E-learning emerges as the next horizon in corporate ...



E-learning emerges as the next horizon in corporate training with promises of cost-savings Chemical Market Reporter New York Sep 3, 2001

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Authors: Pamela Sauer

Volume: 260

Issue: 9

Pagination: F8-F12

ISSN: 10920110

Subject Terms: Online instruction

Chemical industry

Trends

Business forecasts

Cost reduction

Classification Codes: 6200: Training & development

8640: Chemical industry

8331: Internet services industry

Abstract:

Using the Internet and other electronic-based platforms in reducing costs in supply chain management and customer relationship management is a common practice in the chemical industry. A new outlet for Internet-based technologies is human resource management, where the growth of e-learning in corporate training is projected to increase dramatically over the next several years. E-learning is one component of the overall market for corporate training, where Web-based programs are being pursued as a cost-effective alternative to traditional training methods. The US corporate-sponsored training market was valued at $62.5 billion in 1999, with the majority being spent on instructor-led training and performance-improvement initiatives, according to Jefferies & Company Inc. The domestic corporate training market is expected to increase at a 3.9% compound annual growth rate and reach $76 billion by 2005.

Copyright Schnell Publishing Company Sep 3, 2001

Full Text:

(ProQuest Information and Learning: Text missing in the original.)

Exponential growth is projected for e-learning as Web-based training replaces traditional instructor-- lead corporate training. Pamela Sauer reports.

Using the Internet and other electronic-based platforms in reducing costs in supply chain management and customer relationship management is a common practice in the chemical industry. A new outlet for Internet-based technologies is human resource management, where the growth of e-learning in corporate training is projected to increase dramatically over the next several years.

E-learning is one component of the overall market for corporate training, where Web-based programs are being pursued as a cost-effective alternative to traditional training methods. The US corporate-sponsored training market was valued at $62.5 billion in 1999, with the majority being spent on instructor-- led training and performance-improvement initiatives, according to Jefferies & Company Inc. The domestic corporate training market is expected to increase at a 3.9 percent compound annual growth rate (CAGR) and reach $76 billion by 2005. "We would conservatively estimate that the global corporate training market (excluding government) is growing at a slightly faster rate as more European and Asian corporations adopt strategic training initiatives. However, these aggregrate statistics mask a radical shift in spending mix from traditional classroom-based learning to e-learning products," concludes a recent report by Jefferies & Company.

Although market estimates for e-- learning vary, all show very strong growth over the next several years. Jefferies & Company estimates that the global e-learning market will top $28 billion in 2005, representing 60 CAGR from 1999. By 2005, the firm estimates that the US domestic e-learning market will represent roughly 22 percent of the corporate training market as companies shift from instructor-lead training (ILT) to Web-based training.

In 2001, the US is expected to account for $4 billion of the $6.17 billion e-learning market, according to Jeffries & Company. Japan is the second largest market at $1 billion, followed by Western Europe at $669 million. By 2003, the global market is projected to increase to $16.61 billion, with the US accounting for $10.88 billion, Western Europe $2.28 billion and Japan $2.08 billion. By 2005, the overall market is expected to increase to $28 billion, with the US at $16.97 billion, Western Europe at $5.83 billion and Japan at $2.95 billion.

Other estimates for the e-learning market are similarly strong. US and European companies are projected to spend more than $13.5 billion annually by 2003, up from $3 billion, according to a recent study by Deloitte Consulting. Companies in Asia-Pacific are expected to increase e-learning investment by 20 percent in the next four years.

The US market for business skill e-- learning revenues are expected to increase at a CAGR of 103 percent through 2004, according to Suntrust Equitable Securities. This market was estimated at $100 million in 1998 and is projected to increase to $1.4 billion this year and to $8.4 billion by 2004.

The market for IT e-learning is projected to increase at a CAGR of 47 percent by 2004, rising from $400 million in 1998 to $2.7 billion this year to a projected $6.0 billion by 2004, according to Suntrust Equitable.

E-learning in the chemical industry is just beginning to root as companies become more familiar with the concept. A basic definition for e-learning is "training content delivered via computers, using interactive tests, virtual classrooms and flash presentations," says Jim Hillage, a member of the Institute for Employment Studies of Sussex and author of the report "Exploring e-- Learning." The degree of e-learning can range from a "one-size-fits-all" approach of tactical e-learning to fix skill gaps to integrated learning using development models and then to strategic learning, which focuses on all components that affect human performance.

Cost reduction is the greatest impetus to adapt e-learning. "The largest driver of e-learning investments has been the promise of cost-reductions," according to Leigh Kelleher, global director of e-learning, Deloitte Consulting, who manages the company's international learning initiative. Last year the driving force behind companies wanting to implement some form of e-learning structure was to provide training "faster and better, but this year the driving force is cost-savings," says Ms. Kelleher.

Others also point to the cost-savings. "With traditional training methods, companies generally spend more money on transporting and housing trainees than on actual training programs," explains WR Hambrecht & Co. analyst Trace A. Urdan. "Roughly two-thirds of training costs are allotted to travel expenses, which represents a major drain on bottom-line profitability."

To achieve cost savings, Ms. Kelleher estimates that a good model of instruction should have at least 30 to 40 percent of resources allocated to e-- learning with the balance to traditional classroom-based instruction. Marc Sotkiewicz, senior manager, life sciences and chemical e-learning at Cap Gemini Ernst & Young, estimates the current split between classroom and Web-based training at 80 to 20 percent. He says this ratio may not change dramatically, but the overall amount of e-- learning will grow as these companies apply these solutions across broader geographic and subject areas. The primary advantage is cost-savings, improved communication, growth opportunities for learners and an efficiency of transmitting information.

Mr. Urdan also points to increased globalization and mergers and acquisitions driving the trend to e-learning. "More information has to be delivered in increasingly larger organizations, challenging internal planning, logistics and distribution. Corporations worldwide are now seeking more innovative and efficient ways to deliver training to their geographically-dispersed workforce."

However, to what extent e-learning will be adopted in the chemical industry depends on a number of factors. "With anything new, people walk slowly, but when they see the value, they run," says Mr. Sotkiewicz. He points to product training, technical training and sales training as the three main c-learning applications in the chemical industry.

In addition to cost-reductions, a recent report by Deloitte Consulting identifies ten other strategic factors driving e-learning initiatives overall. These include aging demographics, globalization and decentralization, the need for a Wall Street metric for human capital, transformation of traditional roles, a high velocity business environment, legal and regulatory mandates, the knowledge divide, mergers and acquisitions, strategic partnering and customer alliances and changing expectations of workers.

"Baby boomers are beginning to retire, leaving a huge talent vacuum in growing companies," says Ms. Kelleher. "While experienced employees will partially fill the gap, the pace of retirement in some professions is outpacing firms' ability to hire and promote," which in turns creates a need to develop methods to improve the efficiency of training. "Also, e-learning can be used to efficiently bridge the very distinct learning styles of different workers brought on by increased globalization and decentralization by providing integrated, consistent training solutions across the global enterprise." This can include specific training in regulated environments, such as chemicals and pharmaceuticals, as well as in given certifications, such as ISO 9000 and Six Sigma, according to the Deloitte report. Within the chemical industry, Cap Gemini's Mr. Sotkiewicz adds that the potential for regulatory training exists, but has not yet come to broad use.

Also, e-learning, particularly in service-based companies, will provide a metric for Wall Street. "We predict that over the next few years, a new set of metrics will be adopted by financial analysts who are finding that GAAP standards do not properly represent the impact of human capital on a firm's success. Factors such as learning, creativity, innovation and responsiveness all are critical success factors," says Deloitte's Mr. Kelleher.

The increased use of Internet-related technologies, such as in e-procurement, is changing employees' positions, which include Web-based functions, according to the Deloitte study. Also, e-learning can help reduce the time required to come up the learning, change or technology curves. This becomes particularly important in achieving value gained from mergers or acquisitions or through strategic partnering and customer alliances. "Fewer than half of all mergers create the promised value for shareholders, in large part because they fail to effectively integrate people, knowledge, culture and competencies across the merged organizations," says Ms. Kelleher. "Achieving such integration requires that firms undertake the difficult task of understanding how and where intellectual capital is captured, formalized, evaluated and distributed. The same can be said of strategic partnering and alliances, which require an effective mechanism for knowledge transfer," she adds.

[IMAGE GRAPH] Captioned as: US Business Skill E-Learning Revenue, 1998-2004

[IMAGE GRAPH] Captioned as: US IT E-Learning Revenue, 1998-2004

[IMAGE TABLE] Captioned as: What Drives E-Learning?

The critical issue, explains Ms. Kelleher, is to identify the need for enterprise learning within an organization. "There is a big difference between having an e-learning platform and implementing an enterprise learning strategy, but there is no single best approach for all companies when it comes to making learning investments," says Ms. Kelleher. "The optimal approach depends on the organization's strategic objectives as well as its immediate practical needs." Factors that may influence a firm's decision to take a more strategic or enterprise approach include the overall volume of training, geographic distribution, requirements for customer and supplier training, reusability of content, the business value of content, certification requirements, intensity of change and the need to integrate multiple e-learning projects.

Deloitte uses a three-pronged continuum to measure a company's learning organization and assess the goals of an e-learning strategy for a particular company. "The first phase of the spectrum is tactical learning, where the focus is on filling skill gaps in employees' current job roles on specific projects," explains Ms. Kelleher. "Under the next phase, integrated learning, the focus is on developing employees' skills and capabilities against a best-in-class model through formal and informal learning. The last phase, strategic learning, involves integrating all components that affect human performance."

In tactical learning, companies use one-size-fits-most training events, without attempting to customize learning or link it to individual career objectives. Tactical approaches tend to involve limited course work selections, one-way delivery and limited technology. "There is often no consistent process for content updates, and once a precipitating event has been addressed through training, the content often falls into disuse and the ad hoc team assembled to deliver the training disbands," explains Ms. Kelleher.

However, in integrated learning, departmental training organizations begin to share information across the enterprise. "Corporate strategies and executive sponsors emerge, and efforts to align centralized and decentralized teams with collective goals begin to have impact. Attempts are made to integrate hard and soft skills for a holistic view of learning," says Ms. Kelleher. Under integrated learning, online testing and results become more common as firms move toward a strategic model, as do standard systems and data for registration, tracking and billing. Content is integrated within a learning architecture and linked to management tools. Also, formalized vendor strategies are in place.

Other observers also point to the increased use of e-learning tools as a way to develop soft skills in an integrated learning approach. "While spending on IT and soft skills education has been split fairly evenly in corporate training departments, IT training has dominated the Web-delivered training segment since its emergence," says WR Hambrecht's Mr. Urdan. Between 1997 and 1999, the IT online training market outpaced soft skills training four-fold. "The Internet seemed to be a more natural medium for teaching desktop applications, networking, or Internet skills than for imparting business management or customer service skills. The limited availability of customized and quality content contributed to the slower growth of online soft skills training market. We expect the mix of IT and non-IT training to shift dramatically in the next several years," says Mr. Urdan. "More existing soft skill courses will likely be reformatted for online use, vendors will likely increasingly adopt a 'Web-first' delivery strategy and more IT training providers will likely ramp up soft skills content offerings," says the analyst. With CAGR of 123 percent, the business and soft skills training is expected to surpass IT training by 2003.

Although the market for IT training and soft skill corporate training are fairly matched, the roughly $2.3 billion for e-learning in IT training far outpaced the technology-based training for soft skills ($720 million) and Web-based training ($20 million) and was also ahead of outsourced training for soft skills of $5.55 billion in 1999, according to estimates by WR Hambrecht & Co. and International Data Corp. Within the IT market, outsourced training was $9.45 billion, technology-based training $2.27 billion and Web-based training $870 million. Overall, the US market for corporate IT training was estimated at $31.19 billion in 1999 and the corporate soft skill training market at $31.31 billion

[IMAGE GRAPH] Captioned as: US Corporate E-Learning Revenue, 1998-2004

E-learning is also part of the corporate push to develop better knowledge management systems. "There are rising costs of knowledge deficit despite new technology," according to Richard Close, vice-president of equity research of Suntrust Equitable, who points to costs related to intellectual rework, substandard performance and the inability to find resources. He estimates that 3.2 percent of corporate knowledge is inaccurate and that 4.5 percent of knowledge is lost or hidden as a result of turnover, mismanagement and/or hoarding. He places the cost per knowledge per employee at $5,000 in 1999, rising to $5,850 in 2003.

Mr. Close concludes that "knowledge management and learning initiatives have moved to the top tier of the organizational chart. Learning is now seen as a true investment, not just a cost, and initiatives have become increasingly viewed as strategic." He points to the proliferation of workplace learning, with 400 corporate universities in 1998 and 1,600 corporate universities in 2000.

One example from the chemical industry of the value of knowledge management and e-learning comes from Dow Chemical, which points to its e-enabled workforce as an important element in the integration of Dow and Union Carbide. The underlying infrastructure for the company's e-- enabled workforce is a product of both internal investment and outsourced work. Dow has worked with Accenture since 1992 and has had a strategic alliance since 1996 focused on improving systems management, curtailing unproductive IT spending and developing e-business capability.

Dow Chemical developed internal sharing and collaboration using the intranet and the global Dow Workstation (DWS) that "e-enabled" Dow's workforce and provided succesful communication between Union Carbide and Dow employees. The company introduced the first generation DWS in 1996 to provide a global common technology infrastructure for employees. The company upgraded to the second-generation workstation in 1999 to include Internet and intranet access, e-learning, knowledge management, captive shared knowledge, employee portals and customized intranet windows.

To provide training, Dow developed an innovative multi-tier web-- based training delivery and management system-Learn@Dow.now, which provides over 300 courses to roughly 50,000 employees as Web-- based, point-of-need training to the desktops, which the company says has reduced training time and other costs normally associated with the more traditional instructor-led approach. The next generation of enabling technology and infrastructure, DowNet, an integrated network for voice, data and streaming video, is intended to provide enhanced tools to a more empowered workforce through more

[IMAGE TABLE] Captioned as: The Learning Organization Continuum

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