The most effective and efficient training organizations employ some kind of outsourcing. Training outsourcing is following well-established patterns in other areas, such as payroll, human resource management, customer service, IT and call centers. Today, the question a business-savvy training executive asks is not, “Do we outsource?” but rather, “What should we outsource?”
The reasons behind the widespread adoption of outsourcing are many. The most common goal is overall cost reduction. Most organizations view training as a cost center, and consequently, there is constant pressure to drive down costs. Many organizations see outsourcing as a way to reduce overhead and move from fixed to variable costs. Research conducted in 2004 and 2005 shows significant economic benefits in the use of outsourcing. For instance, companies that employ hosted learning-management systems reduce costs per learner by 31 percent and staff size by 26 percent. And research shows that such companies have markedly higher satisfaction rates with their solutions.
Mature learning organizations also understand the value of other advantages, such as improved staff efficiencies, greater flexibility, faster time to market and increased focus on strategic areas. As learning solutions become more complex, specialized content, multiple technologies and broad skill sets are required. Most organizations find it impossible to staff to meet these needs. Best practices use internal resources for strategic functions, such as business performance consulting and development of company-specific content.
What Do Companies Outsource?
Training outsourcing takes three different forms:
1. Outsourcing of content and programs: Few companies can develop and maintain on their own the learning-content resources required for business success. The use of off-the-shelf content or training developed and delivered by third-parties can be viewed as a type of outsourcing.
2. Outsourcing of business functions: The Internet and other technologies make it possible for companies to outsource almost any business function. These include:
- Learning management systems and other technologies: This is a huge area of training outsourcing. A 2004 study showed that 47 percent of surveyed companies used hosted LMSs, and 70 percent outsourced other technologies, such as virtual classrooms. Companies that outsource technology save an average of 17 percent on operational and maintenance costs.
- Help-desk functions: Many organizations consider training administration as non-strategic. These organizations outsource tasks such as scheduling, registration, learner support and tracking.
- E-learning content development: The sophistication of e-learning courses makes their creation much like software development. Specialized tools and techniques require special skills and experience. Many organizations have cultivated relationships with a handful of vendors, which gives them the flexibility to match projects with specific strengths, skill sets, staff resources and costs.
3. The entire training function: Companies such as Avaya, Sun Microsystems, Boeing and Autodesk outsource major portions of their training operations. Although this type of outsourcing is not common, companies that do not have core competencies in training development, delivery and administration can use it to their advantage.
Challenges of Managing Multiple Outsourcing Vendors
With the widespread use of outsourcing comes the new challenge of managing multiple outsourcing vendors. First, a company should establish a specific person or organization that has jurisdiction over all training outsourcing decisions. This is very important, especially if training is decentralized throughout the enterprise. Without centralized oversight, cost efficiencies will likely be reduced or even lost. In fact, some companies end up spending even more because of contract duplications, integration issues, poor vendor selections and higher contract costs.
A centralized outsourcing authority can set criteria for vendor selection, minimize duplication of services and identify potential reuse of services across the enterprise. It also can standardize contracts, non-disclosure agreements and statements of work and negotiate on behalf of multiple business units to ensure best value.
Another essential management tactic is the establishment of standard development tools, templates, integration standards and testing checklists for use across the enterprise. The time and resources invested in these areas will pay off in multiples—and not just in cost savings. Companies employing these best practices realize significant advantage in efficient use of resources, time to market, reduced technical support and increased satisfaction among business customer audiences.
Organizations with strategic, highly proprietary content resources find content-management technology to be useful in managing outsourced content development and promoting reuse or sharing across multiple vendors. This technology gives the organization control over all content assets, rather than relying on outside providers. One word of caution: This technology can drive up the cost of content development because it requires vendors to learn how to use a new system.
Each outsourced project should be run according to established project-management principles. Responsibilities should be clearly delineated and detailed descriptions of all deliverables and project milestones should be documented. Each project must have an identified internal project manager to monitor progress, manage the project schedule, handle problems, ensure deliverables meet requirements and serve as a central point for all project-specific communications.
These days, many learning-related initiatives involve multiple vendors. For instance, the implementation of an LMS could easily involve vendors for off-the-shelf content, customized content, assessments, and one or more development tools. These types of projects require significant attention and internal management.
Cingular: Outsourcing Evolves with Organizational Maturity
“The use of training outsourcing came with the evolution of the learning services organization,” said Jim Bowles, vice president of workforce development for Cingular. “Prior to 1999, outsourcing was fragmented and unmanaged, which significantly compromised cost savings and efficiencies. Today, Cingular relies on outsourcing to augment its staff of training professionals, efficiently leverage a broad range of technology products and meet the training needs of a diverse audience in an ever-changing and highly competitive market.”
Based on its extensive experience, Bowles’ team has established a set of best practices for training outsourcing that covers all aspects of engagements, including the use of standard toolsets and templates, complying with detailed integration standards, and the successful completion of an extensive testing checklist.
According to Bowles, outsourcing delivers three primary benefits: The learning organization is able to scale and operate more efficiently, it can accommodate shifts in development and delivery, and the company can staff to midpoint and then supplement resources when needed. The team relies on a stable of outside resources, ranging from large service providers such as IBM to well-established outsourcers in Ireland to local creative agencies.
Cingular employees have access to a course library of almost 1,000 courses. The company averages between 125,000 and 150,000 course completions each month. The rigorous attention to vendor management results in consistent, quality training across all vendors and has eliminated the content and technology-integration issues often problematic with outsourcing. Once courses are approved, they can typically be deployed companywide in less than five days.
Cingular also has established relationships with content providers and developers that ensure Cingular’s ownership of intellectual property. A vendor’s compliance with the company’s policy is required in order to do business. Any content developed by an outside developer is owned exclusively by Cingular and cannot be reused or sold by the vendor. Cingular also has an agreement with off-the-shelf content providers that gives the company the right to modify or repackage content.
“Intellectual property ownership is a big deal for Cingular and gives us strong competitive advantage,” Bowles said. “It’s sometimes tough finding vendors who are willing to work with us in this way. You definitely have to establish a respectful and trusting relationship.” Cingular’s secure document library centralizes management of all content and offers an additional level of protection.
Projects involving multiple vendors are common. Responsibilities and deliverables for each vendor are carefully defined. A program or curriculum manager oversees the project and ensures all parties are executing on assignments.
According to Bowles, success is highly dependent on clear-cut standards and processes, and effective governance, security, and tracking of progress and results.
Scotiabank: Never Reinvent the Wheel
“We don’t believe in reinventing the wheel,” said Cory Garlough, vice president of global performance and learning for Scotiabank. “We rely on vendors with in-depth expertise that we just can’t efficiently match.”
According to Garlough, Scotiabank uses external partners for many different training functions, including off-the-shelf content, customized content, course development and course evaluations. “Our use of outside resources depends on the need, budget and time available. Often it’s faster and cheaper to use outsourcing.”
Although training is decentralized at Scotiabank, Garlough’s group acts as a clearing house for all training outsourcing, and it is responsible for managing all vendor relationships. “We view this as a value-add, specialized service for all business units,” Garlough said.
All potential outsourcers go through a rigorous qualification and screening process, which includes an evaluation of development tools used and staff expertise. Garlough’s team has developed master contracts and service agreements to save time and ensure the company’s interests are protected. Annual reviews also are conducted with all primary outsourcing vendors in order to give all parties an opportunity to review the relationship and discuss any needed changes. “A good relationship is a must for good service,” said Garlough.
Focused vendor management also occurs at the project level. A Scotiabank project manager is assigned to each project and serves as a central point of communication with the vendor. As Garlough points out, valuable time is typically wasted when vendors have to deal with multiple contacts within a client organization. The project managers create detailed statements of work (using standard templates), which lay out all details of the engagement, established schedules, and document pricing and milestones. At the end of the project, the project manager conducts a project review to assess what went right and what could have been improved. The project manager handles all problems associated with the particular engagement. However, if problems persist or if there are business-related concerns, Garlough or one of his team members steps in to mediate.
When a vendor is working on a technology-specific content project, the company often requires the vendor to deliver a prototype before starting actual project work, especially if the vendor is new or if the project is different from anything completed in the past. This step minimizes work and ensures the vendor is well matched to the project at hand.
“Scotiabank has long relied on outsourcing partners for many business functions. In order to effectively meet global training needs, outsourcing is an important factor in executing our learning strategy,” Garlough said.
Unisys: Managed Services Support Corporate Transformation
Back in the late ’90s, Unisys had begun to transform itself from a technology-product provider to a worldwide technology and services company. With this dramatic business change came the need to broaden the company’s training offerings.
According to Karen Petersack, director of employee learning and development for Unisys University, the company decided to use managed services for its IT certification training. In addition to reducing costs in this area, the company wanted to increase the effectiveness of the training (with higher pass rates) and move toward a blended learning strategy. If the results were positive, a broader use of managed services would be considered.
Unisys contracted with SkillSoft to manage its IT certification program, which at that point consisted almost entirely of instructor-led training (ILT). Although almost all business units had employees involved in certification training, there were no tracking mechanisms, budget controls or contract consolidations.
With the use of managed services, Unisys reduced its number of ILT certification vendors from 200 to 12, streamlined billing and implemented corporate contracts.
Approximately 95 percent of employees taking certification exams now pass the first time, as compared to first-time passing rates of approximately 75 percent in 1999. Student enrollment in Unisys University certification tracks, which span IT and business, has grown from 1,600 students in 1999 to more than 6,000.
Today, SkillSoft continues to manage the IT certification program, as well as strategic training programs. SkillSoft manages contracts, service agreements and financial arrangements with external providers. It also handles administrative functions such as course scheduling, registration, assessment tracking, help-desk support and detailed reporting. The company currently assigns five full-time employees (three in the United States and two in the United Kingdom) to the Unisys account.
Like other best-practice organizations, Unisys has a CLO with responsibility for virtually all enterprise training. Petersack has direct responsibility for managing SkillSoft and its assigned employees and overall accountability for all service agreements.
“One of the biggest advantages of managed services is that it frees us up to be more consultative with our business partners,” Petersack said. “We have only 80 people worldwide to support about 37,000 employees. Managed services help us use internal staff resources much more effectively to bring real value to Unisys.”
Petersack said role changes of training professionals had to be fostered during the transition to managed services. “You don’t create consultants by simply taking away administrative tasks. We quickly realized it was our responsibility to develop new staff skills.”
An Essential for Maximum Success
Training organizations with highest business impact view outsourcing as an important business strategy. These organizations are not afraid to jettison functions they can’t perform efficiently and effectively.
Leading organizations realize substantial advantage by following three basic principles:
- Stay closely involved with business units and corporate planning processes. Business alignment is strategic and can’t be outsourced effectively. Retain key executive positions, such as the CLO, in order to ensure a high-level awareness of training throughout the enterprise, maintain control over budgets, set direction for enterprise training and goals, and wield authority in managing vendor relationships.
- Dedicate management resources to outsourcing. Over time, outsourcers have a tendency to relax responsiveness and raise prices, thereby diminishing cost efficiencies. Attentive, internal management and overall vendor relationships is mandatory.
- Take advantage of outsourcing technology. Most companies that choose to outsource major systems or multiple technologies see significant cost savings in implementation, ongoing maintenance and operational costs.
Just as training organizations have evolved in maturity over the last few years, so has the use of outsourcing. That’s good news for training executives, who have a wealth of best practices to help them avoid mistakes and increase the business value of their organizations. And it’s equally positive for vendors, who are now usually dealing with experienced clients with practical expectations and defined processes. When managed well, outsourcing is indeed a win-win.
Principal analyst and research director for Bersin & Associates, Chris Howard has worked with hundreds of companies in the deployment of online learning solutions. Chris has held senior product management and development positions at Convergys, IBM and Macromedia. He can be reached at firstname.lastname@example.org.