Mergers Transforming Outsourced Training

By Irwin Speizer

May. 22, 2006

Big mergers are in vogue again. In terms of dollar volume, 2005 was the biggest year for worldwide corporate merger activity since 2000. All those newly supersized companies inevitably develop extra-large training and development needs. And those needs are driving change in the training and development outsourcing field.

    “When people are doing lots of acquisitions, it creates a lot of people who need to be trained,” says Jack Kramer, vice president of global alliances at SumTotal Systems Inc., a provider of learning and business performance services. “They need to be taught who the new company is, what the values are.”

    Helping indoctrinate new employees is just one item on a growing list of tasks that expanding organizations often ask vendors to provide. Bigger companies seek assistance not just in delivering services, but also in coordinating and tracking far-flung training networks.

    With increased size comes more complexity. As a result, big organizations in need of training help are more often shopping for vendors with long track records and demonstrable results.

    “Our customers are requiring a lot more sophistication and experience,” Kramer says. When pitching training and development services to large organizations, Kramer says, “companies want to see where you have done this 10 or 15 times before.”

    Given those demands, it’s no surprise that merger mania is also sweeping the outsourced learning sector. The most recent major deals took place in 2005, marked by Saba’s $60 million takeover of Centra Software and SumTotal Systems’ acquisition of Pathlore Software for $48 million. Also in 2005, Oracle finally closed its controversial $10 billion takeover of PeopleSoft. Both enterprise resource planning systems included learning management capabilities.

    The human resources outsourcing group at Hewitt Associates reports that companies frequently seek two levels of outsourced learning services: training programs and management of the vendors that provide those programs. Many companies still haven’t centralized vendor management and sourcing. In some companies, managers at different levels and locations all have the authority to order up a training program. That can lead to duplication.

    Will Hipwell, vice president of marketing at GeoLearning Inc., a learning services management company, says organizations are moving toward a clearinghouse approach to outsourced training services.

    Customers, he says, “want to centralize everything.” That means hiring a vendor to manage a range of learning resources, from webcasts to instructor-led training to knowledge bases to mentors. With that arrangement, a client feels that “whatever I need, I can go to one place and figure out how to get it,” Hipwell says.

Workforce Management, May 22, 2006, p. 28Subscribe Now!

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