BERSIN & ASSOCIATES. Learning Management Systems State of the LMS Market. Key Findings. LMS Market Data

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1 INDUSTRY STUDY BERSIN & ASSOCIATES The Global Market for Learning Management Systems Learning Management Systems 2013 Reports OVERVIEW Learning management systems (LMS) have been undergoing transformation for several years now. The past two years were especially transformative with acquisitions, further fragmentation of the market and a proliferation of solution providers. The past two years have also been a time of growth for LMSs, especially in the small and midsize business markets, and for markets outside of the U.S. It is becoming more difficult to separate the learning part of systems from other functions and we expect to see that trend continue. In This Report State of the LMS Market Key Findings LMS Market Data Participating Solution Providers: An Overview Janet Clarey, Senior Analyst David Mallon, Principal Analyst

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3 State of the LMS Market When we studied the LMS market eight years ago (which seems like an eternity, based on the pace of technological innovation), the primary role of the corporate LMS was to serve as a central course catalogue and training management system a system of record for training, compliance and development. Back then, buyers of LMSs were looking for cost-savings associated with greater efficiency and effectiveness, and an easier way to track information around training and performance. Learning organizations were also envisioning the LMS as the linchpin of integrated talent management 1 ; however, few companies had an integration strategy in place to leverage the technology and integrate learning with critical talent management processes. In short, corporate learning was beginning to become more strategic and technology solution providers responded by providing more integration with development-related HR processes. Fast forward to 2012 and we see that the vision of integrated talent management has become a reality with many more organizations opting for talent management suites 2 which integrate everything from recruiting to performance management to performance to learning and collaboration. a These suites have a great depth of functionality and in these systems the learning functionality is no longer a discrete application. 1 Integrated talent management supports performance management and at least two additional strategic HR processes (e.g., sourcing and recruiting, learning management, succession management, performance management and so on) through a common interface, data platform, workflow, and cross-reporting and analytics. 2 "Integrated talent management suites" suites are a new breed of software that aggregates and shares talent data across multiple strategic HR processes allowing users (e.g., employees, managers, business leaders and HR leaders) to have better conversation, make better decisions and plan for the future in ways not previously possible. Integrated talent management systems are also known as the talent management suite. 3

4 Figure 1: D Evolution of the LMS Market? Collaborative People Management Audience / Content Specialists Regulatory Compliance, Industry Verticals, Customers & Partners Social Learning Communities of Practice, Content, Knowledge-Sharing Talent Management Performance Management Competency Mgmt., Succession Corporate Learning Application Integrated with Other Learning Components ERP, HR and Application Integration e-learning Platform Make e-learning Possible Make e-learning Easy Training Management System Automate the Process of Instructor-Led Training Source: Learning Systems, Bersin & Associates, Source: Bersin & Associates, Beyond seeing more integrated talent management systems, we saw in 2011 and 2012 some major deep pocket human capital management (HCM 3 ) providers buy up smaller talent management and learning management vendors in an effort to bolster their positions as fully integrated systems. HCM provider Oracle bought Taleo, which had acquired Learn.com; ERP provider SAP bought SuccessFactors, which had acquired Plateau and Jambok. HR giant ADP, probably most recognized as the world s largest payroll provider, entered the market with its own LMS, and some well-known LMS and talent management providers also bought up smaller competitors. We saw SumTotal (once a public company, now owned by a private equity firm) acquire GeoLearning, 3 The HR systems market is divided into a wide variety of talent management vendors and another set of human capital management (HCM) vendors, which are companies with HR management systems (HRMS) solutions. HCM vendors often also sell financial management software, since one of their values is to enable leaders to understand the total people cost of a program or function. HCM tends to look at people from a total, financial and operational perspective, while talent management (which fits within HCM) focuses on the developmental practices of people. An organization can often function without a talent management software system for many years, but cannot function at all without some form of HCM platform. These two markets overlap significantly and the lines become blurred by vendor marketing. 4

5 OpenText acquire Operitel, and SkillSoft acquire ElementK and Mindleaders. There were others and we expect there will be more to come (see Figure 2). Figure 2: Major Acquisitions 2011 to 2012 Acquiring Company Company Acquired Blackboard Moodlerooms (2012) and NetSpot (2012) IBM Kenexa (2012) which acquired OutStart (2012) Lumesse Edvantage (2011) OpenText Operitel (2011) Oracle Taleo (2012) Peoplefluent Strategia (2012) SAP SuccessFactors (2012) which acquired Plateau and Jambok (2011) SkillSoft Mindleaders (2012), ElementK (2011) SumTotal GeoLearning (2011) Source: Bersin & Associates, Of course, not every organization needs or wants an integrated talent management solution. Some LMS solution providers we studied recognized this and made a strategic decision to stay focused on learning. We estimate that more than 100 systems specialize in providing solutions primarily for learning management, and probably more than that as most of the solution providers around the world are primarily LMSs and not suites of products. So, while we continue to watch the market shrink in terms of the number of solution providers at the top end, we are, at the same time, watching the market grow in number of solution providers overall with some serving particular customer segments and vertical markets. This divergence of systems integrated talent management suites on one side and stand-alone learning systems (including social software) on the other side likely means that this will be the last time we will be able to title this study as strictly an LMS study. It is increasingly difficult to separate learning technology from other technology functions of a system. In addition to the integration of learning with talent management, acquisitions in the market and a growth in the number of solution providers in the market, a few other significant things transpired since we studied the LMS market eight years ago that 5

6 are having a great impact on the market an increased focus on social and informal learning, and the optimization of the LMS for delivery via mobile devices. We write more about these later. U.S. Training Budgets and Learning Technology Spending In the U.S., roughly nine percent of an organization s training budget is spent on technology and the LMS is often the single biggest expenditure. We find that overall, U.S. training budgets were up 9.5 percent between 2010 and Small businesses enjoyed the largest gains, with a 12 percent uptick in training spending, while midsize and large businesses increased their spending by five percent to six percent. Learning technology spending 4 has also grown as the scope and utilization of learning tools continues to grow. Figure 3: Year-over-Year Change in Training Spending 2006 to 2011 U.S. Total 15% 10% 5% 0% -5% 9.5% 7% 6% 2% % -15% -11% -11% Source: Bersin & Associates, In the U.S. in 2011, nine percent of training spending went to learning technologies (Figure 4). We find that many firms are concentrating on learning or talent management technology implementation, and social and collaborative functionality. b As a percentage of total L&D spending, we find that midsize organizations spend a greater percentage (Figure 5). 4 Learning technology spending includes one-time and ongoing fees paid for licenses, hosting, support and upgrades. 6

7 Figure 4: Learning Technology Spending as a Percent of Total L&D Spending 2006 to 2011 U.S. Total 20% 15% 10% 5% 5% 11% 6% 8% 10% 9% 0% U.S. Total Source: Bersin & Associates, Figure 5: Learning Technology Spending as a Percent of Total L&D Spending 2011 By Company Size Small Midsize Large 9% 10% 9% 0% 20% 40% 60% 80% 100% Source: Bersin & Associates, Methodology This study is a continuation of our June 2010 research study into this complex and rapidly evolving market. For this report, we studied trends and products through an in-depth survey and through intensive scripted demonstrations from 40 participating solution providers. In addition to the survey, participants in this study also submitted a presentation outlining the following: c Market vision Targeted customer demography Current sweet spot in terms of customer s size Largest and smallest deployments 7

8 Percentage of deployments outside of the U.S. Operational track record Growth strategy Primary functions of the product today, including key features Product roadmap Product architecture Competitive landscape Key differentiators What follows are our overall key finds and themes for this study. Key Findings 1. Global LMS Market Growth Comes from Outside North America, and from Small / Midsize Companies Market Growth The LMS market has grown annually since we published our first LMS report in 2004, when we forecast North America-focused LMS providers revenues at $380 million. By 2008, that number had increased to $840 million. Even when troubles in the global economy took hold in 2009, the North American LMS market grew to $852 million. For those two reports, we focused on North America only. By 2011, the date we last published this report, 5 we focused on North America and the entire global LMS market. We forecast revenues for North America-focused providers to be between $944 and $972 million, representing roughly two percent to five percent relative growth. When we compared these numbers for the same timeframe for the overall global market, we saw similar weak growth between 2008 and 2009, and forecast a single-digit relative growth rate between 2009 and 2010 (which was not much different from what we had predicted for North America). For this study, we have focused on the global LMS market. We found that, between 2011 and 2012, the global LMS market relative growth rate was 14.7 percent, up from 5 We have revised some or our past numbers slightly based on new data. We found that there was a greater amount of unknown in the market, especially when we expanded the study to include global-focused providers. Although new data changed past numbers, the percentages are very similar. 8

9 both the 8.2 percent growth we saw in 2009 to 2010 timeframe and the 12.5 percent growth we saw in 2010 to For the time period between 2012 and 2013, we predict relative growth will slow to 10.4 percent (plus / minus two percent). There are several reasons why we predict slower growth between 2012 and A big factor is the slow growth of the global economy. Other reasons include the saturation of the market for large and global enterprises, and a proliferation of solution providers to choose from, many with easy-to-implement SaaS6-based systems and flexible pricing models. These reasons, along with the commoditization of LMS features, make this a buyer s market. Given the rapid change taking place in the market and its truly global nature, there is wide room for variance in its total value. That said, for 2013, we project the total global LMS market size will be between $1.8 billion and $1.9 billion. Figure 6: Total Global LMS Market 2009 to 2013 $2,500 In Millions $2,000 $1,500 $1,231 $1,332 $1,498 $1,718 $1,939 $1,853 $1, (est.) 2013 (proj.) LMS Global (high) LMS Global (low) Source: Bersin & Associates, Figure 7: Global LMS Market Relative Growth Rates (total) Global LMS Growth 2009 to 2010 Global LMS Growth 2010 to 2011 Global LMS Growth 2011 to 2012 Global LMS Growth 2012 to % 12.5% 14.7% 10.4% (+/- 2.5%) Source: Bersin & Associates, Software as a Service (or SaaS) refers to the business of selling software over the Internet as a web service. In this business model, the software vendor charges an annual subscription fee and can predict recurring revenues far more reliably than with the licensed software model. 9

10 Relative Growth 7 by Geographic Region In North America, total market growth was 14.7 percent in 2011 and will likely drop to 11 percent in We predict growth rates will be flat in 2013 (11 percent), with North America-focused providers comprising roughly 67 percent of the total global LMS market. With high LMS saturation rates among larger companies, the growth will come from small and midsize companies purchasing LMSs, often for the first time. Certpoint, NetDimensions and Intellum are just a few solution providers which are catering to this group, as are specialists like DuPont Sustainable and for the healthcare market like Healthstream. In the Latin America / Caribbean region, we saw a relative market growth rate of 31 percent in 2011 this is not surprising for a developing market. We predict high growth between 2012 and 2013 in this region, likely reaching between 20 and 22 percent growth. The LMS marketing in the Latin America / Caribbean region represents roughly three percent of the total global LMS market. In the Europe / the Middle East / Africa region, we saw 13 percent growth in 2011 and predict 18 percent growth in 2012, followed by a drop to 12 percent growth in The LMS market in this region comprises roughly 21 percent of the total global LMS market. Europe s financial market troubles are well-documented, so this is not surprising; however, there is still an active market in some countries, like Germany, especially for solution providers with integrated talent management. Finally, in the Asia-Pacific region, we saw 20 percent growth in 2011, predict the same in 2012 and expect to see that drop by more than one-half to nine percent in While there is a lot of room to grow in this market, this expected drop may be a sign of movement beyond early adopter phase to a more mature, mainstream market. As well, pricing for these systems in this region tends to be lower due to competition among many smaller companies. The Asia-Pacific region represents about nine percent of the total global LMS market. 7 Here, relative growth is the speed of market growth relative to the entire market, reflected as a percentage. It is different than absolute growth, which measures actual units. 10

11 Figure 8: Global LMS Market Growth By Geography % 14% 21% 31% % 11% 12% 9% 22% 19% 20% 20% 0% 5% 10% 15% 20% 25% 30% 35% North America Latin Amerca / Caribbean Europe / the Middle East / Africa Asia-Pacific Source: Bersin & Associates, Figure 9: Global LMS Total Market Percentage By Geography % 21% 20% 9% 9% 9% % 3% 3% 68% 67% 67% North America Latin America / the Caribbean Europe / the Middle East / Africa Asia-Pacific Source: Bersin & Associates,

12 LMS Providers Customer Base Growth Over the past four years, LMS providers have seen their customer base shift, increasing the number of customers with 1,000 employees and less (from 28 percent in 2009 to 34 percent in 2012) and a decreasing the number of customers with 10,000 or more employees (from 29 percent in 2009 to 24 percent in 2012). Drivers for this shift are the saturation of the market for large and global enterprises, and the proliferation of solution providers from which to choose, many with easy-to-implement SaaS-based systems with flexible pricing models, and fast implementations that work well for small and midsize businesses. Figure 10: Solution Provider Customer Bases By Customer Size % 25% 29% 28% 34% 34% 43% 41% 42% 1-1,000 Employees 1,000-10,000 Employees 10,000+ Employees Source: Bersin & Associates, The picture becomes clearer when we look at solution providers customer base growth and customer base growth as a percentage of the total global LMS market (See Figures 10 and 11). In 2012 the global LMS market growing and much of the growth is coming from small and midsize companies. 12

13 Figure 11: Solution Provider Customer Base Growth 2010 to 2012 By Market Segment 1-1,000 Employees 8% 22% 1,000-10,000 Employees 10% 24% 10,000+ Employees 3% 10% 0% 10% 20% 30% Segment Growth Percent Segment Growth as a Percent of Total Market Source: Bersin & Associates, Of course there are other factors at play in the continued growth of learning management systems. First, organizations realize that they must leverage learning technology systems not only to deploy e-learning, conduct live online training, manage compliance training, and measure and track programs but to gain greater operational effectiveness and efficiency. There is no going back to manual-intensive methods for learning management. Second, the role of the traditional LMS is continuing to expand. Organizations are using the LMS in traditional ways and also to drive greater collaboration, connect those seeking expertise, provide on-demand learning, and serve as a platform on which to connect groups and support networking. Finally, the LMS itself is morphing and becoming a system to support the integration of talent management processes, and social and informal learning functionality, while providing a platform for knowledge management, communication and collaboration. 2. Products and Vendors Proliferate, Leaving the Market Fragmented For this 2013 study, we identified more than 200 solution providers out of what we believe to be between 300 and 500 LMS providers worldwide. We know that there are likely quite a few more, especially in emerging markets. With this proliferation of solution providers serving the market, LMS buyers have an extensive number of available choices, and differentiating these providers continues to get harder and harder, even though basic functionality is now commoditized 8. 8 Commoditized simply means a good or service that is widely available and interchangeable with one provided by another company. 13

14 The depth of features and functionality is often a cause for this confusion, with some organizations telling us that they either do not use features or do not know what features they even have. This is where fragmentation can be a good thing allowing buyers to focus on their particular needs. In our 2011 LMS study, in fact, one of the keywords we used to describe this market was fragmentation. That holds true today and we see this across the following categories: Integrated Talent Management Suites In which learning is one of many elements of the system Specialized LMSs For verticals, such as healthcare, extended enterprise, compliance and content Social LMSs Which include social learning platforms that are used primarily to support learning and learning management platforms with social technologies, adding an additional layer to support learning Across these categories, there are two parts to keep in focus: Market Leaders Those solution providers which have three percent or more market share globally Emerging Providers Those solution providers which are smaller companies that are rising in status, in size or which offer an innovative type of solution for learning. The market leaders tend to have a large enough installed base and revenue stream to invest in acquisitions and new technologies (e.g., webcasting, collaboration, content management and talent management features); they also offer features and capabilities needed by a wide range of industries. The emerging providers may actually have similar or greater capabilities in many areas but have fewer customers, and less R&D dollars for growth and investment. They tend to focus on specific market segments (e.g., industries, geographies or customer types), and often have unique system, content or services capabilities. It is important to keep in mind that you should not just consider market leaders. The market leaders indicated in Figure 12 tend to have large numbers of customers and may, in fact, not serve your particular market or needs as well as one of the smaller solution providers. 3. LMS Market Is Mature, but Is Being Reinvented by Social Learning Tools Social learning environments include functionality for conversations (e.g., blogs, forums, microblogs 9 / status updates, social networks, communities of practice), collaboration 9 Microblogging is the concept of short, frequently updated messages from individuals (patterned after the website to allow people to follow others. It is useful to find people and identify what they are doing, similar to the presence awareness available through instant messaging. 14

15 (e.g., wikis, work spaces, support for events), connections (e.g., user profiles, groups, networks) and content-sharing (e.g., user-generated / sharing, ratings / rankings, social bookmarking, tagging). The general-purpose, enterprise social software provider market is extremely fragmented with many different providers of different sizes, shapes and backgrounds serving particular customer segments or targeted use cases 10. KEY POINT Social learning environments include functionality for conversations, collaboration, connections and content-sharing. The LMS (and talent management) providers are all moving at different speeds to add enterprise social software functionality to their systems in order to support management of informal learning in all of its forms, including social and on-demand learning. Alternatively, a new breed of social-learning specialist platforms is also emerging. These new systems (best exemplified by solution providers, such as Bloomfire, and pioneered by Q2 Learning) leave out much of the formal learning management overhead commonly associated with an LMS. Basically, they offer turnkey social learning use-case support without the clutter. In other words, they may support some ability to prescribe learning, but do not necessarily expect full e-learning standards support or complex learning analytics. Also, do not necessarily expect assimilation with formal learning management without an integration of some kind. That said, as many current organizations which are already successfully enabling social learning can attest, simpler is often better. 4. A Very Clear Consolidation of the Market Leaders The consolidation that we are seeing among market leaders is primarily driven by the desire for solution providers to offer a fully integrated talent management solution. This has created opportunities for others, given that not everyone needs the size, complexity, cost and overhead of a big talent management system. 10 A use case provides a description of a sequence of interactions between actors, and the system necessary to complete a specific goal or function. Use cases are often co-authored by systems analysts and end-users, and are presented as a sequence of simple steps. 15

16 Figure 12: Global Market Leaders 2012 to 2013* Cornerstone OnDemand Oracle (all products) Saba SAP (all products) SumTotal *Based on a minimum of five percent market share. Source: Bersin & Associates, Some Remaining Independents Take Advantage of the Consolidation and Grow Rapidly Independents, like Certpoint, NetDimensions, Cornerstone OnDemand and others, are taking advantage of the consolidation and are growing rapidly. There are several reasons for this. Acquisitions of standalone LMSs like GeoLearning, Plateau, OutStart, Operitel and others by larger organizations such as SumTotal, SAP and Oracle have left the little guy searching for a replacement system. There is a growing market in the small and midsize business markets. Like the little guy, they really do not need the full functionality of a suite. There is an increase in demand for extended enterprise learning; several of these solution providers have the robust ecommerce capabilities, configurable interface and SaaS delivery model that are ideal for extending learning to an audience other than employees. Some organizations are even selling e-learning, creating a new revenue stream. Many of the fastest-growing solution providers are highly innovative providing features and functionality to foster social and informal learning, and mobile learning. We think the biggest factor in the growth of these organizations is the market consolidation and the buyer frustration that often goes along with that. 16

17 Figure 13: Fastest-Growing Providers* Absorb LMS (Blatant Media) ADP Certpoint Cornerstone OnDemand Desire2Learn Inc. e2train Halogen Intellum NetDimensions OnPoint Digital Peoplefluent Talent2 (Cornerstone partner) Technomedia Training-Orchestra Totara (Kineo) *This list is of solution providers participating in this study. Source: Bersin & Associates, SAP and Oracle Have Cemented Their Positions in the Market Two HR industry giants, SAP and Oracle, went head to head this year, both acquiring cloud-based talent management solutions thereby cementing their positions in the integrated talent management space (of which learning management is a part). Here is how it occurred. In 2012, Oracle acquired Taleo, a provider of cloud-based recruitment software. Oracle already has two major HR product sets (Oracle E-Business and PeopleSoft) which include learning management. Oracle integrated those two products into cloud-based Oracle Fusion HCM in So, that is one learning solution. The Oracle Taleo LMS offering was acquired by Taleo from Learn.com in The solution is primarily a midmarket solution and does not yet have robust social learning capabilities, but it is slated to be upgraded. 17

18 During this same time period, Oracle s competition, ERP 11 giant SAP, entered the cloudbased talent management market by acquiring SuccessFactors (SuccessFactors had acquired Plateau LMS in 2010) as its go-to-market talent management solution. Plateau was an enterprise solution with a history of delivering innovation as an LMS provider. SAP has a large customer base of licensed HR and payroll customers which run its HR suite, SAP HCM. While Oracle commands a market share advantage with its core HRMS software, SAP and SuccessFactors, coupled with Workday and a large number of other cloud-based talent management providers, forced Oracle to make a move and acquire SuccessFactor s number one competitor, Taleo. Figure 14: Product Offerings Oracle versus SAP Taleo Recruiting & Talent Management SuccessFactors Learn.com Taleo TBE Taleo Compensation Taleo Performance Talent Grid Plateau LMS JAMbok Social Learning Recruiting Employee Central Jobs2Web Candidate Mgt. Compensation Workforce Planning Goals Performance Oracle Fusion HCM (HR, Talent Management, Social Network, Analytics) SAP NetWeaver (functional middleware) Oracle PeopleSoft Oracle E-Business Oracle JD Edwards SAP HCM SAP Business By Design (SaaS) Oracle Analytics, Oracle DBMS, Sun Hardware Source: Bersin & Associates, BusinessObjects Analytics, Sybase DBMS, HANA Hardware Figure 15: Cloud Offerings Taleo versus SuccessFactors Oracle-Taleo Offering d SAP-SuccessFactors e Offering Learning Learn.com (midmarket) Plateau (enterprise) Social Learning Oracle Social Network Jam (formerly Jambok) Mobile ADF Mobile Jam Source: Bersin & Associates, Enterprise resource planning (ERP) is a category of enterprise software that typically integrates financials, HR, manufacturing, order processing and customer relationship management in an integrated solution. 18

19 Acquisitions can be very challenging, especially when the solution provider which your organization is using is the one acquired. In these systems, learning management is just one small aspect of the total solution. 7. Some Past Leaders Are Shrinking We saw some past leaders shrinking in One was Blackboard, the ubiquitous LMS provider in academia. Facing competition from others (Desire2Learn for instance, and open source solutions, like Moodle and Sakai), more of Blackboard s revenue is coming from government and corporations markets in which the company has found success. The company has been successful as a supplemental tool deployed in corporations alongside traditional LMSs. We expect that Blackboard will gain market share with it sales enablement tool through its partnership with Salesforce.com and its mobile offering. General-purpose content providers, like SkillSoft and Mindleaders (which, at the time of this publication, was being acquired by SkillSoft), find themselves in reinvention mode. Buyers are less interested in general-purpose e-learning libraries. A common path forward is to become a technology provider, as well as a content provider. SkillSoft, Mindleaders and Biz Library are all examples of this trend. Each has been moving in that direction. Of course a change in direction is an investment of time and money, as well as selling strategies. It takes time. SkillSoft is successfully transforming and is about to roll out an entirely new interface in its next version, which should keep it in a leadership position. Its acquisition of Mindleaders will further bolster SkillSoft s position as a leader in the commercial off-the-shelf content market. 19

20 Figure 16: 2012 Estimated Global LMS Market Share SumTotal 9% SAP (ALL) 8% Other 44% Oracle (ALL) 7% Saba 5% Mindleaders imc Information Multimedia Communication AG Elsevier MC Halogen RISC Intuition Meridian KSI Certpoint Healthstream CrossKnowledge NetDimensions ACS (Xerox) SkillSoft Blackboard 4% Cornerstone OnDemand DuPont Sustainable Solutions Source: Bersin & Associates,

21 Figure 17: 2013 Projected Global LMS Market Share* SumTotal 9% SAP (ALL) 8% Other 44% Oracle (ALL) 7% Cornerstone OnDemand 5% Saba 4% Blackboard ACS (Xerox) Mindleaders imc Information Multimedia Communication AG Elsevier MC Intuition RISC NetDimensions CrossKnowledge SkillSoft DuPont Sustainable Solutions Certpoint Halogen Meridian KSI Healthstream *Numbers may not total 100% due to rounding. Source: Bersin & Associates,

22 Figure 18: 2012 LMS Provider Revenues* 12 (estimated) Up to $25 Million $25 Million to $50 Million $50 Million to $100 Million $100 Million+ Halogen Certpoint Blackboard Oracle (all) Information Multimedia Communication AG CrossKnowledge Cornerstone OnDemand SAP (all) Intuition DuPont Sustainable Solutions Saba SumTotal Intellum Meridian KSI SkillSoft Mindleaders (acquired by SkillSoft 9/12) Mzinga NetDimensions RISC *This list is of solution providers participating in this study. Source: Bersin & Associates, Themes Along with our key findings, we noticed some themes. Transformation was the big one. Some of the transformative changes we noticed include the following. 1. More Focus on the User Experience We saw many providers starting to differentiate themselves through usability, scalability and an overall learning experience. These qualities are accomplished using a heuristic 13 method for design. Such systems are intuitive, logical and require fewer clicks for the 12 This represents LMS revenue. Some of these providers are larger when taking into account their full platforms. 13 Heuristic refers to experience-based methods, processes and / or techniques for learning, discovery and problem-solving. 22

23 end-user. We have seen a lot of systems with these attributes. c SkillSoft s SkillPort, ExpertusONE, SilkRoad Point and SAP SuccessFactors are just a few. We also saw learner-driven functionalities, like the profile, development plan and career management, coming to the front, and traditional functionalities, like e-learning and classroom management, becoming less prominent. This represents a significant shift in how learning is handled within the system. Where it once was very much the custom to build around a course or event, it is now built around the learner. 2. Absorption of Learning within Integrated Talent Management Suites It became clear during some of our solution provider briefings that learning was being absorbed within suites. Sometimes learning was woven throughout other talent processes; sometimes learning seemed to be a separate module, especially in systems that were still dealing with the integration of an acquired company. 3. Functionality That Enables the Learning Function to Become Even More Strategic Systems with advanced reporting and / or the ability to integrate with the talent needs of the organization put the learning organization in a position of being a strategic partner. 4. Deeper Analytics Capabilities within Systems An enterprise-class LMS today must have a robust set of features for training analytics and reporting there is a difference between reporting and analytics. Simply put, reporting is about viewing data; analytics is about using data to KEY POINT gain insights and, potentially, to draw conclusions ultimately, to tell a story based on data. Simply put, reporting We were amazed at the depth of some of the data that can be pulled from systems. Many of the new LMSs now have built-in analytics solutions. Many veteran LMS users have built their own separate analytics systems, running on Microsoft SQL Server, or other data warehouse technologies from Business Objects (SAP) or Cognos. is about viewing data; analytics is about using data to gain insights and, potentially, to draw conclusions ultimately, to tell a story based on data. An analytics solution should provide the ability to drill-up and drill-down through the organizational hierarchy enabling any manager, director, vice president or business-unit executive to see aggregate results for direct 23

24 reports, as well as to drill-down into individual managers and learners to identify problems. To do this, we recommend that the solution use a multidimensional or online analytical processing (OLAP) technology for analysis. If you would like more details on learning measurement and analytics, please read our in-depth report on training measurement, High-Impact Learning Measurement. f 5. Increasingly Commoditized Functionality The market for learning management systems is relatively mature and increasingly commoditized. Most systems can accommodate most basic functionality. Innovation is what is highly valued today. However, it seems that products become obsolete or commoditized almost immediately. For buyers, commoditized functionality drives down prices, since all of the products are the same. Rather than focus on the basics, buyers can look to what makes a solution provider different and what customers say about that provider. 6. Support for the Extended Enterprise We live in a global marketplace, and organizations are recognizing that they need to expand and transform business networks. For L&D, this means that the line between internal and external training audiences is becoming less distinct. The LMS can take on an increasingly important role as the foundation of the unified L&D organization, ultimately reducing the total cost of ownership that is associated with purchasing and maintaining multiple systems. This is especially true in large companies (which still average seven HR systems). KEY POINT Alignment deals with the issue of how we make sure that we are working on the right things. The following are some important questions to ask when evaluating an LMS for your extended learning community. The answers will differentiate the most up-to-date extended enterprise LMS product from its advanced LMS predecessors. Will the extended enterprise LMS be smart enough to analyze usage and capture training needs? Do learners have the ability to add a rating or comment to a training program? Can the system create, customize and manage online catalogues? Does the LMS support end-to-end ecommerce transactions? Is there enough functionality to manage the entire registration process for all types of courses? 24

25 Can the formal training be mixed and matched with informal training by learners and / or training managers? Will learners be able to collaborate before, during and after training? Does the system support real-time learning (e.g., performance support)? Can training managers or coordinators customize an individual curriculum from the course catalogue? Will there be more sophisticated reports and overall program analytics (e.g., course usage over time)? The answers highlight only some of the many features and functions an extended enterprise LMS will need to incorporate to fully support the learning needs of the extended enterprise. 7. SaaS and Cloud Computing Become Dominant Software-as-a-Service refers to business or personal applications that are housed and managed remotely, and accessed over the Internet. These applications are subscribed to rather than owned outright. Cloud computing refers to the access to technical resources software, hardware, storage and support over the Internet. A key aspect of the cloud is the delivery of the business application as SaaS. SaaS addresses the issues of customization and integration with which so many organizations have struggled. Solution providers with SaaS delivery models continue to grab market share at the expense of on-premise options. SaaS is now the preferred delivery model in the LMS and talent management markets. 8. Mobile Solutions and Applications Have Emerged A mobile LMS (mlms) can either be an LMS that extends to the mobile environment or a standalone LMS optimized for a mobile device. Most of the early entrants came from existing LMSs, LCMSs, and e-learning development tool providers and content providers. KEY POINT the line between internal and external training audiences is becoming mlmss often have the same, basic functionality of less distinct. traditional LMSs (e.g., assigning, pushing, tracking and reporting of content, access to transcripts, searching a catalogue, learning plan, registration for events, etc.). What makes an mlms different than a traditional LMS is that the functionality and features are optimized for a mobile device. Many LMSs could be described as mobile friendly, but fail to take 25

26 advantage of the strengths of mobile learning as a source of always on performance support, and innovative learning and knowledge delivery. 9. The User Interface Is Changing We found some systems to be drastically out of date. Some mature systems are struggling to compete and stay fresh the result of new user interfaces driven by the tablet experience. The use of text links, folder-style taxonomies and multiple clicks to find information were common among systems still struggling with web-based innovation. 10. Adaptability The role of customization has always been an issue in this market and having to customize at all often has a negative impact on customer satisfaction. It is unlikely that an organization can find a system that meets all of its needs and this is why it is important for systems to be highly configurable. The better systems know this and have acted accordingly. Customization can be costly and time-consuming, and leaves organizations feeling locked-in with one vendor. Anyone who has been KEY POINT through extensive customization does not want to undo that work and go through it again with a new solution provider. What makes an mlms different than a traditional Another issue is integration. Customers are demanding adaptive platforms g LMS is that the functionality a workflow and features are optimized management system with prebuilt learning and / or for a mobile device. talent management processes that can transparently integrate into many different parts of the corporate HR and IT infrastructure. New approaches to enterprise software include the rising importance of SaaS as a delivery model, open architectures, the use of APIs 14 and open source code. Barriers to entry are lower since corporate IT needs to be far less involved, and the time and cost to stand up a new system is far less. This new model of enterprise applications is delivered as both a scalable platform and a finished product. Envision this platform as the foundation of a building. On this foundation, the solution provider has given buyers a preset array of flexible tools, workflows and configurable processes with which to adapt not customize the finished application to meet their unique needs. Adaptive criteria is broken down into the following categories: 14 Application programming interfaces or APIs offer the ability for one application or tool to speak to or be embedded within other applications or tools a hallmark of Web 2.0 technology. 26

27 Application The functions of the system Presentation The interface and other visual outputs of the system Data The information stored and used by the system Delivery Assuming application hosting as a minimum requirement, the degree to which the system s delivery model is truly SaaS Operations The experience of buying, implementing and using the system Figure 19: Transformation of Learning Management Category First-Generation LMS (date range) Second-Generation LMS (date range) Next-Generation LMS (2012 to 2015) Philosophy Centralized (corporate university) Both modularized and integrated with talent management processes or highly specialized (i.e., healthcare, with primary usage being learning management). At this point, the market becomes fragmented. Fused with work ( LMS as we knew it is absorbed and socialized, along with everything else) and / or highly specialized (e.g., sales enablement, extended enterprise training, etc.) Analytics Simple reports measuring completions Dashboards with business-relevant data (i.e., skills gaps, competencies) Big Data with complex metrics that extend outside the enterprise Audience Internal (full-time employees) Internal and other workers (full-time, part-time and contingent) Extended network (e.g., candidates, employees, contingent workers, alumni, customers, partners, etc.) Source: Bersin & Associates,

28 Figure 19: Transformation of Learning Management (cont'd) Category First-Generation LMS (date range) Second-Generation LMS (date range) Next-Generation LMS (2012 to 2015) Collaboration One-to-one, one-tomany interactions (i.e., , IM) Internal many-tomany interactions (e.g., wiki, social interactivities in learning; real-time micro-communication tied to learning activities) Inherent, built in collaboration and communication tools; fusion of internal and external learning enabled by social media and, with that, enhanced security requirements Delivery Model On-premise, hosted or outsourced On-premise, hosted or outsourced, Software as a Service Support for cloudto-cloud and cloudto-on-premise integration Delivery Channels Instructor-led face-to-face and online synchronous learning; self-paced (asynchronous) e-learning and blending of the two Addition of simulations, advanced interactivity, multimedia and social interactivities Addition of game mechanics, highfidelity video, presence indicators, integrated social networks for uniting work and learning Device Support Delivered to desktop, laptop (online, offline or CD) Delivered to desktop, laptop, smartphones, netbooks (online, anytime) Self-service data delivery from any screen or surface (e.g., desktop, laptop, mobile devices) User Interface User Experience (UX) Course and resource management, catalogues, curricula Search and discovery, decision support, content management, integration Source: Bersin & Associates,

29 Participating Providers We mentioned earlier that this market is fragmented across integrated talent management suites, specialized LMSs and social LMSs. Across these categories, when we talk about specific providers, there are two parts to keep in focus: Market Leaders Those solution providers which have three percent or more market share globally Emerging Providers Those solution providers which are smaller companies that are rising in status, in size or which offer an innovative type of solution for learning The market leaders tend to have a large enough installed base and revenue stream to invest in acquisitions and new technologies (e.g., webcasting, collaboration, content management and talent management features); they offer features and capabilities needed by a wide range of industries. The emerging providers may actually have similar or greater capabilities in many areas but have fewer customers, and less R&D dollars for growth and investment. They tend to focus on specific market segments (e.g., industries, geographies or customer types), and often have unique system, content or services capabilities. This is why it is important to keep in mind that you should not only consider market leaders. The market leaders indicated in Figure 12 tend to have large numbers of customers and may, in fact, not serve your particular market or needs as well as one of the smaller solution providers. For this study, we identified more than 200 providers out of what we believe to be between 300 and 500 LMS providers worldwide. We know that there are likely quite a few more, especially in emerging markets. We chose to invite 168 to participate and 46 completed our detailed survey. We have used our insights and market research to focus on global market leaders solution providers which we feel are likely to be successful over the long term. Figures 20 and 21 offer a list of the solution providers with data in this industry study. Of those organizations participating in this study, we chose to profile the following market leaders. c 29

30 Figure 20: Solution Providers Profiles in This LMS Study Blackboard Mindleaders (recently acquired by SkillSoft) Certpoint Mzinga Cornerstone OnDemand NetDimensions CrossKnowledge RISC DuPont Sustainable Solutions Oracle (all) Halogen SAP (all) Intellum Saba Intuition SkillSoft Information Multimedia Communication AG SumTotal Meridian KSI Source: Bersin & Associates,

31 Figure 21: Solution Providers (at least) Partially Covered in This Study Absorb LMS (Blatant Media) Halogen Peoplefluent ADP ICS Learning Group Progreso Avilar Technologies, Inc. imc (Information Multimedia Communication) AG Q2 Learning Blackboard Instancy ReadyGo BizLibrary Intellum Redtray Centranum Intution Reliant Live Certpoint Lanteria RISC Computer Generated Solutions Lumesse Saba Cornerstone OnDemand Melon Technologies SAP CourseAvenue, Inc. Meridian KSI SilkRoad CrossKnowledge Meta4 SuccessFactors Desire2Learn Inc. Mindleaders (recently acquired by SkillSoft) SumTotal DuPont Sustainable Solutions Mzinga Technomedia e2train NetDimensions TEDS epath Learning Open Text (Operitel) Totara LMS (Kineo) exact learning solutions S.p.A. Expertus Oracle E-Business Suite Oracle Fusion Training-Orchestra Upside Learning Solution Pvt Ltd GeoMetrix Data Systems Inc. Oracle Taleo WestNet Learning Gyrus Systems Oracle PeopleSoft Source: Bersin & Associates,

32 Summary The LMS market is in a state of transformation. The following are some key findings and themes for 2012 to Key Findings The vision of integrated talent management has become a reality with many more organizations opting for suites that integrate everything from recruiting to performance management to performance to learning and collaboration. Merger and acquisition activity was high in 2011 to Some LMS solution providers we studied recognized that many organizations do not need integrated talent management, made a strategic decision to stay focused on learning and are growing. The global LMS market is growing, but much of the growth is coming from outside of North America, and from small and midsize companies. Products and vendors proliferate, leaving the market fragmented. The learning management market is mature, but it is being reinvented by social learning tools. There has been a very clear consolidation of LMS market leaders. SAP and Oracle have cemented their positions in the market. Some of the past leaders are shrinking. Themes More focus on the user experience. Absorption of learning within integrated talent management suites. Functionality that enables the learning function to become even more strategic. Deeper analytics capabilities within systems. Increasingly commoditized functionality. Support for the extended enterprise. SaaS and cloud computing become dominant. Mobile solutions and applications have emerged. The user interface is changing. 32