Chief Learning Officer magazine’s Business Intelligence Board survey results illustrate that the number of companies using training outsourcing has declined, but those that outsource are happy with the results.
It is commonly recognized that companies need effective training programs to transfer knowledge and skills to employees, customers and partners; to retain employees; and to improve speed to proficiency. Training programs can be grown organically over time, developed in-house, outsourced to a training provider or implemented using some combination of in-house and external expertise. The decision to outsource rests mainly on whether the needed volume and quality of training can be supported by the internal staff.
Every other month, IDC surveys Chief Learning Officer magazine’s Business Intelligence Board (BIB) on a variety of topics to measure the attitudes, issues and interests of senior training executives. This month’s topic is training outsourcing, and 393 BIB members participated in the survey.
More than 56 percent of the enterprises surveyed use outside providers to fulfill some aspect of their training functions, primarily outsourcing content development, training delivery and LMS. Overall, those enterprises that outsource training are satisfied with the services they receive and plan to increase or maintain current spending levels for 2009.
Defining Training Outsourcing
IDC defines training outsourcing as the ongoing transfer of the management and execution of one or more complete training processes to an external services provider.
However, it is clear from the survey results during the past several years that this is not the current use of the term by the marketplace. The results suggest that enterprises use the term “training outsourcing provider” synonymously with the use of external training providers. For the purpose of this article, we will adopt this broader usage of training outsourcing for our analysis.
Declining Use of Training Outsourcing
During the past several years, two-thirds (66 percent) of enterprises outsourced some of their training functions. In 2007, this number dipped to 64 percent, and this percentage went down again to 56 percent for 2008. The unpredictable economy may be a factor, as internal training resources are being pushed to a higher utilization to curtail costs and spending on external providers is reduced. This is an interesting change in the survey responses, as many of the other behaviors in training outsourcing have remained remarkably consistent during the past three years.
Most companies outsource only select portions of their training functions — only about 2 percent outsource the entire training function. This percentage has remained relatively steady, even though the number of enterprises outsourcing some or all of their training function has declined.
Spend on Training Outsourcing
Spending on outsourcing as a percent of overall training budgets reveals a bell curve skewed toward the left. The majority of companies spend less than 40 percent of their training budget on training outsourcing, with about half spending between 10 percent and 40 percent of their training budget. Conversely, only 20 percent spend more than 40 percent of their budget, and the 3 percent who spend more than 80 percent are probably mostly organizations that outsource the entire training function.
For 2009, 85 percent of companies expect spending on training outsourcing to increase or remain the same. This indicates that while the number of companies that are outsourcing have declined this year, the companies that are outsourcing are satisfied with their use of external training providers. Only 15 percent of companies indicated their training outsourcing budgets will decrease next year.
Outsourcing and Management Control
In an effort to further determine why certain training activities are outsourced, managers were asked to identify the top five most important overall training functions. These, in order of importance, were custom content design/development, training delivery, strategy development, program oversight and learning technology management. Reporting and measurement was a not-too-distant sixth choice.
If we compare the importance of training functions against the training functions most frequently outsourced, there appears to be a correlation between the importance of the activity and activities outsourced for the three areas of custom content, training delivery and LMS.
However, those training functions that are highly important but require the transfer of management responsibilities to execute — such as strategy development, program oversight and reporting and measurement — show low popularity for outsourcing. It seems that companies are using external training providers primarily for activities that are important but do not require the transfer of management authority.
The top two reasons to outsource, by a clear majority of companies, were to deliver more training than internal resources can provide and to access expertise. These reasons remain consistent from 2007. Reducing costs, the third most popular reason, also is an important benefit from outsourcing, and it has become more important to enterprises, while speed to market has dropped in importance. Both of these changes appear to be tied to the current economic situation as organizations seek to “hunker down” rather than pursue new opportunities.
Those companies that are outsourcing training functions primarily to supplement internal resources do so to have training resources available on an as-needed basis. Companies looking to deliver training beyond the capabilities of internal resources consider that training outsourcing can be managed like just-in-time inventory with services on hand as needed, while also resolving issues of cost, lack of talent and timing.
Those that outsource appear not only to be satisfied with current levels of spending on training, but they continue to be satisfied with the results of training providers, as 35 percent of enterprises report being “very satisfied,” and the percentage of respondents who are unsatisfied is low, at 8 percent. These satisfaction levels are consistent with 2007 results, and it appears training providers continue to provide quality services to their customers.
The most important qualities to consider when looking at a training outsourcer are training expertise and subject matter expertise. These are the fundamentals for providing high-quality training services in terms of understanding the subject matter and knowing how to impart knowledge to the audience. Other factors that are important are vendors acting as business partners; a good cultural fit between the customer and vendor; knowledge of the customer’s business; and responsiveness. These qualities, while possibly harder to assess in the proposal process, are key attributes for a successful relationship, especially when the vendor will represent client companies in training situations for employees, partners and customers.
Increase in Training Customers
The targeted training audience has changed slightly since 2005, and there may be an indication of a slow decrease in using outsourcers for training employees with a corresponding increase in training customers. There could be a multitude of reasons for this slight change over time, such as a higher need for customer training as products become more complex or a greater degree of comfort in using outside providers to work with customers.
There has been virtually no change in the training focused on partners during the past four years.
Decision Making Roles Shift
Who decides when or if to outsource has changed during the past several years. From 2006 to 2007, it appeared HR executives were becoming more active in the decision making, even more so than the CLO or head of training. More recently, however, HR executives have become less involved as decision makers, almost back to 2006 levels, while the heads of business units have taken on more decision-making authority across companies and continue to be more active in these decisions over time.
The CLO or head of training, while still not as active in decision-making as in 2006, has become somewhat more involved in the decision making to compensate for the reduction in responsibility in this area for HR executives.
Reasons for Staying in-House
Companies that don’t outsource typically cite satisfaction with their internal training operations or indicate they don’t do enough training to justify hiring outside resources. Some companies that don’t outsource do not want to lose control of their training functions or believe the subject matter is too complex for outside providers. Companies with highly complex subject matter feel that training is more core to their operations and feel a greater obligation to keep those activities in-house.
While this survey answered some questions, it also highlighted areas that need to be explored, such as why the levels of outsourcing may be declining, at what point companies satisfied with their internal staff capabilities move to training outsourcing and why there is a shift in decision making from HR executives to the heads of business units.
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