The Economics of E-learning. Andy Sadler, Vice President, Strategy & Alliances IBM Mindspan Solutions
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1 The Economics of E-learning E Andy Sadler, Vice President, Strategy & Alliances IBM Mindspan Solutions
2 Agenda Who Are We? Why Are We Here? The New Economy What Happened? E-learning Macroeconomics The Market E-learning Microeconomics the Real Deal So What s next? Questions?
3 Who Are We?»Vendors?»Educators, Trainers, HR?»IT?»Functional, Line of Business?
4 Why Are We Here?
5 Agenda Who Are We? Why Are We Here? The New Economy What Happened? E-learning Macroeconomics The Market E-learning Microeconomics the Real Deal So What s next? Questions?
6 The New Economy Industrial and Occupational Change Dynamism and Competition Information Technology Globalization The New Economy Index
7 Human Capital» Human capital is key to financial success in the new economy» Skilled workers are in short supply» The half-life of knowledge is about three years
8 Time» Global 7x24x365 clock for innovation and time to market» Shorter cycles for design, development, and delivery» Reduced time for people to learn new information
9 Connectivity» Information/training moves without constraint» Customers, employees, and partners are connected and ready to learn» Improved connectivity and access are making new modes of training a practical reality
10 Technology» Technologies are converging» Changing competencies for everyone (including educators)» Technology is enabling learning at the point of need
11 Global Learners» Learners (partners, customers, & employees) are distributed world wide» English is only one of many languages» Competition is worldwide. US-centric view is flawed, solutions must be scalable and flexible
12 Agenda Who Are We? Why Are We Here? The New Economy What Happened? E-learning Macroeconomics The Market E-learning Microeconomics the Real Deal So What s next? Questions?
13 E-Learning Market Growing Fast! Cumulative Average Growth Rates '96-'98 '98-'02 (Forecast) % Plus Growth Traditional Training Distributed Learning e-learning
14 E-Learning Market Worldwide WW e-learning Revenue 25 Revenue ($ Billion) Latin America Asia/Pacific Japan EMEA North America
15 E-Learning Market Products & Services 2004 WW Revenue Services 34.5% 53.2% 12.3% Content Delivery Solutions Total: Content Delivery Solutions Services
16 E-Learning Market Fragmented Aggregators Technology Provider Portals Top 10 Players 22% of Market Revenues Content Verticals Publishing Houses The e-learning Market... Content... Owners
17 E-Learning Market -- Segmentation Stage of e-learning Adoption Improving Performance "Chasm" Process Transformation % of e-learning spending to 80% 20 to 30% Buyer Description "Adopter" "Innovator" Which ONE are you TODAY?
18 Agenda Who Are We? Why Are We Here? The New Economy What Happened? E-learning Macroeconomics The Market E-learning Microeconomics the Real Deal So What s next? Questions?
19 Cost Savings» Hard Costs»Travel apply your own formula = Fare + car + accommodation + per diem»learner Non-productive time = salary (loaded)»training Delivery Costs = Instructor + facilities + development + materials» Soft Costs»Opportunity costs»management attention»immediacy and Relevance ->Better retention & less wasted training
20 Puts and Takes»Course Development K Cost per hour is higher but K Duration is less (60% of ILT)» Delivery K No instructor travel, rooms, equipment K Reduced administration» Student Costs K Reduced travel, Opportunity costs» Effectiveness improved via K Multimedia content K Immediacy - Just-in-time K Relevance - Just-for-me
21 E-Learning Case Studies
22 IBM s 4-Tier Learning Model Learn from Co-Location Get together, Build Communities & Relationships, Live it, Do it Learn from Collaboration Discuss it, Practice it with Others Learn from Interaction Examine it, Try it, Play it Learn from Information Read it, See it, Hear it Experience Based Learning Learning Labs, Classroom, Mentoring, Role Playing, Coaching, Case Studies Collaborative Learning Live Virtual Classroom, e-labs, e Collaborative Sessions, Real-time Awareness, Live Conferences, Teaming Interactive Learning, Simulation, & Games CBT/WBT Modules, Self-Directed Learning Objects, Interactive Games, Coaching & Simulations Performance Support & Reference Materials Web Lectures, Web Books, Web Conferences, Web Pages, Videos... Face-to-Face Collaborative Multimedia Internet
23 IBM Management Development» Challenge K provide training for 5,000 new managers worldwide» Solution K Basic Blue for Managers» Business Value K 75% e-learning & 25% classroom K saved $24M for 5,000 managers in 2000 K cost per student hour NMS = $47 (w/o travel) Basic Blue = $21 (w/o travel
24 Business Results Sampling of Basic Blue Results 5 times as much content delivered as previous new-manager offering Cost of student day reduced to 1/3 of prior day rate ($400 vs. $135) Based on 5000 new managers/year, cost avoidance is $24.4M 75% of program is delivered through distance learning and 25% via classroom Allows managers to access materials at their own convenience- anywhere in the world Reuse of templates by other IBM organizations has saved IBM $850K to date Learning evaluation measures show significant increases in leadership knowledge, skills transfer to the job, and business results improvement. Alumni reports of first-year business enhancements due to leadership skill improvements average $450K each. Year-to-date intranet page requests total 7.7M representing a 300 % increase from 1999 Harvard Studies - Blending is synergistic ; significantly preferred to traditional classroom Relative advantage and compatibility of the innovation most important for managers' overall evaluation of training experience
25 Customer Case Study Custom Application Rollout» Challenge KTrain 700 users in 70 locations on new custom software application» Traditional Solution K2 day instructor-led class would require 12 instructors on the road for 5 weeks»costs Course Development $40K Delivery 12 instructors 5 weeks $110K Instructor travel 60 weeks $69K Training rooms 240 days $96K Materials 700 sets $15K Student Salary 700 x 2 days $480K TOTAL COST $810K
26 Customer Case Study Custom Application Rollout» E-learning Solution K3 x 2 hour online learning modules with instructor facilitation KMod 1 all users, Mod 2 90%, Mod 3 66% KDelivery took 8 DAYS, project was 7 weeks»costs Course Development plus Lotus LearningSpace licences and servers $250K $40K Delivery 12 instructors 8 days $35K $110K Instructor travel 0 $69K Training rooms 0 $96K Materials 700 sets $15K $15K Student Salary (700x2+630x2+467x2) Hours $160K $480K TOTAL COST Cost Savings ($810-$460) $460K $350K $810K
27 Customer Case Study Custom Application Rollout» E-learning Solution KSaves $350K in costs KIs more flexible for users KJust-in-time training tailored to user -> better retention KTraining complete in 8 days vs. 5 weeks K Residuals: KCourse available later for new hires and performance support KLotus LearningSpace licences and system available for other uses
28 New Product Introduction Training» 500 Sales/ Sales Support» 1 Day ILT vs. 4 hour e-learning Development (+ Licences) Delivery Instructor Salary Instructor Travel Training rooms 25 days Materials 500 sets Student Travel (extend 1 night) Student Salary TOTAL COST ILT $20K $10K $16K $10K $8K $75K 500 days = $200K $339K E-learning $105K $8K 0 $100K $213K»Cost savings $126K but:»top-line: 500 x ½ day saved per person => 1 person/year = 1 more salesperson = Quota ($1M? $2M?)
29 e-business Sales Training» Train 18,000 sellers on new e-business initiative» Solution: 14 x 15min WebLectures, recorded slides plus voice, accessible via dial-up» All trained in 45 days» ILT would have been 1 day (repeated 1000 times)» Cost savings: 25000x½ day = $5.2M in salary alone plus instructors ($1M), plus travel plus» Cost savings: $5.2M+ and»what s the value to IBM of having the entire 18,000 person salesforce enabled in 7 weeks???
30 How to get started» Research, select and acquire an LMS» Customize, install, integrate with other systems, load new content» Convert and load existing content» Develop and load new content» Measure the ROI
31 A Fable
32 A Fable
33 How to get started» Research, select and acquire an LMS» Customize, install, integrate with other systems, load new content» Convert and load existing content» Develop and load new content» Measure the ROI It takes too long to get results this way!
34 How to get started 1. Find a business problem that learning can fix 2. Fix it 3. Measure the ROI & market it 4. Collect your reward 5. If not(ready for the Chasm) then goto 1 6. Now change the learning infrastructure
35 A Fable
36 A Fable
37 Agenda Who Are We? Why Are We Here? The New Economy What Happened? E-learning Macroeconomics The Market E-learning Microeconomics the Real Deal So What s next? Questions?
38 The Real Issue is "Time to Performance" Einstein and his telephone number... "I have so many things to remember. I never bother to memorize anything that I can easily look up." But what if he needed to look up how to ANSWER the telephone?
39 Formal and Informal Learning 100% Effort Required to Learn I Can Adapt and Apply I Can Do I Know Knowledge Management Most Traditional Training Stops Here E-Learning Time Required Level of Competence 75-85% 10-15% 5-10%
40 A Vision for a Total Learning System Pervasive Formal & Informal Learning Online tutorial/seminar Knowledge Discovery Server Authoring Interfaces Reusable Learning Objects (Online Content) Standards-compliant Knowledge Artifacts
41 Navigation Tips» Think Big Start Small Build Fast.» Every journey begins with a single step Do Something» Find a Business Sponsor with a Learning Intensive Problem» Link e-learning and KM in your organization
42 Thank You
43 Questions?
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