Management Update: Gartner s 2003 Learning Management System Magic Quadrant

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1 IGG J. Lundy Article 26 February 2003 Management Update: Gartner s 2003 Learning Management System Magic Quadrant Demand for learning management systems increased in 2002, and so did the number of vendors competing in the market. A number of large powerhouse vendors are poised to compete in the learning management system market in Many enterprise executives know that e-learning can help employees learn more quickly and effectively. Demand for learning management systems increased in 2002, and so did the number of vendors competing in the market. A number of large powerhouse vendors are poised to compete in the learning management system market in Learning Management System Overview Gartner defines a learning management system (LMS) as the infrastructure on which e-learning can be built and delivered. An LMS is composed of six main components: Registration capabilities (curriculum, courses, instructional responsibilities) Management of curriculum and courses Skills and records management Student interfaces to courseware Administration (for example, test and assessment capabilities, certification, instructor assignment to the courses, any regulatory requirements and history) External system application programming interfaces, including human resources (HR) and, optionally, enterprise resource planning systems Changes in the New LMS Magic Quadrant Gartner s 2003 Learning Management System Magic Quadrant shows an increase in the number of vendors, up to 25 from 18 in 2002 (see Figure 1). Five of the six original LMS leaders remain. One vendor, Learnframe, was dropped due to lack of market activity. Nine new vendors were added to the Magic Quadrant: Gartner Entire contents 2003 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 CyberU Knowlagent Open Text Oracle PeopleSoft SAP Siebel Systems Vuepoint WebRaven Figure 1 Gartner s 2003 Learning Management System Magic Quadrant

3 Challengers Leaders Ability Intelline x Oracle to Hyperwave Execute Knowlagent KnowledgeNet Element K WebRaven Fuel Sk illsoft Open Text Saba Plat eau Thinq Pathlore Docent KnowledgePlanet Sun WBT Systems Click2Learn IBM Siebel SAP CyberU PeopleSoft VuePoint As of February 2003 Niche Players Visionaries Completeness of Vision Plateau Plateau Syste ms Saba Saba Software Siebe l Siebe l Systems Sun Sun Micro syste ms Source: Gartner Research Thinq Thinq Learning Solutions 2002 was a tough year for LMS software vendors. Some thrived, but most struggled to survive. The good news is that most of them made it through the year, but the bad news is that some are worse off than at the beginning of the year. Few made a profit in The entry of the powerhouse vendors IBM, Oracle, PeopleSoft, SAP and Siebel will put additional pressure on LMS vendors. Leaders Quadrant Leaders demonstrate good, scalable product capabilities and features, a strong installed base, acceptable financial performance and good distribution. Leaders do well today and are prepared for the future. Five vendors are in the Leaders Quadrant. Docent entered 2002 with a CEO who has focused the company on customer satisfaction and vertical industry solutions. The company released a new version of its LMS, and also broadened its product suite. Docent has taken positive steps to reduce expenses, and maintains a strong cash position. Pathlore, which is privately held, has quietly been winning deals in banking, healthcare, and state and local government, and is beginning to win some larger enterprise-class engagements as well. Pathlore recently updated its product to a.net architecture.

4 Plateau Systems has quickly risen to become a consistent finalist in numerous LMS deals, partly due to its aggressive pricing, but also because of its open architecture based on J2EE (Java 2 Platform, Enterprise Edition). Although the company initially specialized in regulated industries, Plateau has recently been competing in the government space and the wider commercial market. Saba Software has solidified its installed base, won a number of new major accounts and has turned over its management team. The company was on track to break even in 2003, but a lack of execution in Europe may delay that. Saba recently released a new version of its LMS software that has proven to be popular with its installed base, as has its focus on offering a full LMS suite of products and services. Thinq Learning Systems continues to execute well in government and commercial markets, and its interoperability has helped it to win deals. However, one potential challenge for Thinq is that customers have been slow to upgrade to its latest LMS release. Challengers Quadrant Challengers have good execution and distribution capabilities, but often lack vision. The 2003 Magic Quadrant has two challengers. Intellinex, a subsidiary of Ernst &Young, has won a number of enterprise- and extended-enterpriseclass deals, due in part to the high-level contacts that Ernst &Young has brought to the table. Intellinex focuses on business issues, and stresses long-term customer relationships. Intellinex s challenge is that it sometimes can be choosy about which opportunities it pursues. This should change as it becomes less connected to Ernst &Young. Oracle has quietly won a significant number of installations of its Oracle ilearning LMS product, which is available as a hosted offering and as a stand-alone software license. Unifying Oracle ilearning with Oracle Training Administration is something the company needs to do, and it should reduce the number of products that enterprises need to buy. Visionaries Quadrant The most change has occurred in the Visionaries Quadrant, with four new entrants and two vendors moving from other parts of the Magic Quadrant. Click2Learn, previously in the Challengers Quadrant, has been successful with its Aspen LMS platform, and v.2.0 of Aspen was released in During the past year, Click2Learn has positioned itself squarely into the e-learning software space (LMS, learning content management system, virtual classroom). The new executive team, including several Microsoft veterans, seems to be focused on honing the product vision and strategy, and that has started to pay off. The company s most recent quarter was cash-flow-positive. CyberU offers its.net-based LMS primarily as an application service provider offering, and has been aggressive in its pricing. Although CyberU started as an off-the-shelf content aggregator, it has shifted its focus to e-learning software and services. IBM has formed a learning solutions team to integrate its broad portfolio of services, software, hardware, research and alliance initiatives to serve the learning marketplace. On 29 January 2003, IBM announced IBM Lotus LMS. The IBM Lotus LMS is a new-generation, J2EE-based LMS that features an offline learning client for disconnected use. IBM Lotus bundles the WebSphere Application Server, IBM LDAP and other IBM Software Group technologies in the purchase price of the LMS. The LMS integrates with IBM Lotus Live Virtual Classroom and other core enterprise

5 technologies (such as portals, enterprise resource planning, HR information systems, customer relationship management). KnowledgeNet introduced its LMS in 2002, and the product mainly serves current KnowledgeNet content customers. KnowledgeNet is one of the few content vendors that offers a hosted and a nonhosted LMS product. The KnowledgeNet LMS is an integral part of the KnowledgeNet Enterprise Learning Suite, composed of a blended content library, along with learning management and learning content management systems. KnowledgePlanet has had success focusing primarily on a hosted LMS offering, but also offers it as a behind-the-firewall product for those who request it. KnowledgePlanet has excelled in the financial services marketplace. PeopleSoft purchased Teamscape in July 2002 and launched its Enterprise Learning Solution in 4Q02. Enterprise Learning can be installed with or without other PeopleSoft products, such as Financials and HRMS. PeopleSoft has a large installed base of HRMS accounts that will look at adding its new LMS. SAP offers an LMS as part of its e-learning solution, and has a small installed base that it looks to expand in The SAP Learning Solution is a full-function LMS that includes an authoring environment, a learning portal and a learning content management system. All of that is fully integrated to mysap HR and can be purchased with or without it. Siebel offers its e-training LMS as part of its Employee Relationship Management (ERM) Suite. The product has been on the market for more a year, and Siebel is slowly beginning to build its installed base. Part of the slow growth might be due to lack of awareness. Gartner suspects that potential customers are simply unaware that Siebel offers e-learning capabilities. This is due, in part, to Siebel s marketing focus on its overall ERM Suite, in which it bundles e-training with other applications, including performance management, competency management and career management. Sun Microsystems offers its Enterprise Learning Platform, which includes an LMS that it acquired when it bought Toronto-based Isopia in Since the acquisition, Sun has added functionality to its learning platform, including skills management, assessment, collaboration and, most recently, a learning content management system capability through a partnership with Avaltus. Sun s challenge is that very few of its Enterprise customers actually know that Sun offers an LMS. Vuepoint has emerged as a competitor in the LMS market. It has won name-brand accounts, and is primarily focused on delivering product knowledge to complex sales and support channels. Vuepoint offers its products globally. WBT Systems has refocused its solution away from a pure LMS to a more-complete e-learning suite. New business sales focus in the United States and Europe is increasingly solutions-driven in areas such as regulatory compliance and sales force automation. Niche Players Quadrant The Niche Players Quadrant features a number of vendors that offer hosted LMSs, and those that focus on specific vertical or geographic markets.

6 Element K is an e-learning content provider that offers its hosted LMS as part of its off-the-shelf content. Element K has become a provider of hosted LMS offerings to instructor-led classroom providers. Fuel focuses on the U.K. and European markets, offering an LMS and other components of an e- learning suite. Hyperwave sells its products globally, but has had e-learning success primarily in Europe. Hyperwave is one of the few vendors that focuses on knowledge management, as well as e- learning. Hyperwave received 20 million euros in venture financing in February Knowlagent focuses on the call center with its KnowDev enterprise suite that includes an LMS. Knowlagent s patented interface allows for customization of training for each call center agent, based on metrics captured by the call center software. Open Text offers its LiveLink for Learning Management product suite. Open Text is strong financially, but is relatively new to the e-learning market. The company is better known for its content management and collaboration products. SkillSoft is a content provider that recently merged with SmartForce. It offers only a hosted LMS, mainly in conjunction with its off-the-shelf content sales. WebRaven offers its Dynamic Online Training System, which provides a comprehensive turnkey LMS that includes LMS, learning content management system and authoring, and collaboration tools. WebRaven is strong in the Australian market, and is beginning to focus on the U.S. market. Enterprise Strategies Some LMS vendors now offer competency management as part of their standard offering or as an optional module. Competency management, when combined with LMS functions, offers a powerful management tool to enterprises, because people can be evaluated and training prescribed at the same time. Enterprises should evaluate how well the vendors that they are evaluating have integrated the LMS and competency management functions. Another challenge to enterprises is that successful e-learning involves more than just buying an LMS. With the potential exception of a learning content management system, all other elements must be in place. An e-learning suite is a collection of point products that are loosely or tightly coupled, and increase a product s functionality. Vendors are packaging and integrating four categories of e-learning support: LMSs Virtual classrooms/delivery capabilities Learning content management systems and content authoring Professional services Consequently, enterprises must look at LMS vendors from a suite perspective, not just an LMS perspective, because that can affect the choice of vendors that an enterprise selects.

7 Enterprises should realize that when doing due diligence on LMS vendors, revenue figures can be deceiving. Not all LMS vendors use the same accounting methods, and those that recognize all of their software sales revenue at the time of sale leave little to no cushion should sales dry up down the road. Bottom Line The demand for LMSs by enterprises is one of the reasons that a number of powerhouse vendors entered the market in The market will experience increased consolidation in 2003 as smaller vendors fail or are forced out. Because of the sheer number of vendors that are competing in this market, Gartner advises enterprises to do extra due diligence in areas such as vendor viability. Enterprises should take advantage of the market flux to push for discounts from the numerous vendors that will compete for their business, realizing that some may not be around for the long term. Written by Edward Younker, Research Products Analytical source: James Lundy, Gartner Research For related Inside Gartner articles, see: Management Update: Gartner s 2003 E-Learning Content Magic Quadrant, 19 February 2003 Management Update: 2003 E-Learning Predictions Highlight Increased Deployment, 11 December 2002 Management Update: A Growing Market Battle to Deliver E-Learning Systems, 20 November 2002 Management Update: Simulation Winning Application for E-Learning, Numerous Benefits for Enterprises, 18 September 2002