TRENDS

May 31, 2002

The e-learning industry may be about to explode as companies continue to look for low-cost ways to train their workforces. The reason comes down to simple economics — about two thirds of the cost of sending staff to training programs involves travel and accommodation expenses, leaving only a third of the investment associated with actual employee education. So it's not surprising that many companies are seeking a more efficient way to educate and train workers.

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"Many companies looking to cut their training costs will be looking at e-learning over the coming months and years. And many of these companies will want to dip a toe in the water by using an ASP before investing in an in-house system. A proportion of these — probably the smaller companies — will decide to stick with an ASP." Give us your feedback in the ASPnews Discussion Forum

The most obvious avenue to this efficiency is e-learning — that is, the delivery of training or teaching, which may include testing, group discussions and one-to-one tutoring, from a computer terminal running software locally or over a LAN, intranet or the Internet.

The signs indicate that companies around the world are exploring this option in increasing numbers. Research firm IDC, for example, estimates that the global e-learning market is growing at an annual compound rate of 150 percent, and predicts it will be worth $23 billion by 2004.

The Evolution of E-learning
In what's amounting to a natural evolution, many of the companies that provide e-learning services to corporations are turning to the ASP model to deliver their offerings. Is there something intrinsic to e-learning that makes it better-suited to the ASP delivery model, or is there something about the users of e-learning that makes the ASP model particularly attractive to them? In other words, why do e-learning and ASP work well together?

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One explanation is that although training is not critical to the day-to-day operation of a company, it is expensive and complicated to set up. This makes a high amount of upfront investment difficult for many companies to justify. "E-learning systems can be technically hard to implement," Chris Reed, vice president of Corporate Strategy of Lexington, Mass.-based e-learning company Centra told ASPnews. "You are not just serving Web pages, but also rich content like audio and video. A professionally managed service is obviously attractive," he said.

Another good reason to receive training through an ASP is to try out e-learning without ditching existing training programs, Reed said. "We find that many of our customers want to experiment with e-learning without the expense of setting up the infrastructure to handle it, so it's much easier for them to use an ASP. Once you start doing it larger scale the economics change in favor of licensing the product (instead of receiving an ASP service)."

Sheila McGovern, an e-learning senior research analyst at IDC, also believes that it is the high cost of becoming involved in e-learning in-house that is making e-learning ASPs so popular. "E-learning is actually not so different to other types of IT solutions, and the key driver to adopting the ASP model for e-learning is cost savings in the short term — because doing it in-house involves a big initial outlay," she told ASPnews

Fast and Easy Does It
But there are other factors apart from cost that are making ASP e-learning solutions popular, according to Mike Maunder, vice president for International Marketing and Alliances at Redwood Shores, Calif-based e-learning company Saba. The ASP model is perfectly suited for e-learning delivery in two particular circumstances, he said. "The ASP model is useful for the delivery of generic e-learning like training in the use of desktop software packages," he told ASPnews. That's because the training can be treated as a utility, switched on and off whenever it is required, and updated by the ASP (or the content provider) at minimal cost per end user.

It also makes sense to use the ASP model when there are severe time constraints, Maunder said, because e-learning systems can take many weeks or months to implement, but an ASP can be in a position to start delivering e-learning in a matter of days.

Generic training may well be the future of ASP delivered e-learning. To understand why, it's useful to consider what can be thought of as the ultimate generic training — school education. It's generic because all students are entitled to the same education — there's no proprietary education delivered exclusively to students of a particular school.

A pioneer of K-12 e-learning is Bloomington, Minnesota-based Plato Learning. Its Plato software was originally an e-learning product developed with a National Science Foundation grant back in 1962. The company has evolved over the decades with changing technology and in 1997 it offered an ASP service to deliver education to schools.

Frank Preese, Plato's chief technology officer, sees distinct advantages to customers (schools) in offering education as a service. All also apply to small and mid-sized companies interested in receiving generic e-learning. "Schools look at IT and say why not outsource? It is certainly a problem for schools to support the infrastructure necessary for e-learning. But there are more important points: A school district can get access to far more resources over the Internet than it could have physically in its schools. And secondly, schools are able to access other services through an ASP that they could not offer themselves."

What's Special About E-Learning?
So what does all this tell us? None of the drivers to e-learning ASP adoption are unique to the e-learning industry — low cost of entry, predictable per user costs, speed to market and access to more powerful software or resources are general beneifts of the ASP delivery mechanism after all.

Many companies looking to cut their training costs will be looking at e-learning over the coming months and years. And many of these companies will want to dip a toe in the water by using an ASP to see whether e-learning works for them before investing in an in-house system. A proportion of these — probably the smaller companies — will decide to stick with an ASP rather than incur the costs of bringing training in house.

And all this adds up to a significant market for ASPs. Centra's Reed expects about 50 percent of the company's business to be ASP-delivered in a few years time. If other e-learning companies follow this path, the e-learning ASP sector could be worth, by IDC's estimates, as much as $12 billion in two years. Certainly an area of the ASP industry many companies will be interested in learning about.

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