Fewer organizations are outsourcing learning. But those that do are by and large satisfied with the products and services they receive.
September 2, 2015
Effective learning programs transfer knowledge and skills to employees, customers and partners; help retain employees; and ultimately improve speed to proficiency for everyone. However, how organizations choose to deliver learning can vary.
In many organizations, programs are developed in-house. Some outsource learning, and others leverage a combination of in-house development options and external expertise. The decision to outsource is often made based on the volume of learning required and the quality of learning internal staff can support.
In 2014 Chief Learning Officermagazine’s Business Intelligence Board found the number of enterprises outsourcing learning didn’t change much over the prior year. That trend changed in 2015. Organizations spent about 24 percent of their budgets on outsourced activities, down from about 30 percent during the past couple of years.
Every other month, IDC surveys the board on a variety of topics to measure the attitudes, issues and interests of senior training executives. Recent findings and interpretations are relevant to companies who outsource or are considering outsourcing.
Learning outsourcing is typically defined in research as the ongoing transfer of management and execution of one or more complete learning processes to an external services provider. However, survey results have consistently shown this is not the use of the term in the marketplace. The types of learning activities purchased suggest enterprises use the term learning outsourcing synonymously with any use of external learning providers. The analysis presented here will adopt this broader usage of learning outsourcing.
A Slow Decline
For the past several years, the number enterprises that outsource part of their learning function has had small variations: up in 2007, down in 2009, up in 2011, etc. While up in 2014, in the 2015 survey the erratic trend appears to continue with about 53 percent of enterprises reporting they outsourced some portion of their training function for the past two years (Figure 1).
The challenging economy drove a portion of outsourcing instability, but recently satisfaction with internal training has increased and is likely contributing to the up and down nature of these figures. Enterprises use external providers to deliver more learning than internal resources can provide, and gain access to better learning expertise while controlling costs.
Further, an increasing number of organizations report they “don’t do enough training” to warrant an outsourcing relationship, and this, too, might contribute to the highly variable survey results.
Most companies only outsource portions of their learning functions — only about 4 percent outsource the entire learning function. This percentage has remained relatively constant, even while the percentage of enterprises outsourcing only portions of their learning function declined and recovered.
This makes sense. Outsourcing the full training function is not a decision that begins or ends quickly. And most organizations that are satisfied with their outsourcing arrangements have little incentive to radically change their use of outsourcing.
A Sizable Investment
Companies spend a bit less than a quarter of their learning budgets on outsource services. This is a small decline from 2014 and equals a similar share to 2012 numbers (Figure 2). The percentage of organizations that spend more than 40 percent of their learning budget on outsourcing is increasing: to 28 percent in 2014 from 20 percent in 2008.
Now, only 7 out of 10 enterprises that outsource learning spend less than 40 percent of their learning budget on outsourcing; in 2008, that share was 8 out of 10.
Looking at 2016, about half of companies expect spending on learning outsourcing to remain the same, which represents a significant increase from last year’s findings (Figure 3). This suggests companies that outsource are satisfied with their external learning providers. While the economic challenges have not fully retreated, only 14 percent of companies have indicated their learning outsourcing budgets will decrease next year — this is the lowest we have seen that share since before 2008.
Some analysts and experts predict enterprises would outsource only noncore activities. However, CLOs seem to be willing to outsource both core and noncore activities. The activities CLOs identify as most important include both custom content design/development and learning delivery. Strategy development is also important, with program oversight and learning technology management following with nearly equal importance.
During the past several years, the importance of various learning activities hasn’t changed much, which suggests overall priorities haven’t changed much either. The relationship between the importance of the activity and activities outsourced for custom content, learning delivery and technology management is obvious (Figure 4).
However, learning functions that are highly important but require the transfer of management responsibilities to execute such as strategy development show a lower popularity for outsourcing. Essentially, companies are using external learning providers primarily for activities that are important but do not require the transfer of management authority.
A Need for Expertise and Capacity
While other aspects of learning outsourcing have not changed much, the reasons for outsourcing has shifted. In the past, some 60 percent of companies chose outsourcing to gain access to better learning expertise or 70 percent chose to deliver more learning than internal resources could provide. These reasons remain consistent with last year.
As recently as 2007, speed-to-market was a significant rationale for using external providers. During the past several years, however, speed-to-market has declined in importance. Even while organizations seek to rebound quickly from the economic crisis, they are less likely to use external vendors as a way to get essential learning delivered quickly.
Companies more often use outsourcing to supplement internal resources to have learning resources available on an as-needed basis. And increasingly organizations believe that outsourcing is a more cost effective method to create or deliver training.
Those who outsource seem to be satisfied with their providers. While the percentage of CLOs who report being satisfied with their providers overall is relatively high, the long-term trend suggests satisfaction is increasing. This year, more than 94 percent of companies report being satisfied with their providers, an increase from 2014 and the highest the satisfaction has been since 2009. Subtracting those dissatisfied from those companies that are satisfied, results in a net promoter score of about 90 out of 100.
Companies that don’t outsource typically cite satisfaction with their internal learning operation, they don’t do enough learning to warrant an outsourcing arrangement, or that outsourcing is too expensive. These reasons have been consistently important for the past seven years of this survey.
As one CLO put it in last year’s survey: “Quality and knowledge matters a lot. To keep it consistent and readily available, I prefer to keep training internal.” Another CLO thought internal learning delivery adds flexibility: “We customize our programs to meet our exact needs of our employees as well as the organization.”
Some key findings from this survey include:
- A small decrease in the number of companies that plan to outsource.
- A decrease in the amount spent on outsourcing.
- Companies that outsource are increasingly satisfied with the result.
Many CLOs surveyed offered suggestions to improve training outsourcing. Here is a small sample of their suggestions:
- Brief trainers on organizational culture and priorities before they embark on learning customization.
- Measure methodology at three-month intervals to see if the investment is changing behavior and outcomes.
- Reduce ramp-up time for instructional designers and instructors.
- With regard to content expertise, content must change to meet the client’s business need, use less off-the-shelf and more organization/situation specific content, and understand business and capability to deliver tailored-made interventions to address skill gaps.
As companies continue to recover with the economy, the use of external providers will change. Some organizations will attempt to increase their use of external providers. Others will attempt to “do more with less,” and still others are satisfied with their internal teams and will hold-the-line with their internal organizations.
Whatever organizations choose, aligning their learning offerings with business needs seems to be job one.