the process by outsourcing it to specialists. Because training is so multi-disciplinary, you can improve the cycle time a lot. Speed is a major benefit.”
He added, “What surprised me the most was how much money people are saving. I’ve been on the vendor side of the world and I know how they work. An outsourcing vendor wants to take over something for you that they can do cheaper and charge you as much as they possibly can to make a profit. They’re not really incented to save you money. So sometimes when you outsource things, they’re not cheaper—they’re just easier. What we found in the study was, people are actually saving a lot of money. There are a lot of inefficiencies in training organizations that can be saved by bringing in specialists or offloading functions to different people.”
Reducing inefficiency can mean full-time staff reductions, another cost-saver, or staff reallocation to more strategic functions, which is a productivity booster. “Outsourcing lets people sort of move up the food chain on time and energy so that they can focus more on content development, spending time to understand what the critical business problems are and making sure the training organization is aligned,” Bersin said.
For more information, see http://www.bersin.com.