The shopping is done and the gifts are wrapped. But for CLOs in the market for a new or upgraded LMS, the buying season may be just beginning. According to a recent report from Bersin & Associates, the $1 billion LMS market is expected to grow by 9 percent in 2011.
While the market is expanding, it’s also fragmenting among large, enterprisewide LMS vendors such as Saba and Plateau that integrate learning with broader talent management systems and niche vendors specializing in a specific industry, such as HealthStream and MC Strategies in health care.
“This market is still growing, but it’s increasingly hard to say this is still one space,” said David Mallon, principal analyst with Bersin & Associates.
The Bersin report, “Learning Systems 2011: The Definitive Buyer’s Guide to the Global Market for Learning Management Solutions,” combines data provided by LMS vendors with customer surveys to provide a gauge of the LMS market for the next year.
At the top end, the market is increasingly driven by integration with broader talent management. Even if they’re considering buying a stand-alone LMS, many large, global companies expect it to integrate with other talent functions, such as performance management and succession planning.
“Most at that level are now shopping with talent management in mind even if not necessarily driving the selection,” Mallon said, adding that many small to midsized companies are moving in that direction, too.
At the same time, specialized providers are combining content designed specifically for the needs of a particular industry with a technology platform to deliver it. Mallon points to vendors such as HealthStream, Elsevier and NetLearning in the health care market, which increasingly compete with larger content-agnostic, platform vendors.
“There are a number of learning management system providers that are content and service providers first, but they offer a holistic experience along with this technology platform,” Mallon said.
The overall system isn’t as great an advantage for large vendors as it used to be. LMS administration and learning delivery are increasingly commoditized, Mallon said, with most providers offering much the same services and platform.
While the market grows, so does customer dissatisfaction. The LMS continues to be one of the “lowest satisfaction systems” of any HR software, Mallon said. Increased learner expectations and misplaced analytics expectations may be to blame.
Traditionally, the two primary drivers of an LMS purchase were training administration and e-learning delivery. LMS providers focused on making the learning department’s work easier, sometimes at the expense of learners’ experience.
“For much of the early history of this space, the providers knew that to make their buyers happy, they needed to make the training admin happy,” he said. “Whatever happened out front where the employees came was gravy.”
Vendors are now re-engineering the user experience in response to rising expectations from learners familiar with the easy-to-use social software and programs they use in their personal lives. At the same time, businesses are looking for more sophisticated analytics from their learning departments that can be used to drive employee and business performance. Most learning organizations lack that level of reporting expertise and turn to the LMS, expecting it to provide the answer for their own shortcomings.
“The learning management providers get put between a rock and a hard place on the reporting question, but there’s not much they can do,” Mallon said.
Most LMSs offer canned reports that provide about 80 percent of what buyers need. The level of detail and sophistication users are seeking can only be delivered through customized reporting at an additional cost.
“But those custom building report tools require some amount of expertise and maturity from the buyer to use them and to generate successful data,” he said.
Beyond those shortcomings, Mallon said two broad trends are driving the evolution of the LMS market: continued integration with other talent management services and the need to accommodate continuous learning, both formal and informal. The traditional strengths of the LMS — training administration and e-learning delivery — remain important, but they are increasingly the opening bet in a bigger game.
“The CLO should absolutely be thinking about continuous learning and integrated talent management and how they’re going to address those two big conversations,” Mallon said.
Mike Prokopeak is editorial director for Chief Learning Officer magazine. He can be reached at editor@clomedia.com.
