Let’s Not Forget About Learning

According to a survey by KnowledgePool, a U.K.-based managed learning services provider, 70% of internal client learning and development (L&D) organizations are too busy doing daily fire-fighting to focus on strategic talent and learning issues in their company. Out of 104 L&D managers, 69% say their training department does not have enough resources and 42% say that training receives inadequate support from senior managers. Yet 80% of L&D managers said they could improve their organization’s training ROI; 77% think new opportunities for improvement could be identified through rigorous analysis of their training spend and evaluation data; and 75% say improvements could be made by using more informal and on-the-job learning methods.

Sound like an opportunity for outsourcing? You bet!  The good news from NelsonHall’s most recent quarterly HR Outsourcing Confidence Index is that learning services, which has been the last of the HR outsourcing service lines to recover, is expected to continue to strengthen as the year progresses. Following several strong quarters of growth within RPO, the need is now shifting toward implementing and optimizing learning programs. Good news in learning since the beginning of Q2 includes:

• Genpact winning a content development contract by JobSkills in India
• Raytheon Professional Services winning a contract to develop an e-training program for NATO
• CIBER’s Federal division winning a 5-year training development contract with a potential value of $30.7m by the Center for Strategic Leadership, an institute of the U.S. Army War College
• Accenture winning an e-learning contract with a major bank that may later add classroom ILT
• General Physics winning $3m in 5 new contracts from energy companies across Africa, the Middle East, South America, and Asia
• Edvantage group winning a safety e-learning contract by Yara International, providing 7 interactive e-learning courses for 3,000 technicians, operators, engineers, and supervisors at 30 plants across 17 countries.

In NelsonHall’s last learning BPO report, top drivers of why companies are outsourcing learning, which support KnowledgePool’s findings, include:

1.        Lowering costs (average client savings of 26%)
2.        Increasing training effectiveness and ROI
3.        Improving the quality of learning for employees
4.        Accessing experts in the industry whose core competency is                       learning
5.        Flexible services, aligning learning with the customer’s                                 strategic objectives
6.        Focusing on strategic work, not transactional activities.

Look for increased learning outsourcing to continue the remainder of 2011, including by the likes of IBM who continue to see increased demand globally. In 2012, I think learning outsourcing will really soar. Although uncertainty in the economy continues to cause delayed decision-making, there is no doubt in my mind that we will see a boost in learning as companies unanimously agree talent management is more important than ever. To improve and engage talent, you have to invest in your people. There is only so long you can just say the words, eventually you have to walk the talk!

Gary Bragar,  HR Outsourcing Research Director, NelsonHall

Learning Services Acquisition Frenzy

Last year, we wrote quite a bit about all of the M&A activity in benefits administration including:

• Towers Perrin and Watson Wyatt completing its merger to become Towers Watson
• ACS, a Xerox Company acquiring ExcellerateHRO
• ADP acquiring Workscape
• Aon acquiring Hewitt to become Aon Hewitt
• Other acquisitions made by vendors including Mercer, Xafinity, and Capita.

Will learning be the next HR service area abundant in acquisitions?  Although we have seen learning services acquisitions in the past, including ACS acquiring Intellinex in 2006, and will likely continue to see more in the future, I don’t believe we will see any in learning that are equivalent in scale to the large benefits acquisitions.  However, if there was an award for the number of acquisitions in a short period of time, it would have to go to General Physics Corporation (GP). On March 10^th, GP acquired RWD Technologies for $28m, its 8^th acquisition in the past 18 months.  RWD is based in the U.S. near GP in Baltimore and has three additional U.S. locations as well as offices in the U.K. and Colombia.

GP got RWD at a bargain since RWD’s consulting revenues were $65m in 2010.  RWD was hit hard by the recession and GP came along at the right time with cash on hand.  As a result of the acquisition, GP inherits RWD’s IT learning expertise, where it had little prior experience.  The acquisition also strengthens GP in the petroleum, manufacturing, and automotive sectors.

Last month, GP acquired Communication Consulting to expand delivery of its training services in China.  GP’s other acquisitions were made in the U.S. and U.K. between September 2009 and December 2010.

GP’s 2010 revenues were $259.9m, an increase of 18.6% compared to 2009.  Growth was attributed to increased volumes from existing clients, new contract awards, and its acquisitions, which had the greatest impact.

Moving forward, what will happen?  Well for one thing, don’t count GP out from making future acquisitions.  GP still has ~$35m in revolving credit after the RWD deal and has stated that they will continue to seek acquisitions to grow globally.  However, with so many acquisitions, GP now faces the challenge of creating an integrated client experience and cross-selling into the strengths of these acquired companies to continue its rapid pace of growth.

It will be interesting to watch as things unfold this year.  In the meantime, we can finally put to rest the question “what’s happening with RWD”.

Gary Bragar, Lead HRO Analyst, NelsonHall

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