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JULY 25, 2000 B-SCHOOL NEWS Look Who's Building Online Classrooms Right now, e-learning is being embraced more by Corporate America than by educational institutions
Given such questions, primary schools and universities have been cautious about getting into the e-learning game. But corporations have been far more adventurous. In fact, e-learning is becoming commonplace in offices and workplaces across the country, spawning a multimillion dollar industry. The trend isn't limited to just tech courses. Online programs now teach so-called "soft" skills, such as leadership, coaching, and global teamwork. The new learning models have the potential to make education a high priority on the job. After all, analysts write volumes on the value of having an educated, skilled, and speedy workforce. When a lesson can be transmitted quickly to managers and sales teams worldwide through an e-learning program, it begins to show on the bottom line. Says James Moore, Sun Microsystems' director of workforce: "If you look at product development at Sun, by the time I got everyone trained [the traditional way, the product] would be obsolete." STACK OF DOUGH. Is e-learning here to stay? Business Week Online explores this question in a series that looks at the companies investing heavily in adult learning on the job. Later parts of this series will examine how private e-learning companies are trying to cash in on the potential boom and will look at how companies are affected by the change. While no reliable estimates on the current U.S. market for corporate education exist, by 2003 the Net-based corporate education market should be worth a hefty $11.4 billion, according to International Data Corp. The stack of dough could be that tall thanks to a conversion by training directors to use the Net to teach employees. It saves money and time, and managers can pack more information into a lesson, missionaries say. Publicly traded e-learning companies -- long victims of a skeptical market (see BW Online, 1/28/00, "It's Time for a Refresher Course in Education Stocks")-- are beginning to report improved earnings, too. Chris J. Nguyen, CEO of Baltimore's Caliber Learning Network (CLBR), says when his company reports quarterly earnings on July 26, investors can expect sequential growth over the first quarter of 2000. SmartForce (SMTF), a Redwood (Calif.) e-learning company that focuses on adults, saw revenues increase to $36.4 million in the second quarter of 2000. And in San Francisco, DigitalThink (DTHK), an e-learning company offering programs for corporations, also reported stronger earnings in its fiscal first quarter of 2001, ending June 30. The $6.3 million in earnings is a 433% increase since last year. That's right, 433%. THE RACE IS ON. "Our customers want learning strategies to integrate all the learning that goes on in their organization with the corporate strategy," says John W. Humphrey, chairman of Forum Corp., a 30-year-old private-sector provider of leadership training. FT Knowledge, an e-learning company spun off from British publishing giant Pearson, announced earlier in July that it will acquire Forum for $90 million. The move points to a race among Old Economy training groups to use the Web to meet company needs. The idea is to mix e-learning with some classroom sessions, using content from varied sources -- executives, university professors, or private training companies. Other online learning companies are struggling to stay on top of demand. General Manager Robert Brodo of 15-year-old SMG Net, the online business unit of SMG Strategic Management Group in Philadelphia, says each of the company's 40 top clients -- Boeing is its largest -- has had a conversation about bringing courses online. Eighty percent are implementing courses such as SMG's "simulated company." In the two-day simulation, execs can play out five to six years of business experience. "We can't keep up with the demand, and it's scary when you have to tell a customer that you can't start a project for them until October and November." Privately held SMG says it will generate revenues of $31 million in 2000 -- $5 million from online programs. Next year, Brodo estimates $48 million to $50 million in revenues. "The growth is from online corporate universities," he says. Cushing Anderson, program manager for learning-services research at International Data Corp., is in the process of researching how companies are using e-learning for everyone from managers to sales teams and programmers. In 1999, 6% of all corporate training was done online, he says. Anderson's preliminary findings show that doubling to 12% this year. In 2001, that figure should double again. "Large companies tend to be more adventurous and have larger budgets" to put courses online, he says, though most buy programs from outside vendors. HOME-GROWN. That isn't the case at IBM. Nancy J. Lewis, IBM's director of management development worldwide, says Big Blue will move its training programs online for 5,000 new managers, saving the company $16 million in 2000, half of which has already been realized. She adds that producing five times the content at a third of the cost has helped convince all of IBM's training units to adopt the model. Her unit alone has reduced its staff from about 500 trainers worldwide to 70 this year. IBM is so confident about its training that the company has packaged its programs to sell to customers -- a side business that is already bringing in "small amounts of revenue" says Lewis' second in command, Robert MacGregor. If IBM's models for e-corporate universities works, it could become a profitable new business. Heads of training and development have grander plans than simply offering a course online. They expect to change adults' learning habits. Pippa Wicks, CEO of FT Knowledge, says in January, 2001, the company will launch a new learning program called insight Forum. "You do your job through the training program," she says. For instance, a customer-service manager would use the program to perform her daily tasks and then receive feedback about her decisions. Employees could take the training individually, or entire departments can share information in open sessions. FT Knowledge says it is already billing an unnamed company $3,500 an hour to link a handful of its execs with one of FT's management gurus for advice via videoconferencing. MORE ENGAGING. Los Altos (Calif.)-based Pensare, a four-year-old e-learning company, has a different vision. The company uses a model that lets employees, not trainers, decide what they need to learn, and when. "Tell [employees] what they need to do to help [execute] company strategy, then say, 'what do you think you need to know to help us?'" says Pensare co-founder Dean Hovey. Online learning, delivered quickly and in a setting where the information can be commonly shared, will make the training process more engaging and less of a chore, experts say. And it'll give companies an advantage over competitors. 3Com, for one, places a high value on e-learning. "I've got senior people saying that they want more [online training]," says Geoff Roberts, 3Com's director of education. 3Com's agility with technology makes it imperative to train not only internal employees but also its customers. "We're selling into a market where 80% of the people don't understand the industry," he says, adding that 3Com's investment in e-learning is fed from the company's marketing budget, not training. As companies convert lessons to be delivered over intranets, one massive obstacle remains: Unless it's mandatory, most employees drop out of training. "Getting 2% to 3% [of a workforce to sign on] can't happen," says Forum's Humphrey. "There have to be more breakthroughs to make learning less intrusive to the worker." His suggestion to clients: Make lessons relevant. GRAND PLANS. The good news is that generation-Y workers -- recent college grads -- are more comfortable using the Web. In 2003, analysts expect 95% of college students to use the Internet. Only 41.7% did in 1996. This means college grads entering the workforce in 2003, and beyond, may be more receptive to e-learning. In fact, they may expect it. In 1998, 700,000 students were enrolled in distance-learning programs. By 2002, 2.2 million will be, according to Credit Suisse First Boston analysts. The plans sound grand. More and more companies will log their workers on to lessons on the Net. But getting the 45-year-old manager or executive to adopt e-learning models as easily as they've grown to employ e-mail is a challenge. No matter how fancy the program, if no one logs on, it'll be a hard to convince any CFO that investing in e-learning is worth it.  By Mica Schneider in New York  | | Learn about your online education options |
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