ELearning Market Update (July 2008)

Doom and boom

In 2001 Elearnity published a paper entitled “Recession bites, elearning marches forward”. Seven years on we have oil prices at record highs, energy prices rising, food prices rising and a major credit crunch. How will elearning fare this time around? Steve Rayson takes the market temperature.

The Economist this month joked that this is not just any recession, but an M&S recession, a reference to the recent troubles at M&S. However, things are not always what they seem. Not all businesses are affected equally by the recession. For example, M&S Direct, the online business hosted by Amazon and for which we at Kineo have been doing some elearning, is growing at 70% a year. Also, M&S themselves have seen cost benefits from the elearning approach we’ve applied – so it’s all helping.

The optimism of those at M&S Direct is shared by many in the elearning sector. We have previously commented that the recession might present an opportunity for those developing elearning. It might seem counter intuitive but reductions in training budgets could force organisations to look again at the value offered by elearning.

This was picked up recently by Michael Henley. Michael wrote an interesting piece on the prospects for elearning during an economic downturn. He also noted that “The prevailing feeling seems to be one of optimism, and that this is in fact a time of opportunity for the industry.”
To back this view he quoted a number of industry experts and commentators in the US:

Ankit Jain, G-Cube solutions writes:

“Lower revenues and lower profits for US corporations certainly means a cut in L&D spending. However, I have strong views that eLearning in relative terms is likely to benefit from recessionary conditions as it is a proven cost friendly alternative to a traditional classroom. ... In my views the share of eLearning hours will increase to over 40-50% from current 30% due to two factors - lowered base of number of training hours (as expected during recession) and increased share of eLearning as such. ... [the] eLearning industry in general has a great future irrespective of US recession.”

David Barton of Michelin North America agrees:

“For the first time in the 13 years that I have been working with technology enabled learning in North America, our global learning and development group is seriously exploring its use.”

Brett Andersen of The Bank of America is not afraid to use capital letters:

“With financial cutbacks come greater restrictions, such as hiring freezes, significantly lower budgets, etc. And with less money and fewer resources, training and development employees have the challenging OPPORTUNITY to be more creative.”

The same feelings were echoed in the by UK Richard Naish. He estimates that in the current downturn the proportion of learning delivered as elearning could increase from 20% “to around 30 per cent elearning. So rather than worrying about how they will weather any downturn, the elearning industry should be looking forward to growing revenues over the next two years.”

Of course none of these writers go on to suggest that in the next economic upturn, elearning will nosedive as training budgets flow back into flying people around the world to stay in nice hotels so they can attend poorly designed residential courses. Once you go elearning, you never look back. Good for everyone.

You can’t spell recession without ‘e’

If we look at the fundamentals there does appear to be a number of reasons to be optimistic about prospects for elearning’s growth during a downturn.

  • Elearning has a huge cost advantage over classroom delivery, especially for larger organisations with staff spread geographically and the zero marginal cost of delivery to additional learners.
  • Elearning has environmental benefits – key with staff being required to travel less and cut costs.
  • Elearning can quickly reach and train many people cost-effectively, reducing costs of induction/onboarding and rolling out new processes.
  • Elearning can reduce training time and increase speed to competence, increasing productivity.

Not all of the elearning market will be affected in the same way of course. It may still be a tough time for more traditional players. It’s a good time for adaptable organisations though – for example, there has been a huge increase in the take up of open source solutions. (Yes, we know, hold the front page: ‘people like free stuff during recession’ shocker). In particular, Moodle has offered very cost-effective solutions for organisations.

The advances in development tools and streamlined development approaches have led to significant growth in rapid elearning, which enables high quality content to be produced quickly and cost-effectively. In itself, rapid elearning during an economic downturn can become a more attractive option than more expensive traditional methods.

What does IPO stand for again?

Finally, even cautious investors are returning to the market. Research from Ambient Insight indicates that investment in learning companies peaked in 2000 at over $1.04 billion. It then declined rapidly after that to bottom out in 2004. However, private investment has been steadily increasing since 2005, but has spiked in the last six quarters.

The research provides compelling evidence that private investment firms are now targeting new types of companies and products. Funding in 2007 was the highest since 2001. Funding in the first half of 2008 has already reached 74% of the 2007 total and now totals more than all the investments made in the entire year of 2006.

Follow the money – it’s a great time to be considering a move into elearning, as investor or training manager. Could this be the recession-proof industry?