Today, most learning professionals would correctly guess that there are less than a dozen major LMS vendors. But even those vendors are disappearing. And consolidation is not the cause.
by Site Staff
July 9, 2008
Almost eight years ago, analysts predicted that consolidation in the LMS industry would shrink the number of vendors from more than 100 to a small fraction of that number. The analysts were right. Today, most learning and development professionals would correctly guess that there are less than a dozen major LMS vendors. But even those vendors seem to be disappearing. And consolidation is not the cause.
Talent Management on the Rise
Instead, LMS vendors are purposefully morphing into talent management vendors. Talent management is clearly a hot topic. But are LMS vendors taking the right tack? According to Forrester Research, “C-level executives increasingly view learning and talent management as an essential initiative in developing razor-sharp talent that can move the organization toward its goals.”
In its simplest form, talent management is defined as attracting, developing, rewarding and retaining high-caliber employees to meet an employer’s goals.
To some degree, industry analysts, shareholders and institutional investors have pushed vendors to chase talent management. By selling software that manages talent instead of merely learning, vendors are thought to net bigger profits, greater market share and a more compelling story. As vendors have tried to meet the expectations of analysts, investors and venture capitalists, the scope of the wares that vendors are selling has grown and grown. But growth can come at a price.
Who’s Paying the Price?
Learning and development solutions providers are paying a price when they emphasize talent management at the cost of learning. For example, for an LMS vendor to develop a truly competitive talent management solution, the company must invest in research and development (R&D) to write software for, say, compensation management or performance management. Or the vendor must spend money to acquire such technology, and, then, integrate the product into its portfolio.
But there are a lot of products, features and functions coming into the LMS market that have little value to a learning and development professional. Training is focused on developing the workforce. And while some organizations have an entire department devoted to managing compensation and figuring out how best to leverage pay to attract talent, these tools are not vitally important to learning and development professionals.
Vendors are spending tens of millions of dollars each year on R&D. But what percentage of this is being spent on bringing next-generation LMS technologies to the market?
Meet the New LMS, Same as the Old LMS
Unfortunately, developing better, smarter LMS technology has taken a back seat to developing or acquiring software for recruitment, compensation and performance.
That means in a lot of cases, training professionals are “driving” an LMS model that looks largely the same as it did three, four or even five years ago. Imagine what would happen if the auto industry sold its customers the same car, with no substantive improvements, for six years in a row.
In many organizations, the training professional is buying a talent management suite for specific reasons, such as competency modeling or skill-gap analysis. But in terms of real dollars, this same training professional is paying for a six-figure contract to get enhancements to maintenance agreements, or enhanced features and functions for performance or compensation management tools. Vendors should not lose sight of what customers need: A cutting-edge LMS, every bit as good as the performance, recruitment and compensation management tools being developed today.
There’s no doubt that Wall Street drives LMS vendors, especially the publicly traded ones, to capture greater market share. But positioning themselves as talent management vendors, with nary a nod to the learning professionals they serve, ironically ignores the constituency best equipped to account for and develop talent: CLOs. Recruiters can find talented employees. Compensation professionals can best peg what they ought to make. And performance managers can track how well someone is doing his or her job. But does a chief learning officer or vice president of human resources looks to these systems or disciplines to develop talent?
Of course, they don’t. But these senior-level training and HR executives may not be looking at an LMS, either. And if that’s the case, then it’s incumbent upon LMS vendors to develop and provide training professionals with a third- or fourth-generation LMS that will pique the interest of a vice president of HR, CLO or even CEO.
The “ERP Lite” Trap
LMS vendors that push themselves to capture talent management market share have already found that they’re competing in an entirely different place. In fact, LMS vendors will soon find – if they haven’t already – that they’re competing with ERP vendors, but without the full functionality ERP vendors offer.
Yes, LMS vendors who choose to become talent management vendors may have compensation, performance and learning tools, but they likely won’t have the tight integration with financial and manufacturing software that ERP vendors offer. A learning-cum-talent software vendor also will lack 401(k) management and additional HRIS functionality that ERP vendors claim. Simply put, LMS vendors who go this route run the risk of becoming “ERP-lite” vendors.
A Learning-First Approach
In spite of the aforementioned issues, talent management does matter. It’s smart for LMS vendors to add sound capabilities for competency management, skills-gap analysis, performance management and even analytics that detail the effects of training on performance. But LMS vendors would serve themselves and their clients well if they
● Focused on investing in their core technology.
● Offered streamlined talent management tools, as they relate to prioritizing learning investments and prescribing learning interventions.
● Simply integrated with best-of-breed compensation and recruiting software, such as ERP vendors or niche players.
The future of the LMS market is very bright for both users and developers of learning technologies. According to IDC, the market for e-learning infrastructure alone is pegged to be $1.4 billion in 2008. That’s a respectable market. And the truth is that a lot of that market is defined by learning and development professionals who are looking for an LMS to meet new challenges.
If vendors solicit advice from their customers and challenge those same clients to look at opportunities, LMS software makers will find many ways to apply e-learning outside traditional training (e.g., delivering regulatory training to employees). And that sort of tack can spell growth for investors and shareholders alike.
For example, virtually every bank in the United States that owns an LMS uses it to train its employees, and only its employees. But what if a bank deployed LMS technology to woo young customers by offering online tutorials about Banking 101? What opportunity is larger? Training several thousand bank employees, or educating tens of thousands of customers?
Here’s another example. Auto makers could tap an LMS to distribute an interactive, online owner’s manual, which would include periodic e-mail reminders for maintenance along with a short, interactive how-to course. The LMS would deliver the course, capture contact information and provide manufacturers with customer preferences.
A Vision for the LMS
What organizations need today and tomorrow in the way of employee development can only be supported if LMS technology evolves. However, the industry hasn’t kept up with what the majority of learning and development professionals need. The growth of Web 2.0, for example, has seen online collaboration evolve from bulletin boards to blogs and virtual worlds. The next-gen LMS must also have comprehensive support for Web services and the ability to tightly integrate in a service-oriented architecture (SOA). Every function of the LMS should be available for tight integration with a portal, software application or tool. Vendors need to develop LMS technology to push the evolution of learning.
As the LMS industry has grown, the number of integrations between portals and LMS software have certainly risen. But there’s much work that could be done on this score, too. For instance, any LMS ought to be tightly integrated with portals so users can grab pieces of LMS functionality, such as ROI for learning, from their portal while the LMS simply operates in the background. In other words, end users have no idea they’re even using an LMS. People won’t have to sign on to an LMS in the future and stay within that system to do their learning. Instead, the LMS will be launched by way of a portal, and users will interact with the LMS from other applications.
For example, a plant manager might tap a materials-planning tool inside SAP or Oracle. Once there, he finds he doesn’t remember how to run the program. So he clicks on a link that’s labeled “Learn More,” and from behind the scenes, the LMS launches a three-minute course on the topic via a simulation.
Or, perhaps, an engineer is performing a safety audit. As she’s performing the audit, she demonstrates her proficiency, which is tracked by the LMS via her handheld device, which then delivers an online assessment. Depending on how she does on the test, the LMS either records a passing grade or prescribes learning for a gap in her skill.
If this industry doesn’t take a learning-first approach, then it runs the risk of disenfranchising learning professionals. Many of these customers simply haven’t seen enhancements to the core functionality that led them to first buy an LMS.
Training professionals have been behind the wheel of their LMS for years. When they think about what would make that “driving” experience a better one, they should think more power, more flexibility vis-à-vis integration with other systems and more elegant simplicity for executives, administrators and employees to use.
In the end, the best way for LMS vendors to manage talent is to stand up, be recognized, listen to training organizations and commit the research dollars to develop the very best learning technologies. If LMS vendors do that, they’ll step onto the talent management stage as an employer’s best supporting actor.