ELearning Market Update (November 2007)

It’s a tale of two markets this month, as Steve Rayson explains in his review of who’s fighting fit and who’s holding onto the ropes.

There’s nothing generic about these results…

The overall e-learning market continues to be very strong as emphasised by Skillsoft’s quarterly results. Skillsoft are now forecasting to achieve over $270m of revenues next year and their gross margin is currently running at 87%. Who said there wasn’t money in e-learning?

As someone with sales and marketing responsibilities, the other interesting fact to me from Skillsoft’s report was that they have upped their sales and marketing budget to $25m a quarter. What we could do at Kineo with a $100m sales and marketing budget each year. Maybe we’d make our business cards out of gold.

Two recently published annual reports - the ASTD's 2007 State of the Industry Report and Training Magazine's 2007 Industry Report confirm the opportunities in the market. Thanks to Clive Shepherd for highlighting these two recent reports on his blog. Both reveal growth in the use of e-learning in the USA As a share of total formal training hours, the ASTD estimates that e-learning is at approximately 25% (up from 11% five years ago), while Training Magazine shows e-learning at 30%.

LMS stands for Losing Market Share

By contrast life does not appear to be as good for the LMS vendors or rather talent management vendors or whatever they are called this quarter. SumTotal announced their quarterly results this month. Their turnover was $29m for the quarter but rather than achieving an 87% margin like Skillsoft they made a net loss of $2m. As we’ve said many times, open source LMS such as Moodle and Ilias will make an impact on this sector, particularly for small and medium sized companies. Not a good place to be with a commercial offering.

Bespoke market: don’t get stuck in the middle

Life is also tough for some bespoke e-learning companies. Epic also put ten or so people on notice of redundancy this month. This may in part be due to the changing shape of the market and a squeeze on the middle ground.

With skilled designers, companies like ours and others can create very effective and engaging e-learning using rapid tools and techniques from as little as £6k an hour. Other companies like Caspian are developing high end 3D simulations from £25k an hour. This is putting pressure on the middle of the market. If you’re paying £18k an hour for content as many do, you might ask yourself, what are you getting for the do extra £10k or £12k? Better design? Better designers? Not likely. Too often you are paying for extra documentation and bloated processes. To see what we can do for £6k an hour, have a look at an example module at the 60 Minute Masters site www.kineolearning.com/60minutemasters or contact us at info@kineo.com to see more examples of our work.

Wave goodbye to the old ways

Our experience would tend to echo’s in Ambient’s analysis of the US market which is set out below:


This is shows the growth of open source and open learning products. It also suggests we are entering the commoditisation phase where new tools and technologies are driving down prices. If this is right we could expect to see more of a squeeze on the bespoke providers trying to justify £15k plus an hour for e-learning and pressure on tools providers from open source solutions.

Don’t agree? You can take part in ASTD’s Learning Circuits annual trends survey if you are quick and let them know what is happening in your organisation. The results will be made available later in December and we will cover the results for you. You can participate in the ASTD e-learning survey here.

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