E-Learning Market Update (May 2009)

This month we examine trends in the LMS market. We look at recent evidence of a significant shift towards Software-as-a-service (SaaS) and how this combined with the growth of open source solutions could change the face of learning management systems as we have come to know them.

There were two new reports this month:

ElearnitySoftware as a Service – Impact on Learning & Talent Management Systems
Brandon Hall – 2009 LMS Knowledge Base

These two reports highlight two different trends in the LMS market. The Brandon Hall Report (based on their marketing material) leads with the fact that vendors are offering more social learning tools and features. The Elearnity report focuses on a shift in the provision of LMS systems on a software-as-a-service basis. How far Brandon Hall picks up on this trend is difficult for us to ascertain as we have not bought their report but would be willing to hear from Brandon or others who have purchased the report. The Brandon Hall blog did make reference to SaaS in February and their reviews of various LMS tools refer to the fact many are now offering On Demand or SaaS versions. We will look at social learning trends in more detail next month, but this month we focus on the growth of SaaS.

Software as a Service – Changing the LMS Market?

Elearnity undertakes detailed research interviews with organizations on the key trends taking place in the market and publish their report free. The focus of Elearnity’s research Software-as-a-service (SaaS) is one of the fastest growing segments of the information technology (IT) industry because it provides a more cost-effective alternative for enterprises to achieve their business objectives than traditional packaged applications. This will inevitably impact on the LMS and talent management systems market.

SaaS is defined by Wikipedia as:

“A model of software deployment where an application is hosted as a service provided to customers across the Internet”

As Elearnity points out, the company that really put SaaS on the corporate radar is Salesforce.com, providers of a SaaS‐based Customer Relationship Management solution. Over 41,000 companies using their SaaS solution, Salesforce has revenues of over $700m a year and is still growing at approximately 40‐50% year. The open source alternative Sugar CRM, which we use at Kineo, is growing equally fast. Squint and look at Sugar and Salesforce, and it's very hard to tell the difference. Except one of them is basically free. That's what kind of swung it for us....

Elearnity looks at what the analysts have to say about SaaS

  • Gartner research showed 61% considered SaaS more cost‐effective than on‐premise solutions (61%) and easier and faster to deploy (57%). Other motivations included a lack of IT resources to implement on premise, reduced capital expense, and a perceived higher user acceptance. Overall according to Gartner 88% of organizations expected to maintain or increase their use of SaaS.
  • IDC (January 2009) argues that the recession will accelerate the growth prospects for SaaS and updated their growth projection for 2009 over 2008 from 36% to 40.5%.

According to Elearnity’s own research new suppliers of SaaS‐only Learning & Talent solutions have appeared in the market and seem to be growing faster than more established software suppliers that are also now increasingly offering SaaS or “On Demand” versions of their own software.

Elearnity estimates that “approximately 70‐80% of new Enterprise Learning & Talent Systems are now hosted externally. The fastest growing segment of this is SaaS.”

Open Source SaaS

At Kineo we believe that the adoption of SaaS combined with the emergence of open source solutions will change the face of corporate learning platforms. Elearnity is not so sure, though they do say “we believe it is likely rather than inevitable that Open Source will impact the SaaS Learning & Talent Systems market. But currently, it is too early to say how extensive or rapidly this might manifest itself.”

We think you have to look at the impact of open source software as this is changing the software market as significantly, if not more significantly than SaaS. The e-Learning Guild report in 2008 showed that Moodle was the most used LMS by corporations of all sizes with 18% of the market in the US.


Elearnity conclude:

“ … we believe the benefits of lower cost, time to implement and lower resources … will continue to make SaaS Learning & Talent Systems attractive going forward."

We agree with this perspective. The advantages for organizations that adopt SaaS approaches seem to us to be:

  • Speed to implementation & business impact
  • Predictability
  • Lower entry IT costs and economies of scale
  • Removing basic implementation and maintenance tasks
  • Faster & higher ROI
  • Outsourced system & technical expertise
  • Rapid upgrades/access to updates
  • Faster access to innovation
  • Increased vendor focus on customer satisfaction especially as you pay as you go
  • The avoidance of technology obsolescence
  • Focus & operational freedom
  • Flexibility
  • Reduced hassle & risk

There are concerns often about security and data protection, though in reality often many external systems being more secure than internal ones. Over 40,000 companies trust their most sensitive customer data to Salesforce and hence whilst such concerns do need to be addressed they are not a barrier to SaaS services.

The call to action has got to be to consider open source SaaS approaches to learning and talent management for your organization. Get in touch if you want to find out how we've used Moodle and Sugar CRM, and how they can help you.