Will We See An Uptick in Learning/Training Outsourcing When The Recession Eases?

The top driver for outsourcing the learning function is training-related cost savings, to the tune of 10 to 50 percent, depending on the extent of services outsourced and the use of offshored services.

Just last week General Physics Corporation announced a multi-year outsourced training agreement with a leading global software corporation. Among the few other bright notes in the outsourced learning space: IBM won a three year e-Learning services deal with Tianjin Economic Technological Development Area, Raytheon Technical Services was awarded a learning services contract with the U.S. Navy, and ACS engaged in an LBPO initiative with Hertz.

But new learning BPO (LBPO) contracts have largely stalled in the past year. Why? Training is often one of the first line items organizations nix when expenses must be reduced, and the recessionary state of the worldwide economy has had such a severe impact on bottom lines that short-term thinking has prevailed and training budgets have been slashed.

Still, organizations recognize both their new and existing employees are their most critical asset, and that having a ready supply of top talent will help them capture greater market share, achieve their business objectives and beat the competition. Leading edge movers will want to leverage their competitive advantages, including their people, to help make their turnaround happen ahead of the market. Others will be ready to return a focus and funding on learning when we exit the downturn.

We believe there will be an uptick in LBPO contract activity starting in the latter part of 2009 into 2010, particularly by 2Q10. Businesses will still be very cost sensitive, and the pricing and value advantages of LBPO should help restore life to this market. To take advantage of the coming opportunities, our 2008 “Targeting Learning BPO” market analysis indicates LBPO providers will need to demonstrate their ability to:

•  Manage learning while budgets are falling, including utilization of analytics to illustrate the business value of and ROI from specific outsourced learning programs

•  Maximize learning spend by leveraging feedback mechanisms to monitor and prove performance levels, and utilizing technology to monitor the quality of learning content

•  Reduce learning costs by buyers’ typically expected 15 percent for administration and vendor management by employing methods such as use of offshore resources as appropriate and lower cost delivery modes including virtual classrooms and e-Learning

The bottom line is that developing talent remains a major issue for most organizations today. And because the top people development challenge is cost pressures, organizations must make certain they have the right people getting the right learning opportunities, whether through in-house or external third-party trainers, to meet today’s competitive “get it right the first time” imperative.

Gary Bragar, Lead HRO Analyst, NelsonHall

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