UK E-learning Market Update (Nov 2006)

Last month we pondered whether consolidation was finally happening in the e-learning market. It is now the word on everyone's lips this month after the Skillsoft Netg merger. Steve Rayson has a look at the latest trends.

Skillsoft Netg Merger

With the announcement  of the merger between Skillsoft and Netg there doesn't appear to be much left in the the generic content space to consolidate.

Is it good news or bad news for customers? This merger effectively puts Skillsoft in a monopoly position in the market for IT e-learning. This might enable them to operate as monopolies often do i.e. raise prices!  However, there are still many smaller and  niche content providers which customers can turn to. You have to feel though that  Skillsoft's negotiating leverage with both customers and other suppliers has increased. 

We may be overly cynical though as many customers have already indicated that they welcome the merger including Netg customers. There is a firm hope that they can bring the best of both worlds together and improve their offerings.

Some analysts believe the company will manage the merger well. Skillsoft is not new to acquisitions, some of us can remember back to Smartforce. The acquisition price seems high to us, nearly 1.8 times revenues for a loss making company. However, this could be a profitable acquisition for SkillSoft, it removes a major competitor and allows them to focus on new services and development.

We will watch with interest how both Skillsoft and the market reacts.

Other Mergers?

We hear rumours of other mergers afoot both in the LMS and e-learning content area. It will be interesting to see what the new year brings but whatever happens it does seem like the frequently predicted consolidation is finally happening in the market.

General Market Trends

In our news digest we have highlighted a Research Report (Oct 06) from Ambient Insight which says the e-learning market is growing but prices are falling fast.

According to Ambient Insight "pricing pressures, competition, Open Source solutions like Moodle, server appliances with pre-installed content, and inexpensive hosted services are driving prices down very fast."

The research predicts that the market for eLearning will grow by 30.8% over the forecast period. Other key findings include the major shift in buying behavior and buyer demographics, a transformation of the supply chain, the robust growth in BPO “smartsourcing” services, innovative business models, and new revenue opportunities for nimble suppliers.

Our discussions with other e-learning companies appear to confirm these general trends. There is a lot of work out there but also a great many pricing pressures not least the growth of open source tools. The market in the bespoke content development space also remains competitive despite recent mergers, this may prompt even further consolidation to stabilise margins.

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