Effective training programs transfer knowledge and skills to employees, customers and partners, help retain employees, and ultimately improve speed to proficiency for everyone. Organizations choose to deliver training in a wide variety of ways.
The decision to outsource rests often on the training quality, subject matter expertise and industry knowledge. Last year, this study revealed slightly fewer organizations were outsourcing training activities. This year there is a small decline in the share of training budget devoted to outsourcing and a decline in the total spending on outsourcing. Organizations spent about 20 percent of their budgets on outsourced activities, down from about 30 percent just a few years ago.
Every other month IDC surveys Chief Learning Officer’s Business Intelligence Board on a variety of topics to measure senior learning and development executives’ attitudes, issues and interests. More than 180 BIB members shared their plans, objectives and feeling on training outsourcing.
Training outsourcing is typically defined in research as the ongoing transfer of management and execution of one or more complete training processes to an external service provider. However, survey results consistently show this is not the term the marketplace uses. The types of training activities purchased suggest enterprises use the term “training outsourcing” synonymously with any external training provider use. This article adopts this broader usage of training outsourcing for analysis.
Outsourcing Usage Fluctuates, Budget Spend Declining
For the past several years, the number of enterprises that outsource part of their training function has had small variations: up in 2007, down in 2009, up in 2011, etc. While down in 2015, the most recent survey year, the erratic trend continues; about 58 percent of enterprises report outsourcing some portion of their training function for the past two years — a slight increase.
Until recently, the challenging economy drove a portion of outsourcing instability. However, increasing satisfaction with internal training may contribute to the up and down nature of these figures. Enterprises leverage external providers to deliver more training than internal resources can provide, and to gain access to better training expertise while controlling costs.
Companies that outsource spend about 20 percent of their training budget on outsource services. This is a meaningful decline from 2013 and 2014 when about 30 percent of the training budget went toward outsourcing. (See figure 1.) Currently, only 15 out of 100 enterprises spend more than 40 percent of their training budget on outsourcing. In 2013, that share was about 30 out of 100.
Looking forward to 2017, more than half of companies expect training outsource spending to remain the same, which represents a significant increase from the findings from last year. (Figure 2.) This suggests companies that outsource are satisfied with their external training providers or overall training approach. Economic challenges have not fully retreated, but only about 10 percent of companies indicated their training outsourcing budgets will decrease next year — the lowest share since before 2008.
Where Is the Training Budget Going and Why?
Some analysts and experts predict enterprises only outsource “non-core” activities. However, CLOs seem willing to outsource core and non-core activities. The activities CLOs identify as most important include training delivery, strategy development and enrollment management — each described as among the most important activities by at least half of enterprises.
The importance of various training activities hasn’t changed much the past several years, except for a decline in custom content development. Examining what’s considered important and what’s outsourced shows a closer relationship to areas where partnerships between enterprises and learning outsource vendors can be most successful: training delivery, enrollment and vendor management, program oversight, custom content design and development, and learning technology management, among others.
While other aspects of training outsourcing have not changed much, the reasons for outsourcing are shifting. In 2013, a majority of companies chose outsourcing to gain access to better training expertise or to deliver more training than internal resources could provide. While those reasons remain the most important, the ability to “better align learning function with company’s strategy” and “reduce cost” are now considered a priority by more than a quarter of organizations, up from about 15 percent last year.
The percentage of CLOs who report being satisfied (either very or somewhat satisfied) with their providers overall is relatively high, and long-term trends suggest satisfaction is increasing. This year, more than 94 percent of enterprises report being satisfied with their providers, about the same as last year, and an increase from 2014. Subtracting those dissatisfied from those enterprises who are satisfied results in a “net promoter score” of about 90. (See figure 3.)
Companies that don’t outsource typically cite satisfaction with their internal training operation, don’t do enough training to warrant an outsourcing arrangement, or cite outsourcing as too expensive. These reasons have been consistently important for the past seven years of this survey. This year, complexity of subject matter — presumably custom created content — has become an equally important reason not to outsource training. The importance of relevant training, and the value it can bring to an organization, is summed up in one CLO’s response to “Why don’t you outsource?”: “It is not ideal to outsource the future of organization.”
Leveraging external providers remains a well-established practice. Key findings from this survey include:
- A small decrease in the number of enterprises who plan to outsource.
- A decrease in the amount companies spend on outsourcing.
- Companies that outsource are highly satisfied with the results.
Many CLOs surveyed offered suggestions to improve training outsourcing. These two seem particularly relevant:
- The organization and the outsourcer should hold a shared vision, resulting in a “closer alignment between the results of the training outsourcing with the desired outcomes for the business.” Another concurred that it was important to complete a “proper evaluation prior to selection of training providers.”
- Outsourcers who can blend cross-functional skills in learning and development into a single company — such as training administration, training content design and development, delivery — are important.
As enterprises continue to recover along with the economy, how they use external providers will change. Some organizations will increase their use of external providers. Others will “do more with less,” and still others are satisfied with their internal teams and will hold the line with their internal organization. Whatever organizations choose, aligning their training offerings with business needs remains job one.
Cushing Anderson is program director for learning services at market intelligence firm IDC. Comment below, or email editor@CLOmedia.com.
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