E-learning struggles as companies slash budgets

IT training had a rough ride during the last quarter of 2001, and the first quarter of this year hasn’t been much better, according to one analyst.

“The market has slowed down quite a bit,” said Julie Kaufman, research manager, skills research at Toronto-based IDC Canada. “In IT training specifically the industry was on a kind of rollercoaster back in 2001. The first quarter was strong and then we started hearing announcements about Nortel and Cisco and it started changing the training industry.”

During the summer, the rollercoaster brought the industry back up spurred by new interest in customer relationship management (CRM) and enterprise resource planning (ERP) software.

“Then 9/11, and nothing happened for the remainder of September and most of October,” Kaufman continued. “That had an immediate effect, but there was a bounce-back in November.”

However, that small bounce just wasn’t high enough and resulted in the sector seeing only single-digit growth in 2001, not at all in line with comparatively high growth in other technology areas.

“Very, very low growth and totally out of line with the rest of the IT industry,” she said. “I would expect that the market has not improved in this quarter and a lot of (training) companies haven’t been able to fill seats.”

Richard Gordon, vice-president and managing director at education integration company Global Knowledge Network Inc., said his company has not been exempt from the classroom-based learning slowdown. Luckily, he added, the company is focusing more on e-learning, which eliminates both travel and employee absenteeism.

“The traditional industry has been impacted in two ways because people don’t want to travel and because budgets are tighter,” Gordon said from his Ottawa office. “With e-learning, you can take a virtual live class over five weeks in chunks of two or three hours a day, so you not out of the work environment entirely.”

He added that this teaching method is more conducive to the kind of learning companies are looking for right now, namely, specific company or project-related education.

Kaufman agrees that the days of learning for simple development’s sake are nearing the end.

“There will be higher expectations placed on training than what in many cases is being provided,” she said. “Training that is not related to a specific, strategic initiative will suffer. Things like desktop application training, things that are nice to have but you don’t absolutely have to have it, that has already suffered and it was the bread and butter of many trainers. Training has traditionally been a knee-jerk reaction to a need because they have implemented something and need to know how to use it.”

Gordon boiled it down to one simple statement. “Smaller companies are going to go out of business,” he said.

“If the revenue is usually derived from a single technology, or they are very small in a regional scope, or they are training to individuals instead of corporate clients, then what is going to happen is consolidation. Larger companies are going to prosper in the medium to long-term.”

Don Whitty, president and CEO of Fredericton-based Mosaic Technologies Corp. said he has seen a real shift in the way potential clients make decisions about training with his company.

“Opportunities haven’t gone away, but opportunities are not coming to fruition,” he said. “For instance, where I may have had a sales cycle of 45-75 days from meeting a client to putting a contract together, that is now 240 days. Cash flow in the interim is an issue.”

Whitty said that in the past Mosaic, which splits its efforts between schools and e-learning, contacted clients and they would either have a contract or be “told politely” that the client wasn’t interested. Now, clients seem interested, but are putting off commitments for as long as possible.

He added that companies that jump into a trend without it being their core competency have obscured the landscape of e-learning.

“For someone to be involved in online training and to be aware of it only as a buzzword, then you have this glut of people in there and they are bidding against those who are committed in the long-term and it obscures the landscape for the buyers,” Whitty said. “I think that some of the people in the corporate marketplace are standing back.”

But good news for Whitty and Gordon, Kaufman said. She expects business to pick up in the latter half of 2002.

“Spending isn’t happening in the technology sector, but once we start seeing the sector bounce back with more technology spending occurring, that’s when we will start seeing the training market bounce back,” she said. “The latter half of this year should see a bit of a rebound.”

IDC Canada in Toronto is at http://www.idc.ca

Mosaic Technologies Corp. in Fredericton is at http://www.mosaictechnologies.com

Global Knowledge, with worldwide offices, is at http://www.globalknowledge.com

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