Companies that seek to become high-performing organizations or achieve the agility required to remain competitive require well-aligned and highly effective learning programs that improve speed to proficiency, increase organizational efficiency and assist in the rapid transfer of knowledge and skills across the enterprise.
A company can develop this learning efficiency organically over time, or it can outsource the learning function to an expert and achieve this efficiency more quickly.
Advantages of learning outsourcing include focus on organizational core competencies, reduction in overall learning costs and access to content development, technology and delivery expertise. But learning outsourcing is not without its challenges, which include potential for loss of intellectual property, wrong cultural fit and confusion over who provides what.
Every other month, IDC surveys Chief Learning Officer magazine’s Business Intelligence Board (BIB) on a variety of topics to measure the attitudes, issues and interests of senior training executives. This article looks at learning outsourcing and address questions such as: What is the definition of outsourcing? Who are the decision makers to outsource? Why do companies outsource? How do companies choose a learning outsource provider? How widespread is learning outsourcing? What is the nature of learning outsourcing engagements? What is the learning audience? How satisfied are buyers with their outsourcing provider? How likely are companies to outsource in the future? Why do some companies choose not to outsource?
Learning Outsourcing Definition
There continues to be a diverse understanding of the term “learning outsourcing.” IDC defines it as the ongoing transfer of the management and execution of one or more complete learning processes to an external services provider, with the key word being “management” — by IDC’s definition, true outsourcing engagements are ones in which the vendor is responsible for not only the execution but the management of that function. For example, a buyer who makes a short- or long-term commitment to a content development vendor but retains management of that activity has not outsourced the content development function, nor is the vendor that provides these services, by definition, an outsourcing provider.
Some buyers, however, equate the procurement of learning services from a third-party vendor as outsourcing. As such, when BIB participants were asked to provide names of two companies they thought of when they heard the term “training outsourcing provider,” the list contained a significant number of companies that do not specifically market themselves as such. In addition to training outsourcing providers, the list also contained companies that provide primarily content, technology, development or learning delivery.
This year, BIB participants named 110 vendors, nearly 24 percent fewer than the 144 listed last year, suggesting that there might be more of a consensus regarding which providers constitute a learning outsourcing provider. But it is apparent from the number and names of providers given that there is still some confusion about the term “training outsourcing provider.”
Leading the list of companies were SkillSoft and DDI, replacing Accenture and IBM, which ranked first and second last year. Other companies on top of the list were AchieveGlobal, FranklinCovey and New Horizons in the a three-way tie for the next position.
Learning Outsourcing Decision Makers: Shift from CLO to HR Executives
From this crowded list of players in the learning outsourcing space, it is mainly the CLO or head of learning who makes the key decision for all learning outsourcing agreements. There is, however, a shift away from the CLO or head of learning toward HR executives (and to a lesser extent, toward the CEO) for decisions involving the outsourcing of the learning function.
A reason for this shift might be that more HR executives are making the decision to outsource learning in companies where there is no CLO or head of learning. Alternatively, it might be that the CLO and head of learning perform functions outside the traditional learning arena and are viewed as HR executives. The head of business units making the decision to outsource learning remained constant at 17 percent to 18 percent of the total.
Primary Reasons to Outsource: Scalability and Access to Expertise
Whether the key decision makers are CLOs or HR executives, the primary reason to outsource learning is the same: 29 percent of respondents selected “to deliver more training than internal resources could provide” as a top reason for looking to outsourcing.
A growing number of executives realize the contribution learning divisions can make to achieving business success, and as a result, they are putting heavier expectations on learning departments to keep their employees proficient and knowledgeable. In some cases, given the limited number of learning personnel available, these companies might find it difficult to keep pace with their own expectations and look to outsourcing learning. The ability to scale up learning resources as they are needed is a powerful benefit of learning outsourcing.
The second-most commonly selected response by the BIB was “to gain access to better technical or training expertise.” Outsourcing affords a company the opportunity to access technical or learning expertise immediately, helping companies to respond to their development needs in a timely fashion.
Other benefits of outsourcing are reducing cost, freeing up learning professionals to focus on more-strategic issues (such as better aligning learning objectives with corporate goals) and increasing competitiveness and speed to market.
Buyers Looking for Expertise
Given that buyers look to an outsourcing solution as a means of attaining learning expertise, it is not surprising that learning and subject-matter expertise rate as the two most important qualities buyers consider when selecting an outsourcing provider. Simply put, buyers want a provider that is knowledgeable about the topic and knows how to convey that knowledge in the most effective manner. These two qualities have essentially become the table stakes for competing in the learning outsourcing market today.
Behind learning and subject-matter expertise, respondents felt “good cultural fit” is an important quality for an outsourcing provider to have. This speaks to the personal and intimate nature of learning, with more front-office functions of learning being outsourced.
Although cultural fit might not be as important when selecting a provider to outsource technology management activities, it is more important for activities such as content development, which require interaction with company subject-matter experts, or learning delivery, where the selected provider will have frequent contact with employees.
Other qualities companies look for are outsourcing providers that act as business partners, responsiveness, lowest price point and flexible structure agreement. BIB members find qualities such as financial stability and proven case studies less influential in their selection of a learning outsource provider.
Majority of the Market Outsources Some Portion of Learning
About two-thirds of CLO BIB respondents indicated their companies outsourced some or all of the learning function, consistent with the answers for the last couple of years. It appeared that whether the learning function is centralized or decentralized had no bearing on a company’s decision to outsource learning — about two-thirds of companies with either centralized or decentralized learning function outsourced a portion or all of it to an external providers.
Most Buyers Outsource Select Learning Activities
Learning outsourcing engagements typically fall into one of two camps: those in which select training activities are outsourced, and those in which the entire learning function is outsourced. As in the last couple of years, most respondents who outsource engage in select learning activities (97 percent), and a minority (3 percent) said their organizations outsourced the entire learning function. This suggests companies are content to leverage specific areas of learning, and they either are not ready to outsource or are not interested in outsourcing the whole learning function.
Of those who do outsource, more than half do so for only front-office activities, compared with 4 percent who outsource only back-office learning functions. This suggests outsourcing providers are able to provide seamless integration with the company to the extent that companies are comfortable outsourcing the more visible and crucial aspects of learning compared with the less visible back-office functions.
Of the front-office functions, learning delivery and custom content design and development were the most frequently outsourced, and learning technology management was the most common outsourced back-office activity.
Buyers Satisfied with Outsourcing Solutions
Of the respondents who do outsource, nearly 80 percent are either very satisfied or somewhat satisfied with the arrangement. Nine percent indicated they were dissatisfied with their company’s outsourcing situation. These results were consistent for both select and total learning outsourcing, which suggest an outsourcing strategy can be deployed successfully for either case.
Fewer Likely to Outsource in Future
Despite the high satisfaction rate, there has been a decrease in the number of respondents who plan or continue to outsource in the future — from 69 percent last year to 58 percent this year. Upon closer examination, there are a couple of factors that play into the decrease in the number of companies that plan to outsource.
One is that some respondents outsource but do not plan to do so in the future as a result of dissatisfaction or because of a temporary need for outsourcing that is now completed. But the bigger story seems to be that the respondents who do not outsource don’t plan to do because they are satisfied learning internal training resources.
More Are Content with Internal Learning Resources
When asked the primary reason for not pursuing learning outsourcing, 37 percent of respondents said they are content with their internal learning resources (see Figure 4). This response is followed by 18 percent of respondents who feel their companies do not do enough learning to justify outsourcing. There has been a noticeable increase in these two responses this year.
Conversely, there has been a decrease in the number of companies that say the outsourcing providers do not understand the business and that the subject matter is too complex. In addition, the companies seem less concerned about losing institutional knowledge or intellectual property to an outside provider.
The results suggest learning outsourcing providers have improved in demonstrating they understand the company’s business and its complexities but also highlight an opportunity to better communicate the advantages of outsourcing to the buyer community.
Also, although cost was not a major factor in deciding whether to outsource and with whom to outsource, it appears cost is of a bigger concern for those who are not outsourcing.
Learning outsourcing is well-established within the ranks of the BIB. The key findings from this survey include:
• Decrease in the number of respondents likely to outsource in the future primarily because of the increasing number of companies that are content with their internal learning resources.
• Most buyers outsource select learning activities and are looking for learning and subject-matter expertise, followed by cultural fit.
• The adoption of outsourcing continues to be about two-thirds of the market, as it has been for the last couple of years.
Although this survey answered some questions, it also raised some that need to be explored, such as whether future growth in learning outsourcing will come from existing customers outsourcing more select learning activities and whether more companies will build learning expertise organically and become content with their internal learning resources.
For now, it appears majority of the companies are satisfied with either the learning outsourcing provider or their internal resources to meet their learning needs.