At the beginning of each calendar year, my staff and I take out our crystal balls to make predictions for how we see the training market evolving in the next twelve months. What I thought would be helpful is to take those predictions out, knock the dust off, and see how we’re doing after the mid-year point. Here are some observations about some of those predictions, as well as some other opinions about the current state of the training industry.
1. Corporate Training Spend is Up – Speaking with executives from many buy and supply side training organizations, it appears overall spend for corporate training services are up by as much as 10% from last year. It’s not as much as most have hoped for, but still good news for many – – especially since last year’s spend was down by approximately 22% from the year before. FYI – overall spend for training services includes costs for internal staff and real estate, as well as external services, technology, facilities and equipment.
2. Outsourcing Spend is Rising – Contrary to popular belief, training outsourcing is not dead. My estimate on 2010 spending for outsourced services would put the market in the 6 to 9% growth range. Increases in spend with course providers and tech companies are positive, although not very strong in some content segments (see item 6). Strata 1 outsourcing service providers are recognizing the biggest growth in this market, as evidenced by General Physics’ recent announcement of a 22% growth in revenues for 2nd quarter 2010. Similar growth rates are being seen by some of the strata 2 private outsource service companies, mainly coming from services with existing clients.
3. Deal Size and Complexity are Lower – A few years ago, many thought that outsourcing meant training suppliers would take over all aspects of the training organization, including the people. Not the case. The reality is that training outsourcing is more about managing selective services. The size of training outsourcing deals are much lower today than in the past few years, and the complexity of the deals are much lower; meaning fewer processes per engagement. Corporate training executives are using outsourcing more as a risk mitigation strategy than a cost cutting strategy in today’s market.
4. New outsourcing deal growth has been slow – Growth in outsourcing spend has primarily gone to existing suppliers. I believe this reinforces the idea that buy side companies are reluctant to make long term commitments to new suppliers until they have a better idea of future activity. They are past the cost cutting measures they’ve been in for the past couple of years – now they’re more focused on risk aversion.
5. Custom Content Development Leads Services Activity – Most of the activity in new outsourcing deals have been in custom content development. As companies are gearing up for what they’re hoping to be an economic upside, the need to create new courseware for sales reps and customers has been on the increase. This has been very good news as it translates into job growth with training suppliers for instructional designers.
6. Content that’s Not Hot – Training programs that some like to call, soft skills training, continue to be the slowest to return. The demand for Leadership training, personal development, and coaching programs remain slow; and my belief is they will remain slow for the foreseeable future.
7. Sales and IT Training are Up – Two content markets that have been improving are sales training and IT training. Custom sales training companies have seen strong increases in activity for programs for new sales staff. As companies hire new sales staff, they need to train them on the sales methodology and the features and benefits of the products they will be selling. The IT training market is seeing good growth, where most of the increased activity if with independent professionals taking courses for job improvement. Growth in corporate spend for IT training is also up, but not quite as much as the public seat business. For-profit institutions have been getting the lion’s share of this growth market.
8. Learning Technologies Has Mixed Results – A market that has seen mixed results is learning technologies. Large, internationally integrated learning technology companies have seen very good activity, as evidenced by Saba (up 16%) and Citrix (up 14.5%) in recent announcements. Companies that have a strong authoring and delivery technology portfolio seem to be doing the best. Unfortunately the traditional LMS market continues to commoditize leaving many of the upstart companies struggling to gain ground. But let’s be clear, most training professionals still believe that one of the most important sourcing decisions they make is for an LMS. Spend for an LMS is not going away – I just think it’s going to take on a new look. Don’t be surprised how Google’s open source applications, and free LMS’s like Moodle™ will impact the market in the next few years.
9. Learning Portal Services on the Rise – I believe the next big growth market for training is in managed learning portals. Learning portals integrate and aggregate all kinds of content for the learner; articles, press releases, competitive intelligence, courseware, books, research, etc. The future of learning portals is not about managing events (courses), but managing content. I believe the technology opportunities are strong, but much of these tools are not tailored to the training community. They’re the same technologies available to any web developer. It’s the services for managing learning portals (SaaS) and how content gets aggregated that makes this market a great opportunity.
10. Independent Consultants are taking the Brunt of this Market – Probably the most disheartening part of our industry has been the shortage of opportunities for independent, strata 4 consulting companies. These organizations provide much of the transactional based services; projects, course delivery, instructional design that our market has depended on. Unfortunately these are considered less strategic and easy to cut when budgets are limited. Don’t be surprised to see more forced aggregation of suppliers by procurement officers, forcing strata 4 companies to operate under larger strata 1 and 2 vendor management training organizations.
In conclusion, I recently read a study published by FutureThink stating that more than 50% of the learning leaders they surveyed believe their training offerings will grow in the next two years. Let’s hope they are right. I think we’ll all have our fingers crossed that overall business confidence will improve translating into more opportunities.
As always, I welcome your comments. And if you like, feel free to send me a note at firstname.lastname@example.org.
Editors Note: FutureThink, General Physics, Citrix are sponsors of TrainingIndustry.com.