How organizations choose to deliver learning can vary widely. Learning programs can be developed in-house, outsourced to a provider or implemented using some combination of in-house and external expertise.
The decision to outsource rests often on the volume and quality of training internal staff can support. IDC’s research last year found that, while enterprises that outsource training were satisfied with outsourcing, that satisfaction is declining. In 2014, about 50 percent of enterprises will use an outside provider to augment some part of their learning function, and again, enterprise satisfaction was on a downward trajectory.
Every other month IDC surveys Chief Learning Officer magazine’s Business Intelligence Board on a variety of topics to measure the attitudes, issues and interests of senior learning executives. This month more than 125 BIB members shared their insights on training outsourcing.
Outsourcing Use, Spending Appears Steady
For the past several years, the number of enterprises that outsource part of their learning function has had small variations: up in 2007, down in 2009, up in 2011. In the most recent survey, the trend appears to have stabilized. About 59 percent of enterprises report outsourcing some portion of their learning function (Figure 1). It is likely the dip in 2009 and 2010 was a reaction to the global financial crisis as organizations reduced learning expenses dramatically, and in some cases did not renew outsource arrangements.
However, while the challenging economy drove instability, it also contributed to learning spending recovery. Enterprises leverage external providers to deliver more learning than internal resources can provide and to gain access to better learning expertise while controlling costs.
Most companies outsource only portions of their learning functions, and only about 4 percent outsource the entire function. This percentage has remained relatively constant, even while the percentage of enterprises outsourcing portions of their learning function declined and recovered. This makes sense: Outsourcing the full learning function is not a decision that is either begun or ended quickly. Also, most organizations are satisfied with their outsourcing arrangements, providing little incentive to radically change.
Companies that outsource spend a bit less than a third of their learning budget on outsourcing services. This is a small increase from 2013 and continues a trend from 2012. The percentage of organizations that spend more than 40 percent of their learning budget on outsourcing is increasing, from 20 percent in 2008 to 28 percent in 2014.
Now, only 7 out of 10 enterprises that outsource learning spend less than 40 percent of their budget on outsourcing (Figure 2). In 2008 that share was 8 out of 10.
Looking forward to 2015, about 46 percent of companies expect learning outsourcing spending to increase, a significant increase from last year’s findings (Figure 3). While economic challenges have not fully retreated, only 16 percent of companies indicated their learning outsourcing budgets will decrease next year — down slightly from 2012 and 2013.
Outsourcing Targets Are Important
Some analysts predict enterprises will outsource only non-core activities, but CLOs seem to be willing to outsource both core and non-core activities.
The activities CLOs identify as most important include custom content design and development and learning delivery. Also important is strategy development, followed by program oversight and learning technology management.
The importance of various learning activities hasn’t changed much in the past several years, suggesting overall priorities haven’t changed much, either. Figure 4 compares the importance of learning functions with the learning functions most frequently outsourced. The relationship between the importance of the activity and activities outsourced for custom content, training delivery and technology management is obvious. However, learning functions that are highly important but require a transfer of management responsibilities to execute, such as strategy development, program oversight and reporting and measurement, show a lower popularity for outsourcing.
In the past, 60 percent of companies chose outsourcing to gain access to better learning expertise or to deliver more learning than internal resources could provide (70 percent). However, the reasons why companies outsource are shifting.
As recently as 2007, speed to market was a significant rationale for using external providers. During the past several years its importance has declined. Companies more often use outsourcing to supplement internal resources to have learning resources available on an as-needed basis.
Increasingly organizations believe that learning outsourcing is a more cost-effective method to create or deliver learning. One CLO polled uses outsourcing to take advantage of the experience of outside talent. Another believes outsourcing learning delivery allows her “to have training services available on an as-needed basis.”
CLOs articulated two recurring themes for their use of outsourced learning providers: “Headcount reductions forced us to seek outside assistance,” and, there is “no time for resources internally to develop training.”
When given a choice to outsource or hire additional resources, 50 percent of CLOs think outsourcing is more cost-effective and flexible than hiring resources. One CLO said, “Training needs [are] constantly changing. In-house expertise becomes static and confined to specific areas.”
While the percentage of CLOs who report being either very or somewhat satisfied with their providers overall is relatively high, there is a slow, long-term trend that suggests satisfaction is waning. This year 74 percent of enterprises report being satisfied with their providers, a slight decrease from 2013, and this reflects a long-term decline from 2008. However, the net promoter score, the net dissatisfied subtracted from the net satisfied, shows a slight increase from 2013, but again, a slow decline from 2008 (Figure 5).
Provider Subject Matter Expertise Critical
The most important qualities CLOs consider when looking for a learning provider are learning and subject matter expertise, and the importance of learning expertise has increased significantly from the past several years. Nearly 70 percent of CLOs now report learning expertise is among the top criteria when selecting a provider, up from less than 60 percent in recent surveys. Responsiveness as an organization is also increasing in importance as a selection criteria.
Also important is the vendor’s ability to act as business partner. CLOs understand the fluid nature of learning objectives and the mutual flexibility that successful learning outsourcing arrangements require. Gaining in importance is the cultural fit between the two organizations. CLOs report that good learning initiatives go bad when the learning provider’s culture can’t mesh with that of the learner population.
Companies that don’t outsource typically cite satisfaction with their internal learning operations. As one CLO put it, “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.”
Organizational approaches to knowledge transfer often differ. Some companies seek to expand internal capability, others hire external capability and some mix the two. But using external providers remains a well-established service. The key findings from this survey include: a small decrease in the number of enterprises that plan to outsource, a continued increase in the amount companies spend on outsourcing, and that companies that outsource are satisfied with the results, though a long-term trend of declining satisfaction is apparent.
Many CLOs offered suggestions to improve learning outsourcing, such as:
- Effectively and pragmatically measure the effectiveness of learning.
- Assure consistent quality of faculty and instructional designers.
- Content expertise:
- Provide training customized to our industry.
- Provide training on applications as they are used inside our firm and not just out-of-the-box training.
- Provide curriculum that reflects the pain points of our industry and its specific requirements.
- Develop flexibility and installed capacity to provide training at any time.
Many suggested variations to better partner with an enterprise. One CLO said, “Partner with me and don’t nickel-and-dime me for everything. Show me you have a vested interest in our company’s success and being a part of that process. Help me bring you into the organization by selling the value you provide and the method in which we will partner for our joint success.”
Another CLO suggested this would involve “flexible contracting, ability to ramp up quickly and dedicated resources focused on our business.” This may also mean working with outsourcers that have a good understanding of specific processes like “training partners who understood our design process and standards. … We spend a lot of time reviewing content created by vendors that does not meet our instructional standards.”
As enterprises continue to recover along with the economy, the use of external providers will change. Some organizations will attempt to bank their headcount savings by increasing their use of external providers. Others will attempt to do more with less on their own. Whatever organizations choose, aligning their learning offerings with the business needs is job one.