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Introduction
We have all heard the claims that implementing eLearning will
significantly reduce training costs and improve performance. While
eLearning is in use at many leading corporations and learning management
systems are helping track learning activities and leverage the Internet
for delivery of learning content, the fact is that eLearning projects
rarely produce a significant Return On Investment (ROI). The reasons
for this is three-fold; 1) the cost of eLearning development is very high;
2) the lifecycle cost of maintaining the eLearning materials is rarely
considered in the return estimate; and 3) the full cost of
Learning Management System (LMS) technology can be significantly higher
that the returns it can provide.
“Nearly
75 percent of corporate learning professionals indicated that reducing
education and training costs was their main driver for launching an
e-learning initiative. Corporate learning practitioners indicated
they saved less than 20 percent in training-related expenses by delivering
programs via eLearning.”
Corporate
University Xchange's Pillars of e-Learning Success, 2002
Analyzing the Cost of eLearning
Corporations are paying as much as $85K per hour of instruction to
outside contractors for development of eLearning materials. It takes
a lot of return to pay for an investment of this magnitude.
Development of a one-week course of instruction could cost as much as
$3.4M.
In general, these contractors bring two things to the table:
- Knowledge of instructional
design and development processes.
- Experience with technology
(usually from third-parties) to generate eLearning materials.
The costs are high because of the amount of labor that is expended
generating analysis and design information, developing course objectives,
testing materials and instructional content using manual processes and
difficult authoring tools. Some
estimates of eLearning development consume as much as 450 hours of labor
to produce a single hour of instruction.
Conversion of existing instructor-led training to eLearning should,
in theory, require less instructional design since the learning
objectives, testing materials and content are available for re-use.
These figures do not include the time for internal subject
area experts required to support the development of instructional content.
eLearning development contractors are not unfairly overcharging for
the services they provide. The
manual processes and difficult development tools are the real culprits.
It is extremely unlikely that an eLearning development contractor knows
enough about your business to develop new materials without support from
your expert personnel. These internal experts could develop or
convert instructor-led materials into high quality eLearning if; 1)
technology could automate the instructional development process and; 2)
the desktop applications that these experts are already familiar with
could be used to generate the eLearning content. Once an outside
contractor has developed your eLearning content it is almost certain that
any maintenance or updates to these materials will have to be contracted
as well. The internal experts required to communicate these
revisions to an outside contractor could, with the right tools, perform
the maintenance without contractor support.
"Pricing usually depends on the number
of people taking the training courses, with most companies offering a
variety of licensing options, hosting services, volume discounts,
subscription-based ASP services, and off-the-shelf and custom
courseware. Providers of enterprise-level learning management systems,
such as Click2learn, Docent, IBM, Saba Software, and Sun Microsystems,
do not publish pricing, since each engagement is customized. To train
ten of thousands of employees, you can expect to pay hundreds of
thousands of dollars."
PC Magazine, An Introduction to E-Learning Providers,
December 26, 2001
Many Learning Management Systems cost companies in excess of $750K per
year for license, maintenance and student access fees. Some
corporations are paying more for their LMS technology than they are for
the eLearning content they deliver. LMS systems are essentially
high-tech warehouses for training management and eLearning content.
What company would pay more for a warehouse than the value of the
inventory it contains? The answer is quite a lot of companies are in
this unfortunate position. LMS technology is not worth more than the
inventory (eLearning and other training programs) it contains, delivers
and helps manage.
"E-learning systems, cited in a recent study as yielding great returns on investment, may not be so great after all.
Learning officers at two Fortune 500 companies last week pointed out a "gotcha" that can negate the returns cited in the September report: vendors' insistence on applying per-seat licensing contracts to companies with large numbers of potential end users."
Costs negate e-learning
ROI - ComputerWorld, December
23, 2002
The Promise of Returns
If knowledge is a corporate asset, then training must be viewed as both
a strategic initiative and competitive advantage. One sign that training
has come of age is the advent of the corporate university. In 1988, there
were approximately 400 corporate universities. Today there are
approximately 1,600, and if the trend continues, they will exceed the
number of traditional universities in the
U.S.
by 2010. The real question is
can the trend continue without meaningful results from these investments?
“The
effect of training on productivity growth is approximately five times as
much as would be generated by compensation incentives.”
Barron,
Berger, and Black, 1993
“Firms
who invest $1500 per employee in training compared to those that spend
$125, experience on average 24% higher gross profit margins and 218%
higher income per employee.”
American
Society of Training and Development
“Professionals
can spend as much as 75% of their time looking for sources of information
needed to do their jobs.”
Information
Week,
9/6/2001
, Employees Share Pearls of Wisdom
Studies have proven that training, eLearning and Knowledge Management
implementations increase productivity and improve performance. As
depicted in Figure (1), many companies focus on everything except the
training that can provide these returns. The majority of eLearning content
available at corporate universities is regulatory compliance, HR, soft
skills or information technology related material.
The eLearning programs that
can significantly increase revenues and decrease costs are the ones
focused on the people who sell and deliver the company's offerings.
“Less
than 18% of corporate e-learning courses are on topics specifically
related to an e-learner's job. Only 23% of corporate learning
organizations target their programs to external customers. Only 13 % of
corporate learning organizations target their programs to suppliers.”
Corporate
University Xchange's Pillars of e-Learning Success, 2002
It should be obvious that
focusing eLearning investments on improving the skills of the sales force,
customer support personnel and channel partners will increase both
revenues and customer loyalty. So
why don’t corporate learning organizations invest heavily on these types
of programs? It appears that
increasing
overall course count ("over 500 courses at our corporate
university") became important to the
managers of these company institutions at some point.
The investment in large libraries from IT and HR eLearning publishers reduced
the ability of corporations to invest in programs geared towards increasing
revenues and decreasing the cost of goods sold. The same issue seems to have impacted the investment in employee
and supplier training programs. Not
that corporations don’t have training for employees and suppliers, they
do. The vast majority of the training just isn’t
related to the employees or suppliers jobs.
Revenue generating eLearning
programs include:
·
Customer and Channel Education
- Self-service training to improve customer satisfaction, delivers
incremental revenue, and reduces support costs.
·
Product Launch - Cross
functional and multi-channel education to accelerate go-to-market
readiness, provide real time feedback between field sales personnel and
corporate marketing staff, and shorten “time to revenue” when rolling
out new products.
·
Sales Force Readiness - Shortens
the time it takes to bring new sales representatives up to full
productivity levels, accelerate ramp up time associated with new product
education, ensure up to the minute global competitive intelligence, and
improve sales force retention.
Cost reduction programs include:
·
Employee Job Training –
It's clear that a strong focus on enhancing employee performance needs to
be at the top of any corporate agenda. As the parallel between people
practices and business results becomes more distinct, developing and
sustaining the right conditions to allow a high performance culture to
flourish must become a number one priority.
·
Supplier Training Programs -
Focused supplier training and other learning opportunities that enhance
the skills and knowledge needed to maintain competitive advantage.
“Over
61% of workers want training via computers, TV or the Internet. Less
than 21% receive it.”
May
2000, Training,
Rutgers
University
Figure 1. eLearning programs
should focus on providing high returns
About Knowledge Management
Solutions, Inc.
Knowledge Management Solutions, Inc. is a leading provider of
innovative knowledge and learning management solutions for Fortune 2000
companies and Government agencies. Our new advanced distributed learning platform, KMx, and its innovative
new learning development model address the corporations' training
challenges, while driving down the cost of developing and delivering
eLearning programs. It supports conversion of existing instructor-led courses and
development of learning objects built with the
Sharable Content Object Reference Model (SCORM) standards. We are
committed to providing solutions to the training challenges corporations
face. Key features include:
- Designed and built to automate
instructional development processes and includes an authoring system
that enables subject mater experts to develop high quality eLearning.
- KMx is the first step toward
future intelligent learning servers, based on SCORM standards. It
tracks and interacts with the learner and trainer in real time to
approximate the effectiveness of training.
- KMx is an end-to-end rapid
deployment enterprise solution. It includes the KMx Development and
the KMx Performance Learning Management systems and can be integrated with popular ERP and HRMS systems.
- Provides a lower cost of ownership than
any enterprise-learning product on the market today. Low, fixed
annual costs with NO per-user seat
licenses.
- Delivers complete tracking,
scoring, and usage data that provides a knowledge base
to enable evaluation of training effectiveness and return on investment.
"I
have had the opportunity to work with many learning management systems and
training development platforms, most of which have fallen short of meeting
expectations of the development staff and training management. KMSI
has designed a platform that is practical to use, addresses the key needs
of the training manager and meets the requirements for reuse of content
for both training and human performance support. This platform integrates
proven instructional design principles, documentation and job-performance
support strategies, with current available technology to produce an
extremely effective training development and delivery tool."
Bob
Danna, Executive Management Consultant
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