E-Learning Looks Beyond Its NicheE-Learning Looks Beyond Its Niche

For more than a decade, E-learning application suppliers have had high hopes of making it big in large companies. But the market always seems to get reined in by the economy's ups and downs, corporate fickleness in investing in employee training, and the preference for live instructors in classroom settings.

A merger last week is aimed at finally getting E-learning out of its niche, where it's been largely confined to human-resources management and training departments. SumTotal Systems Inc. will acquire Pathlore Software Corp. in a $47 million deal that would create what the vendors say is the largest standalone learning-management software company. The acquisition is expected to be completed by November.

By combining Pathlore's strength in E-learning distribution and analytics with SumTotal's content-management and content-creation tools, the merged company hopes to elevate E-learning to an enterprise application for creating learning programs anywhere within a business.

Pathlore and SumTotal combined have revenue of about $100 million and 1,500 customers. The merged companies will compete with dozens of small suppliers of E-learning products, as well as larger vendors such as IBM and Oracle.

"The real hope is to create a safe and credible choice for customers in what has been a cluttered marketplace," says SumTotal CEO Andy Eckert, who'll retain that post. "This is a very notable move in a market that's just beginning to get its legs, a market that was not seen as mission critical. But that's changing."

The E-learning market has been undergoing a shake-out for several years. SumTotal itself was created by the merger of E-learning vendors Docent and Click2Learn in 2004. Other recent deals include Saba Software Inc.'s acquisition of Thinq Learning Solutions Inc. in March.

Pathlore's products include tools to analyze the business benefits achieved through employee E-training. A company deploying E-learning software to educate its salespeople about a new product, for example, can judge if the training pays off with higher sales.

Christina Parr, director of training and organizational development at La Quinta Inns Inc., a Pathlore customer, says training is getting a boost from learning-management and performance-analytics software. "The analytic tools are helping businesses take a more scientific approach, aligning employee learning with performance metrics," she says.

La Quinta is slated to launch a "university" next month to train its 10,000 employees and 5,000 franchisees, Parr says. Pathlore's learning-management system is being rolled out to help La Quinta centralize the learning, so that each worker has access to the same online content, Parr says. She's upbeat about Pathlore's acquisition by SumTotal. "Support is already good, but I expect it will get even better."

Corporate spending on E-learning and employee-training programs was put on the back burner at many companies during the economic downturn in the early 2000s. Over the last two years, however, businesses--including many health-care and financial-services companies--have increased their training budgets, particularly for compliance education related to government regulations.

Classroom teaching still has its place, but the trend is toward more blended learning of live instruction and virtual learning, IDC analyst Peter McStravick says. As that happens, E-learning will no longer be just a niche technology but an integral part of the corporate training environment.