InformationWeek

IBM says yes. The vendor last week launched its Mindspan Solutions division for E-learning, a 4,000-employee unit dedicated to helping companies set up online training programs. The Lotus spin-off will offer Lotus Learning Space software over the Web and private networks.

Analysts say IBM's move is a harbinger of substantial growth to come. Of the $62.5 billion U.S. companies spent on training and educating their workforces last year, more than $3 billion was spent on technology-delivered training, according to Hambrecht & Co., IDC, and Training magazine. IDC expects that number to hit $11.5 billion in 2003.

Here's why: Analysts and users say that as E-commerce accelerates business, E-learning can shave time and money from the cost of educating employees and help them quickly learn new skills. Brandon Hall, founder of E-learning research firm Brandon-Hall.com, says companies using online training can see an average of 50% in time savings and 40% to 60% in cost savings compared with conventional classroom learning.

"Our industry changes day to day and hour to hour," says Tom Golub, project manager and senior educator for E-learning at Aetna U.S. Healthcare, a subsidiary of Aetna Inc. in Blue Bell, Pa. "With E-learning, we're on the cutting edge." The insurer is using online training to rapidly integrate its U.S. Healthcare unit with Prudential's health-care division, which it acquired in August.

Meanwhile, the activity is picking up among E-learning vendors. Gilat Communications Inc., a small but established player in the E-learning market that started out delivering satellite services, will change its name to Mentergy Inc. this week as it pursues a rapid-growth strategy that includes its acquisition earlier this year of content-provider Allen Communications and software vendor LearnLinc. Also this week, TrainingNet will add consulting services to its online business-to-business training services, thanks to its acquisition of Learning Solutions Alliance. And E-learning vendor Ninth House Inc. recently partnered with Cisco Systems on behalf of Empire Blue Cross and Blue Shield in New York to upgrade the company's network to broadband and bring E-learning content to its employees' desktops.

IBM, Hewlett-Packard, Mentergy, and others are positioning themselves to offer end-to-end E-learning products and services that include learning management (so managers can evaluate students and program effectiveness); authoring tools (for content creation); platforms for online training; custom development services; and pre-packaged content. Even large consulting firms are getting into the act. In March, KPMG Consulting LLC and Digital Think Inc. formed an alliance in which KPMG will offer Internet training and consulting to its customers on an outsourced basis. And last month, Andersen Consulting and Docent Inc. partnered to develop and market E-learning products and services.

Although online training has been used mainly with IT workers, analysts say the greatest growth will be in nontechnical training. Aetna is using a LearnLinc program over its intranet to teach staffers how to enroll a customer and settle a claim. Golub says the training time per employee is one to three weeks, compared with an average of six months for a classroom approach.

But online learning hasn't earned an A+ just yet. As the E-learning market itself experiences rapid change and consolidation, companies must evaluate their options carefully, says Terry Burdett, CIO at AT&T. "There's so much 'veneer-ware' out there, you have to be very selective," he says. AT&T has been using HP's Virtual Classroom in a pilot program since December for its sales force in the southeast region. Many of those reps, who sell mostly to hotels and resorts, work out of their homes and AT&T didn't want to fly them to Atlanta for repeated training.

Despite growing enthusiasm for E-learning, several factors could slow growth. For one, online classes can be bandwidth hogs. Hall says E-learning, which frequently includes video and audio, works fine over an Ethernet connection. But what about remote employees who are dialing up via modems over standard telephone lines? "That's too slow for video or audio," says Hall, adding that any given course has to be usable by all in order to be effective.

Getting users to buy into the concept of online learning can also be a challenge. The Limited Inc., parent company of retailers Henri Bendel, Lane Bryant, Lerner, and Victoria's Secret, plans to roll out E-learning to 10,000 employees by year's end. So far, 20% of training is done online.

But Beth Thomas, director of The Limited Training Services, says the expansion could meet with resistance. "Eighty-five percent of our people want instructor-led classes," she says. "They love them." That's because the Limited uses what it calls "stealth" learning-making sure students have so much fun, the education seems incidental. Thomas is now trying to move that approach online.

One vendor, at least, can support that effort. Ninth House Network treats E-learning as entertainment by combining storytelling, advice, virtual mentors, and role-playing. Thomas and Ninth House have the right idea, says Gartner Group analyst Clark Aldrich, because in the end-as is so often the case-content is what matters.