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By Sam S. Adkins, Chief Research Officer
This article was originally published in the CompTIA newsletter in June 2006.
Ambient Insight’s research shows that revenues for Learning Business Process Outsourcing (BPO) in the US IT Training industry are growing at a five-year CAGR of 15.1%. Jill Burger, principal research analyst, reports that, "The corporate buyer is still the largest revenue source for suppliers in 2006, but the demand is growing faster in the other seven segments we track."
Here are some pointers for service providers willing to branch out and compete for this new business.
Consumers are buying again
In 1998, individuals accounted for slightly less than 10% of all IT Training purchases. Due to a variety of factors, individuals now account for almost 13-15% of all purchases. Ambient Insight expects this upward shift to continue so we watch the consumer segment closely. The majority of consumer spending on IT-related learning services is for live product tutoring, a fast growing revenue category in other segments as well.
The market favors providers that can supply broad tutoring services for a range of hardware and software products. The retail chains have responded to this opportunity and often outsource to individual instructors or partner with commercial IT Training firms.
The best corporate opportunities are outside the enterprise
By 2011, spending for IT Training-centric learning services in the corporate segment will be dominated by non-enterprise buyers, such as large organizations and small and medium business (SMB) buyers.
The non-enterprise buyers are least likely to purchase services from offshore outsourcers, so the domestic competitors still have the advantage. Virtual labs and live virtual classroom events are now in high demand across all corporate sub-segments.
The federal government opportunity is bigger that it looks
The federal government often purchases training for IT contractors and there are at least four million individuals outside government agencies that are often provided training at the government’s expense. This training is usually customized to specific agency needs.
Security training is often a major aspect of large outsourcing deals and one-off training deals. Partnering with entrenched suppliers that already have approved vendor status is a fast way to tap this opportunity.
Winning business from local and state buyers
The local and state government buying segment is complex. This segment is an avid buyer of IT-related learning services, but finding the person who approves the purchase order can be a daunting task. A good place to start in state governments is to find the CIOs running the central IT agencies.
The county governments are buying IT learning services for new technologies used by first responders. Some of this technology, like mesh networking, is completely foreign to local agencies and they depend on outside training services. Providers that track ongoing Homeland Security technology expenditures in this segment will find many new revenue opportunities.
NCLB creates new opportunities in PreK-12 Academic
The No Child Left Behind Act has created a strong demand for IT services in this segment. School systems in the US spend about $10 billion a year on technology and much of it is now spent on learning technology. Thousands of schools districts are deploying very sophisticated learning management systems (LMS), courseware management systems (CMS), classroom collaboration systems (CCS), and student information systems (SIS).
Most training services for these systems will be provided by the software providers and their partners. Yet there is a unique opportunity for suppliers that can offer cross-platform learning services.
Profiting from higher education
Higher educational institutions in the US spend over $7 billion a year on a wide range of technology. They purchase a wide range of learning services.
The for-profits are really corporate entities and they run their business like any other corporation. They are a good place to gain a foothold in this segment. A good revenue opportunity in the non-profit side of this segment is providing learning services surrounding popular Open Source learning platforms like Moodle.
Off the radar for most: NGOs, Non-Profits, and Associations
Associations in the United States spend over $2.8 billion on technology every year and employ over 300,000 people. But this segment is a very insular ecosystem.
Finding the buyers is a process of following the funding trail that can lead far beyond the actual organization using the services. It is worth the effort in the long run, but perhaps not the lowest hanging fruit for vendors outside this segment.
Healthcare is Complex
The buyers for learning services in the healthcare sector are actually spread out among corporate, academic, government, and association segments. One unique aspect of the demand for IT-specific learning services in this segment is that the buyers are often not the healthcare providers or employers at all.
For example, medical device technology companies are major buyers of learning services and often provide products that result from these services for free to healthcare providers.
New services are hot
Ambient Insight research shows that some specific service revenues are growing much faster than the general IT learning services market.
For example, the revenues for live product tutoring are growing by 105%. This is a brand new type of service made possible by recent advances in remote technology and collaboration technology. These new technologies have also accelerated the demand for Real-time Collaboration-based Learning and the revenues for virtual instructor services are growing by 78%.
This is welcome news to industry professionals and companies trying to generate new revenues. To tap these revenues, you’ll have to meet the needs of new buyers.
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