Slowing Economy Sparks Boom In E-LearningSlowing Economy Sparks Boom In E-Learning

E-learning, already growing in popularity among businesses that want to provide more training for more employees, got a big boost in the past year. The slowing economy caused more companies to turn to E-learning systems and courses as a way to keep down training costs. And the terrorist attacks of Sept. 11, which resulted in a significant decline in business travel, made the prospect of taking lessons in the office or at home more appealing.

Those factors should add up to a booming business. Research firm International Data Corp. estimates that the E-learning market in the United States will grow from $2.3 billion last year to $14.7 billion by 2004. Worldwide, the overall E-learning market is expected to hit $23 billion by 2004.

The biggest challenge the E-learning industry faces may be the mind-set that says learning is done best in a classroom with a teacher standing in front of students. "Change management and proactive marketing [to employees] are critical to a successful E-learning initiative," says Susan Guest, the former VP of learning and development at American General Inc., a Houston subsidiary of insurance company American International Group Inc.

Several years ago, Guest was given the task of shifting the majority of American General's career training from the classroom to the Internet for more than 7,500 employees. While it's relatively simple to develop an E-learning infrastructure and offer online courses, she says, her biggest challenge was to change a corporate culture that placed a premium on classroom training with peer interaction.

To sell the new system, Guest gave more than 60 demonstrations--each with more than 50 attendees--to make the program familiar to employees. Along with her training team, she also printed brochures and provided support at the company's computer labs to help educate employees and train them on the new system.

Employee training is a high priority at the financial-services and insurance firm. Executives say that offering extensive career-development opportunities gives the company a strong competitive advantage while also improving employee satisfaction. That's why American General was providing training at eight learning centers in its offices around the country that offered computer labs and small libraries of business materials.

However, the content offered in the courses wasn't uniform, and many employees couldn't find the time to visit the learning centers. Company management concluded that the system was inadequate and decided to shift the focus and budget to an Internet-based curriculum.

The shift was a natural one, Guest says. "Almost all of our employees had personal computers on their desktops," she says. "And a lot of them, especially the IT folks, wanted access to E-learning from home."

After getting the green light from management in 1999, Guest says, it was time to "start blazing new territory." The company's training team analyzed products and services from several vendors and selected a learning-management system from Thinq Learning Solutions, supplementing it with online courses from NETg, SkillSoft, SmartForce, and other industry-specific content vendors.

Like many companies investing in E-learning systems, American General faced some technology integration issues, Guest says. Her team had to integrate the learning-management system with a content-creation system and with the online courses the various content vendors offered. They also needed to integrate the learning-management system with the company's PeopleSoft Inc. enterprise resource planning system so personnel could be notified by E-mail when certain types of training were needed and available.

Two years later, the payoff is clear: American General's Virtual Learning Center offers more than 500 Web-based courses, plus assorted instructor-led courses. More than half of corporate training is completed online, up from a quarter in 2000. And costs have dropped. The company has reduced by 20% the overall amount it spends on training. It costs $10 per person to provide an online training course, compared with $65 for a classroom course.

Employees are pleased with the change. "From 1998, we had a positive increase in the employee perception of having growing and learning opportunities at American General," Guest says.

Corporate training managers and analysts say a successful E-learning initiative is complicated. Multiple elements in just the right proportion are needed to elicit employee adoption and acceptance and to achieve financial savings.

"It's a cold, hard fact that E-learning saves money," says Mike Brennan, International Data Corp.'s E-learning analyst. "But the quality of content, management buy-in, and a blended approach of both classroom and online learning are critical aspects to success."

While many business managers are keen to see the savings generated by E-learning hit their bottom line, the immature market means that experienced E-learning executives are hard to find. Those with experience find themselves with numerous job opportunities. Guest, for example, has just been hired to head the online training efforts at Baxter International Inc., where she'll serve as director of E-learning at the $6.9 billion medical-instrument supplier in Deerfield, Ill. Moves such as that aren't unusual: In May, Steve Kerr joined financial-services firm Goldman Sachs as chief learning officer after leaving the same position at General Electric Co.

While training originated in human resources, there's a growing trend in many industries to create an executive position geared toward managing career development. In March, Romacorp Inc., the Dallas operator of Tony Roma's restaurants, created the position of VP of people and learning. Filling that role, Brad Lutz oversees the domestic and international training for the chain of 243 restaurants.

With leadership in place, the first challenge for business managers is to develop a strategy, then sort through the hundreds of vendors offering a wide range of products that promise to improve training while cutting costs. The E-learning market is highly fragmented and includes learning-management systems, which use Internet technologies and protocols to track and manage online and instructor-led employee training; learning content-management systems, which manage formal and informal content used as part of the courses; and content-development applications, which let users create original content in a variety of formats. In addition, E-learning service providers offer live virtual courses over the Internet.

"The biggest challenge for all companies is that there's such a plethora of options and there's a lot of vaporware out there," Guest says.

Vendors have flocked to the E-learning market because it has held up better than many others during the economic downturn. Many of the newcomers offer systems that are less expensive and more modular than some of the big systems that take six months or more to implement.

The growing use of E-learning systems and services is also attracting new vendors. Many employers offer training courses via company intranets, according to an information Research survey of 500 large companies. Those businesses say that 25% of their employees have completed third-party E-learning courses, while 35% have completed company-customized E-learning courses.

The potential for profits in E-learning has also attracted large, established technology vendors. Oracle, PeopleSoft, SAP, and Sun Microsystems have either introduced or are testing their own learning-management systems.

Despite strong customer interest and predictions of huge growth, developments in recent months have shown that the E-learning industry isn't immune to the impact of macroeconomic changes. Training budgets are often the first to be cut when businesses face declining revenue and profits. And the Sept. 11 attacks have prompted some businesses to shift spending to security and disaster-recovery technologies.

Those trends have hurt the E-learning market. Several prominent E-learning companies in the past two months have cut revenue projections and jobs. IT course provider KnowledgeNet.com Inc. laid off 28 employees, or 8% of its workforce, last month. In September, Bobby Yazdani, founder and CEO of learning-management systems provider Saba Software Inc., said three multimillion-dollar deals were put on hold during the third quarter.

A wave of consolidation also has hit the market, driven by falling stock prices, the lack of venture funding, and future strategic plans for growth. In the past six months, at least four developers of learning-management systems acquired learning content-management companies.

"E-learning is still young, and it's going through growing pains," says Claire Schooley, a senior analyst with research firm Giga Information Group. "Now, a downturn in the market makes it all the more difficult."

There's one significant problem that prevents more widespread adoption of E-learning: No single vendor offers a complete, robust, scalable system that includes everything from content development to deployment to tracking, Schooley says. Instead, customers are forced to cobble together content from one vendor and infrastructure from another.

The lack of standards can make that type of integration difficult. Industry groups such as Sharable Courseware Object Reference Model and Instructional Management System are working to define standards, but progress is slow, Schooley says. "Vendors have all developed proprietary products and making them compliant is a very difficult task. But fewer and fewer companies are saying they won't be conforming."

Despite those problems, more businesses are adopting E-learning. Docent Inc. and Saba Software, two leading learning-management systems vendors, have signed contracts in the past month with several large companies, including General Motors Corp. and Prudential Securities Inc., while learning-management system provider Pathlore Software Corp. says it signed 168 contracts with companies such as NEC America and Northwest Airlines in the third quarter of fiscal 2001.

Procter & Gamble Co., the $39 billion household-products manufacturer in Cincinnati, uses a Saba system to track and manage training for more than 35,000 employees. Larry Green, manager of P&G's Global Learning Center, says the company is very satisfied with the system. "The usability of the core software is vastly improved" over previous versions, he says. Still, he says he'd like to see easier integration between the learning-management system and authoring tools.

Wim Wetzel, NEC America's training and education manager, says companies that don't use a learning-management system end up paying more than they should for outside training because they can't efficiently track dollars and courses. A system from Pathlore helped NEC America, a subsidiary of $43 billion communications equipment supplier NEC Corp., achieve a savings in training costs of more than 40% in one year and a 16% return on investment, he says.

About 3,000 NEC employees use online training for technology and leadership courses. Pathlore lets NEC monitor the quality of internal and external courses by incorporating feedback, Wetzel says. When three employees reported that the quality of a course offered by a major telecommunications company was poor, the offering was eliminated. "It goes far beyond a simple administrative system," he says.

E-learning also can aid productivity. "Our sales force can't come in for three-day conferences anymore," says Matt DeFeo, VP of recruiting and training at Black & Decker Corp., a $4.6 billion power-tool manufacturer in Towson, Md. But they still need to understand the company's new products and features.

Black & Decker overcomes that problem with online courses that use a learning-and content-management system from Vuepoint Corp. DeFeo expects to save more than $100,000 annually in hotel charges and let the sales force spend more time in front of customers. "We expect with online learning to have our 700 sales folks with customers 12,000 more days a year," he says.

For E-learning to do more than save a company money, the quality of content is critical, says Tom Kelly, VP for the Internet Learning Solutions Group at Cisco Systems, where he oversees training for a sales force of more than 10,000. In the past 16 months, training has shifted from 90% classroom to more than 90% online.

"There was some resistance at first due to a misconception that the courses would be tedious," Kelly says. However, he says, they were broken down into "small, digestible chunks" of 20 minutes or less and "the audience was won over by the new access and self-paced control."

These snippets of training content--a combination of video, audio, text, and multimedia files--are dubbed "learning objects" and are at the forefront of the fight for E-learning acceptability. The objects are designed to personalize the learning experience by providing easy access and just-in-time learning--and to do away with the perception that E-learning involves lengthy online PowerPoint presentations.

Adobe software is too tedious, offering an overabundance of information for the 800 sales representatives at Commonwealth Financial Network Co., says Darren Tedesco, business development manager of technology at the privately held investment-brokerage firm. Tedesco is reviewing E-learning authoring tools in order to break down that critical data into a learning objects format. "We want to make the training more efficient at all ends," he says.

While learning objects make E-learning more appealing to users, many still prefer the social interaction that classroom training offers. And many classes, such as hardware demonstrations, are much more productive in person.

Cisco has kept some classroom training to supplement the shift to E-learning. The company continues to hold several four-day boot camps for its sales force each year.

Most analysts and training managers say E-learning will never completely replace classroom lessons. Interacting with peers and debating with a teacher are features that are hard to duplicate with E-learning systems. "Face to face is really where you need to be," Giga's Schooley says.

Nevertheless, more companies are expected to shift much of their training to E-learning systems. The ability to provide a wider variety of courses and cut costs at the same time are benefits too attractive to resist.