E-Learning Struggles To Make The Grade

From customer to analyst to investor, the consensus is that E-learning still has a few things of its own to learn.

It's a technology that's being re-evaluated across the board. There are plenty of problems, as early adopters discovered. "Many people have been burned," Meta Group analyst Jennifer Vollmer says. "And they're advising others to hold off if it isn't necessary."

Some of the stumbling blocks that trip up users of E-learning technologies are integration and interoperability problems among elements of E-learning systems; product limitations; inadequate support services; and vendors' financial woes.

But until last month, the online-training sector wasn't as hard-hit by the IT-spending slump as most of the technology industry. What E-learning had going for it was an ability to let companies with tight travel and training budgets train workers inexpensively.

For about a year and a half, many providers saw double-digit revenue growth, and several quickly became leaders in a field of hundreds. Docent, Plateau Systems, and Saba Software emerged as top developers of learning-management systems. Centra Software and Interwise became known for live-collaboration software, and NetG, SmartForce, and SkillSoft gained popularity as course-content designers.

Now, weakening demand is evident. Centra, SmartForce, and learning-management system makers Click2learn and DigitalThink warned in April of revenue shortfalls. On Wall Street, many suppliers' shares have lost more than 50% of their value since January.

Still, E-learning has a future; what it lacks is maturity. So, while there are businesses seeking the E-learning advantage, many are taking their time doing so. Before investing in these systems, they want to make sure they fully understand their own training needs, what works and doesn't in an E-learning format, and their product options. "People are slowing down on jumping into E-learning with both feet," says Larry Carlile, E-learning manager at consulting firm A.T. Kearney. "From cost savings to effectiveness, there's a better analysis these days."

Companies know that E-learning is no longer just about immediate cost savings but about increasing worker productivity, driving operational efficiencies, and streamlining corporate training. "With all of these benefits, E-learning is going to work, but we haven't found the best way to go about it," says Giga Information Group analyst Claire Schooley.

A number of deals in recent weeks show that many companies still believe they can make E-learning work. The American Red Cross and learning-management system supplier Plateau Systems cut a seven-year deal worth more than $10 million; Pathlore Software Corp. implemented a system for Delta Air Lines Inc.; and Toyota Motor Sales U.S.A. Inc. said last month that its use of the Vuepoint Learning System to consolidate training departments will save the automaker more than $11.9 million in five years.

Rick Taniguchi, the E-learning associate dean at Toyota's training division, University of Toyota, says it took a year plus a 200-page study of the proposed E-learning investment and the Vuepoint system itself to determine that Vuepoint best met Toyota's needs. Such a time-consuming examination is critical when selecting E-learning tools in a fragmented market in which most vendors offer only one or two elements of a complete E-learning system.

One element is Web-based learning-management systems, which manage employee learning by registering users and tracking their course completion and career development. Another element, learning content-management systems, does most of what learning-management systems do but also allows for course delivery, development, and management. Either type of system must be integrated with the course content, which can be developed in-house, customized by a content developer, or acquired off-the-shelf. Then there are various formats for the training itself: live online, also known as synchronous; self-paced, or asynchronous; and supplemental classroom training.

Managing content in the E-learning infrastructure is a major issue, "thanks to the different content generated in different formats with different standards by different vendors," says Brandon Hall, founder and lead researcher of E-learning consulting firm Brandon-Hall.com. Industry standards, set by groups such as the Sharable Courseware Object Reference Model and the Aviation Industry Computer-Based Training Committee only now are being adopted by vendors. Previously, suppliers developed proprietary code, which created integration hassles.

Integration issues were behind Cargill Inc.'s switch to KnowledgeNet Inc. for its E-learning content. Cargill, a privately held agricultural-services provider in Wayzata, Minn., has a learning-management system from ATC Inc. that keeps tabs on training for more than 90,000 employees. The system tracks classroom courses as well as synchronous and asynchronous online learning. "Our learning-management system essentially asks, 'What do you need to learn?' and 'Here's how you can do it,'" says Cargill training and development services manager Kim Miller. "It was really key to our initiative."

Problems arose when the content from Cargill's previous content vendor didn't integrate successfully with the learning-management system. "They may say they are standards-compliant, but that might mean they meet two out of 22 specifications," says Miller, who declined to identify the former content vendor.

Cargill chose KnowledgeNet as its new content supplier because of KnowledgeNet's large catalog of technical and business courses, interactive and animated format, and ability to easily integrate with the existing infrastructure. The new content uses Flash animation technology, which Miller sees as a plus. "Content has to be more demonstrative than simply reading on the screen," she says. "Employees aren't going to come back if the content isn't engaging."

Companies are switching E-learning suppliers more often than one might expect in light of their large investments in the technology. In April 2001, $13.23 billion manufacturer Eastman Kodak Co. agreed to use Thinq Learning Solutions Inc.'s TrainingServer LMS to manage training for more than 80,000 employees. The software was to be rolled out to the Rochester, N.Y., company's U.S. operations last year and European offices this year. One analyst, who asked not to be identified, says Kodak didn't go through with the project because of insufficient vendor support. Last month, Kodak signed a deal to use a similar application from Element K LLC, which already was supplying some of Kodak's E-learning and classroom content.

Element K fit the bill because its learning-management system integrates easily with its own and other vendors' content, says Element K president Terry Nulty. "And Kodak liked the strong support we offer," he says. "Customers are committed to E-learning, but they're saying, 'If you want us to be a long-term customer, you have to work with us to get it implemented.' "

Thinq VP of marketing Michele Cunningham says that while Thinq "exceeded" its contractual obligations to Kodak, special interoperability requirements caused Kodak to sign with Element K. Kodak declined to comment.

"I've heard of companies switching to their third or even fourth learning-management system provider," says Giga's Schooley. "They realize it's a new field ... but they see the results, with employees learning faster, the savings to the bottom line, and business efficiencies."

Scalability was one of many product limitations that pushed financial-services training provider Sage Online Learning to switch from a behind-the-firewall Docent system to a hosted Saba application in March. The privately held company provides online content in company-specific formats to more than 125 banks and financial-services firms. "We discovered it was really hard to scale from 100 learners to 100,000 users," president and CEO Deborah Dilley says.

She also says a hosted solution, with virus and hacking protection, was more attractive financially than a licensed product. Switching to a system that provides standards-compliant content development was important, too. "The marketplace changes faster than anyone can implement their systems," she says, "and if it takes long enough, the tools are already out of sync."

For companies that can't stomach the thought of looking at E-learning products from hundreds of vendors and putting themselves at high risk for interoperability problems, Meta's Vollmer recommends turning to systems integrators with proven E-learning practices, such as PricewaterhouseCoopers or Accenture.

The results can be impressive. About a year ago, Cable & Wireless plc outsourced its learning needs to HR-services provider E-peopleserve. The Accenture subsidiary oversees the E-learning systems of the London telecommunications provider, from course development to learning-management system infrastructure. Cable & Wireless E-learning director Michael Short estimates that training costs in the United Kingdom, even excluding travel expenses, dropped from $320 per person per day to $20 to $30.

But not everyone will see such savings. Live-online software is one E-learning product category that's often guilty of grand promises and paltry returns. The applications are said to cut travel, conference-call, and other training costs through real-time communication and collaboration. But the technology is lacking, says Meta's Vollmer. The audio and streaming-media features can place strain on bandwidth, she says, and the voice-over-IP technology that most of the apps rely on sounds robotic and doesn't sync with the instructor's image. "This is a market before its time," she says.

Trusting their E-learning investments to established vendors is another lesson learned by early adopters. A year ago, General Motors Corp. unveiled an E-learning initiative expected to save the automaker $4 million a year in training costs. Working with content provider UNext.com and its Cardean University subsidiary, GM planned to offer busy managers and executives courses--including an MBA program--developed by universities and business schools such as Carnegie Mellon, Columbia, and the London School of Economics.

The program's launch was delayed, in part because of financial difficulties at UNext. By September, UNext had laid off 135 of its 325-member workforce. In March, Thomson Enterprise Learning, part of Thomson Corp., acquired the rights to the content and to the Cardean University courses. A month later, GM said it would roll out its eMBA program in a few weeks.

"It's made all of us look at sustainability and breadth, and that's why we like Thomson," says Donnee Ramelli, president of General Motors University, GM's training division. "They have a tested capacity in this space, but they are also a sizable sustainable partner."

While the E-learning industry has a lot of growing up to do, Ramelli thinks its future is virtually assured. "Everything is knowledge-based in this society," he says, "and the faster you can ship it around, the more value to major companies."