Outsourcing corporate back-office functions means significant bottom-line savings in learning. The back office involves the set of services that can be centralized into a shared-service model and done in a repeated fashion.
October 13, 2004
Outsourcing corporate back-office functions means significant bottom-line savings in learning. The back office involves the set of services that can be centralized into a shared-service model and done in a repeated fashion. This spans a variety of industries, from financial services and insurance to manufacturing and pharmaceuticals and includes enterprise learning technologies, learning management systems, assessment, IT administration and operation such as hosting software applications, integration of that software into other environments and running 24×7 data operations. Training administration creates another large piece as operations include instructor and facility schedules, book shipments, e-learning content and vendor management.
“The front office is what the customer does, and the back office is the stuff that can be outsourced,” said Alan Todd, chairman and CEO, KnowledgePlanet. “The back-office piece of training operations gets married to the front office, the highly strategic stuff that the training organization does. They focus on understanding the business, the industry, the problems and the challenges facing their leaders. That stuff should be centralized and automated, and those that work full-time should be focused on doing high-level client relationship management with their business unit leaders, helping them develop performance management strategies or learning intervention strategies that can get the whole team operating at a higher level.”
The economics of outsourcing learning are significant, according to a recent study from Bersin & Associates, “The Economies of Training Operations,” based on 106 organizations with at least 10,000 employees that outsource some portion of their training operations. The study showed that enterprises that outsource back-office functions spent some 31 percent less per learner than those that did not. Outsourcing also can reduce total training and development staff requirements and administrative overhead. “The ones that outsourced the technology and the hosting and operations had 60 percent lower ongoing operating costs,” Todd said.
More research from IDC highlights 58 percent of those surveyed who believe their training and development operations will become more centralized over the next two years. “We’ve found that most training managers are spending 50 percent of their time on tactical stuff, on administrative stuff, and that’s the problem,” Todd said. “That’s where they’re being held back and inefficient. That’s where the companies that don’t outsource the back office end up spending too much money and getting too little for it. Outsourcing the training back office is the best approach. There’s comprehensive outsourcing, which is essentially you outsource everything and you have one person that does contract administration. Back office is better; it’s more of a service bureau approach where the company maintains more control. It’s less risky, and the return on investment is a little higher.”
The IDC study went on to say that companies are spending 22 percent of their training budgets on back-office functions, which comes out to several million dollars annually for the Fortune 1000. “That’s money that they can reuse on things that can give them a higher return, more strategic things within learning and workforce development,” Todd said.
Centralization across multiple customers would obviously lower cost, but cost savings is only one aspect to outsourcing. Companies could reallocate freed resources and energy onto more strategic goals such as preparing the specialized content an enterprise workforce needs to launch new products faster and support customers better. In addition to offering more time and more money for learning, back-office outsourcing also affects service. “You can actually reduce the time-to-competence of your field sales force because we make sure our companies are leveraging e-learning and employee self-service, and these are things we have experience with millions of users,” Todd said. “There are a lot of ways (organizations) can get not only cost reduction through outsourcing the back office, they can increase service level.”
The future of this specific outsourcing is bubbling. Human resource outsourcing is a very popular trend at the moment, one that’s been gathering steam in recent years. “I believe that training outsourcing and training back-office outsourcing is a mega-trend that’s running about two years behind the human resources outsourcing trend,” Todd said. “Training and development is one of the components that would be a subset of that. It should accelerate dramatically over the next two years.”