ELearning Market Update (October 2008)

A new report from Ambient Insight shows that the elearning growth rate has slowed significantly to 8% from previous forecasts of 18% and 21%. However, the report also highlights some key growth sectors in a slowing elearning market, most notably rapid elearning and open source learning software.

The ambient research indicates that whilst overall the e-learning market is still growing, larger enterprises are actually reducing their elearning expenditure. It is small and medium enterprises that are currently increasing their elearning spend.

Ambient provide their reasoning behind the market trends. Their view is that large corporates already spend 18% of their training budgets on elearning and there is less opportunity to switch from classroom to elearning. Hence these elearning budgets have to be reduced in line with overall reductions. By contrast in smaller organisations elearning has become more affordable and there is a significant switch from classroom to elearning.

In Ambient’s view the current climate is also creating increased demand for low cost and open source solutions.

The detailed highlights are as follows:

  • The growth in elearning is slowing, the growth rate is now forecast at 8% a long way below the previous forecasts of 18% and 21%
  • There is negative growth of 5% in the largest enterprises. Expenditure by large enterprises still represents 48% of the entire corporate market. However, corporate training buyers now believe they are in a recession and it is having a significant impact on their budgets, product preferences, and buying behaviour.
  • In the previous recession, to cut training costs corporate buyers shifted expenditure from classroom products to selfpaced e-Learning products. However, in self-paced elearning products already account for more than 18% of all enterprise training expenditures and those budgets are now targeted for reduction. Unlike the last recession, there are now several newer and cheaper learning technologies available to buyers. Ambient point to growth in hosted learning management and open source solutions.
  • Whilst there are many opportunities for e-learning companies margins are eroding and the competition is now fierce (if not ruthless.)
  • Demand for e-learning in small organisations has doubled as elearning has become more affordable.

The Ambient report will not make happy reading for companies like Saba. In the week following the Ambient report learning management provider Saba revealed their latest financial results which demonstrate the pressures the current market is putting on such suppliers.

Total GAAP revenues in the first quarter of fiscal 2009 were $25.3 million compared to $25.5 million in the same quarter last year. On a GAAP basis, the company’s net loss was $2.2 million, or $0.08 per share, in the first quarter of fiscal 2009 compared to a net loss of $2.4 million, or $0.08 per share, in the same quarter last year. On a non-GAAP basis, the first quarter of fiscal 2009 and the first quarter of fiscal 2008 were both approximately breakeven.

Over the last 12 months Saba’s share price is down 57%, which whilst good compared with some of the banks recently, is not encouraging. However, for open source LMS solutions such as Moodle, the demand continues to grow confirming the findings of the Ambient research.