Where the Market Is: IDC on E-Learning
Summary of a presentation by IDC’s Julie Kaufman
By Stephen Downes
March 18, 2003 Fredericton, New Brunswick
The information presented here will support industry’s mandate to:
- assume a leadership role in cluster development
- develop priorities and strategies
- implement strategic actions to grow the cluster
- champion the cluster
Canada has a lot of strength in learning, and is in a position to assume a leadership role in e-learning. Though there has been a lot of hype about e-learning, a lot of the growth has been stealth growth, that is, from smaller companies.
Though there has been an overall tech crash, e-learning remains strong. It is one of the top growth markets in Canada (third overall).
But what is e-learning? Defined as “synchronous or asynchronous learning that is
conducted over the internet, intranet, Extranet or other internet-based technologies.”
Major areas of e-learning include:
- learning content
- learning information solutions
- learning services
The e-learning market in 2001 was $US 5.2 billion, growing to $23.7 billion in 2006, an increase of 35.6% worldwide. These predictions have been revised down, in some cases
significantly. For example, the Asia-Pacific market, expected to grow 97% over five
years in 2001 was estimated last year to grow 15% over the same time.
The U.S. is the largest market, both in terms of numbers of users and e-learning vendors. E-learning in the U.S. was part of the dot com boom, with a lot of companies spending on large e-learning system. When the market crashed they took a second look. “We just
spent all this money. Nobody’s using the system.” That’s why there was a big decrease in spending in 2002.
Canada mostly avoided this, since we were able to learn from the problems in the U.S.
Canadian investments were very tactical, department focused, and related to a business investment.
In Latin America, infrastructure remains the greatest stumbling block. Additionally,
language is an issue. There aren’t many Latin American vendors, which creates
opportunities for partnerships in the region.
The major barrier in Asia-Pacific is also infrastructure. In addition, language and
software remain issues. As well companies haven’t focused on the region. Investment and
growth has been slow in Japan; this has a lot to do with culture. Working online alone at
a computer isn’t conducive to that culture. Growth will increase with the use of video
classrooms and similar tools.
Eastern Europe is still working on developing a physical infrastructure. It had very high
growth over the last few years because this was all brand new. In western Europe
investment was strong until last year. It varies a lot by country. In Britain, the corporate
investment is large, but in France there is not the same investment. This again is due to
culture; they prefer to interact. Spain, though, has been a very quick adopter. Many U.S.
companies are looking at Spain as a jump-point into Latin America.
E-learning adoption slowed dramatically starting in 2002 for a number of reasons:
- economic environment – e-learning is very expensive, and the large enterprise
applications are being purchased
- budget shortfalls
- broader decusion-making unit (DMU) – many more people are involved in the
- lengthy sales cycle – eg., one LMS company is looking at a three year sales cycle
- long implementation – it’s taking a lot longer to implement LMSs, also,
companies are creating custom content
Spending patterns also changed. In 2001, IDC thought LMSs and streaming video would
be major things. But instead, synchronous courseware and collaborative tools became
more important. This was partially because of 9-11 but also because people didn’t have to
make massive investments in these tools. The LMS is being pushed into the future,
toward the end of 2003. Online mentoring is also something further into the future. Video
is not really expected to play a major role until 2005 or later.
- technology infrastructure issues
- lack of capital expenditures
- corporate culture and change management – people need to actually use e-
- learner acceptance – “they tried e-learning, they hated it”
- investment priorities – learning is the first thing to be cut
- content development and implementation costs
- focused, dedicated training priorities
- globalization – probably the number one driver, especially for large organizations
- shorter business cycles
- cost rationalization
- consolidation and deregulation – eg., the financial services industry (regulation,
too) – people need to learn within days – eg. After 9-11 the NY Port authority had
to train everybody, 12,000 people, in two weeks – “try doing that in a classroom”
– they did it in a week and a half
- greater access to technology and internet
- growing acceptance
So… all e-learning solutions are still experiencing growth. But while most of the hype
has been about packaged content, most of the growth will occur in e-learning services.
We have seen a shift away from packaged content and toward custom solutions. Every
business problem is different, and businesses are looking at spending the money to get
exactly what they’re looking for. The LMS and infrastructure market is still growing, but
Top 10 trends to watch:
1. Shift in focus from software solutions to content
2. Shift in focus from packaged content to custom development
3. Non-IT training gaining market share rapidly
4. Collaborative solutions are gaining acceptance – eg., virtual classrooms and
5. Hosted service acceptance on the rise – people don’t have the bandwidth and they
don’t have the capital
6. Interest in online video will continue to wane before making a comeback ina few
7. Not as much buyer consolidation as you would like – there will be a slight
shrinkage in the decision-making unit
8. Not as much industry consolidation as you would like – there are some
acquisitions, and these will continue, but not nearly at the pace people it will be –
LMS vendors may consolidated, but content probably won’t, because of the
different levels of expertise that are required
9. Service providers will have a bigger role to play
10. The financial status of providers will play a bigger role in the decision-making
process – people re looking for providers that are going to be safe
Competitiors: the problem with e-learning is that it’s so fragmented it’s hard to say who your competitors are. There are something like 500 companies in Canada. Some major
regions in the landscape:
- Pure plays – someone who just does e-learning (over 50% of their revenue is e-
learning); they are usually small, usually innovative – 45 % of the overall market
- Traditional IT providers who are looking at getting into the e-learning market. A
lot of the very large firms have identified e-learning as a strategic investment.
IBM is looking at $7 or $8 million in revenues from this space. Sun Microsystems.
Microsoft. Accenture has an e-learning division. Ernst and Young. EDS. They
may in some cases be competition, but they may also be fantastic partners. EDS,
for example, will look to partners to develop content for their clients. – 35%
- Complimentary providers – they have a solution that is complimentary to e-
learning even if e-learning isn’t their strength. Advertisers, for example – their
entire business model is educating a client. Educational institutions are considered
complementary partners to the corporate market. Publishing houses: they have a
lot of content, and they have been trying to develop e-learning, but it’s not their
strength. – 15%
- Channel and distribution providers – some companies, like Ingram, have started
selling integrated solutions – this can be competition or a partnership opportunity.
Software and hardware companies play a influential role: Cisco, for example. 5%
E-learning continues to be a fragmented industry and it’s going to stay that way. Here’s
- large number of small providers in niches
- wide variety of services and core competencies thatkeep more players in the
industry – there are so many ways to do e-learning
- it’s still a high growth market, attracting new people
- Less reliance of the geographic location of the provider
We will see the roles played by complimentary providers and other providers shrink;
most of this will be taken up by IT companies.
Most of the e-learning market (60%) is content, and most of the content market (70%) is
technical content. This is mostly provided by large technical companies. But they are
expensive and inflexible. Smaller companies can be more reactive and cheaper.
2 comments from Vcenture capitalists:
- There are so many companies, how can they distinguish themselves?
- Contracts are always short term – how can you obtain longer-term contracts?
Contract length is an issue. Try to develop an outsourcing model with a client
relationship. You may have many projects, but for a given company, for every project
you’re at the table. Develop a relationship over time.
The number of companies will continue to be an issue. Talk about what we do and do
well. Venture capitalists don’t understand the detailed market segments. We need to
educate VCs, banks, and make them realize that there are different types of companies
What jurisdictions have been successful in marketing themselves through a branding of
We found some, but not very many that have been successful. One that did stand out was
a group out of Malaysia / Singapore. Pushing Singapore as an e-learning hub.
Do you have any information about the size of the market for the transfer of proprietary
information to the customer, and how would we address this?
We haven’t really come up with a model yet. “Let’s talk about this offline” (this seems to
be IDC-speak – onstage is “online”, off-stage is “offline”
What is the future of the online university related to e-learning
Private domain – eg. Being developed by IBM, Unisys, etc. – they are trying to reduce
travel costs, and they understand the infrastructure
- general public university – Canada has been extremely slow into moving into an
online world – based on university structure, funding, risk, and marketability. A
couple of courses here and there, but that’s it.
- Pure online university – the US is being more aggressive – there is significant
demand in the US, but not in Canada. But there is a demand externally, Asia-
Pacific for example. Africa and the middle east are other areas, because of the
lack of educational institutions.
Still need to do research on which models are working.