Overall, investments in learning technologies and services have declined predictably in 2009 compared with 2008 budgets, though a large percentage of firms did not change their spending much between those two years. And while investments in learning technologies continue to be a priority compared with most other spending alternatives, design and development of in-house training and leadership and executive development appear to be the areas expecting the most growth in the next 12 to 24 months. Enterprises expect to continue their investment in collaborative software and performance management capabilities, and custom content development will be the most important service CLOs will invest in during the next budget cycle.
Every other month, IDC surveys Chief Learning Officer magazine's Business Intelligence Board (BIB) on a variety of topics to gauge the issues, opportunities and attitudes that are important to senior training executives. For the past several years, members of the BIB have been asked to provide annual insight into their investment choices. This month we look at how companies are investing their training dollars, in what learning technology and learning services areas, and whether spending on training will increase or decrease from 2009 to 2010.
2009 Training Budgets Declined as Expected
On average, training budgets declined as a result of the global economic crisis. For the first time since the Chief Learning Officer BIB has been reporting its budget intentions, a plurality of firms saw a decline in budgets, with almost 45 percent of CLOs experiencing a decline in budget and only 23 percent seeing an increase.
The average impact on budgets was a decline of about 14 percent, with firms that saw a decline reporting one of about 20 percent and firms that had larger budgets only growing about 10 percent.
The trend for changes in training budgets looks somewhat better for 2010, although a large percentage of companies are unsure of the direction of training budgets next year. About 20 percent of enterprises expect a decline in budget for 2010, which is also about the average reported decline between 2005 and 2008. Overall, we project that budgets for 2010 will grow slightly — about 4 percent on average, with about 40 percent of firms seeing no change from their 2009 budget.
Key Investment Areas
CLOs continue to use their training dollars efficiently, spending most on important areas that offer fast and visible results. The clear first choice is developing in-house training options. This reflects a cost-savings attitude and recognition that relevance of instruction is critical to its value.
Enterprises are also continuing to invest in e-learning — again, reflecting pressures to deliver more training content to the widest possible audience. Informal learning and leadership and executive development are also investment priorities. Compared with the priorities from previous years, performance management has fallen in importance to the middle of the list of options. This may suggest that the other options represent a shorter, more visible return on investment, though the long-term value for performance management remains high.
One-quarter of companies expect to decrease investment in training facilities and equipment and in tuition paid out to colleges and universities. With community college and advanced degree program enrollment up, it is likely this reflects a reduction in employee benefits as opposed to an indication of a decrease in the perceived value of advanced degrees. Two other areas of investment decreases are expected to be in training and development personnel and payments to external learning services suppliers. Both of these priorities reflect the ongoing scrutiny of budgets and spending throughout the organization.
Design and development of in-house training: Organizations build and develop training content for their unique requirements. These are typically related to unique knowledge or processes within the enterprise. As organizations focus on their core operations, in-house knowledge and the use of internal experts will increase.
E-learning: E-learning offers many advantages, among them flexibility and convenience, and as such, this area continues to be a key investment priority for CLOs.
Informal learning: Not the oxymoron that it appears to be, investing in the tools that support informal learning, such as social networking technologies or expert locators, can be beneficial to facilitating organizational development.
Leadership and executive development: The core of executive development is leadership training, which continues to be a priority for large companies. As boomers retire, training and development professionals must prepare the next generation of executives that will replace retiring leaders. Combined with mentors and job rotations, leadership development increases retention rates among mid- and senior-level executives and helps enterprises ensure the talent and experience they require will be available when it's needed.
Companies are continuing to invest in their technology infrastructure. However, fewer are planning to increase their spending. More CLOs expect to invest in collaborative software than other technologies, but fewer in 2010 than in 2009. Overall, only about 8 percent of enterprises expect to decrease their spending on technologies. The percentage of enterprises that will be increasing their investment in specific technologies is significantly lower than in previous years.
The priorities in spending on areas of learning services appear to have shifted as a result of the economic crisis. Custom content development now appears the biggest priority for learning services. Last year, needs assessments were the most important services investment, but this year, only half as many enterprises expect to increase their spending on needs assessments.
Overall, fewer companies expect increases in investments in learning services as compared to learning technologies, though about the same percentage expect a decrease.
In the next one to two years, companies plan to use external providers most often for hosting, content development and classroom delivery. This is fairly consistent with spending on external providers over the past few years. Hosting, content development and classroom delivery have long been the most popular uses of external providers. For the most part, frequency of engaging with external providers is also declining, consistent with the trends reported above.
Most CLOs and senior training executives have refocused their dreams. In past years, integrated technology solutions were the items on most wish lists. This year, the fantasy items were focused predominantly on learning management systems, with organizations wanting to upgrade, replace or install such systems. Content authoring tools, improved access to content libraries and content management software were also frequently mentioned on this year's wish list. Growing in importance from last year are new ways to reach stakeholders and improve communications, including social networking tools and collaboration tools.
For the most part, training investment priorities are consistent with the financial pressures brought on by the economic crisis. While CLOs are conservative in managing their learning investment portfolios, changes in priorities in investment areas are an effort to provide the maximum company benefits with limited resources.