After one quarter (for most companies) into the fiscal calendar year, it is time to see what the future holds in our space.
There is Money in those Hills
“This is the best month (January) that we have ever had. I mean ever”, from a senior executive at a mid to large size vendor that has been in the market for several years.
They were not alone. Across the board, a large number of vendors (from small to large) saw increases in their quarter numbers. In many cases, big numbers in comparison to the last 3 years.
A good thing? Yes. Especially, when vendors released their 2010 final numbers and saw big increases from the previous year.
For example, Cornerstone On Demand, 46.6M USD in 2010, 29.3M USD in 2009.
When it comes to say Cornerstone On Demand – they have yet to become profitable.
The reason Cornerstone suffered losses in 2010, was largely caused by a change in fair value of preferred stock warrant liabilities. The losses? 48.4 million dollars.
For other vendors in the space, the revenue range most fall into has slightly increased, so from 3-8M in revenue, the numbers are showing 3-10M in revenue. Yet, revenue is just one component, in the financial scheme of things, and what people are not aware of, is the companies debt load and cash on hand.
So, how about this for a twist: Increase in Revenue, boost in numbers but for some vendors, the gain is in actuality a negative because their current and potential new customers suffer. How?
Failure to Follow the Path to Success
Many companies fall into this “illusion”. They start to generate big numbers (revenue), the market is rebounding and with that result, comes the double whammy
- Freebies are no longer free
- Bugs and we are not talking about the creepy legged ones
This leads to the bigger issue
- Unhappy current customers
A trend that is happening in the LMS market more so than in the other e-learning markets, is the failure to follow their path of success.
I am seeing many vendors whose products were built for SMB (and more aligned on the lower side of mid size companies) who are now pushing into the mid/upper mid to large size customer band. The problem here is that they developed a solution that is not made for 10,000 or more end users.
Sure, they can pitch as such, and the features may indicate that, but behind the scenes they are not made for it. As a result, their Q/A suffers drastically, they fall behind their product release schedule, and they have customer issues.
While there is nothing wrong with seeking the golden goose, and even catching it a few times, if you do not have the server bandwidth to do so, nor the internal support and capabilities to handle it, how long do you think they will remain?
How long do you think your current customers whom you initially targeted are going to be happy?
One vendor is months behind their release schedule. Months. The irony here is that they were not once behind their release schedule in 2009-10.
Another vendor is suffering Q/A issues. The product suffers from lots of bugs after the last update. They are slow to solve issues and current customers are not happy.
The twist to all this, is that for the Big Dog vendors or those whose main target is large size clients, this isn’t an issue –
okay, not the Q/A, in fact, it is a big problem for many of them.
This isn’t the case with a LMS product geared to small business or associations, for example, who land a large client or two, and then say to themselves – ah, we can compete, so lets focus on that. You can’t.
Yes, we offer that – oh, did I mention it was extra?
In 2009 and 2010, many vendors in the LMS market, tossed in items that at one time were extra fees. E-Commerce, support, branding, customization (to a degree).
In 2011, the trend is showing that those days are gone. While the global economy has yet to fully reverse itself, it is clear that many vendors believe it is, or realize that potential clients have no problem paying for it.
While their continues to be a slight increase in providing tech support and service for free (at least one year), the same cannot be said for e-commerce.
It has become an add-on fee for many vendors, and even worse, many of whom have an “extended enterprise” or multi-tenet system (or advertise that option). Let me be clear on this, in order to have extended enterprise, you need e-commerce. So, what they are saying is “here is the house. Oh, you want windows in that? Extra”.
I am talking about the ability to offer e-commerce in the product. So, they have you. You need it for an EE, so they charge you for it. Worse, they charge yearly.
Equally disturbing are fees for other things – such as single side on (SSO) (last year, a swath of vendors tossed it in), branding and APIs.
Thankfully, for branding/skinning the increase is tiny, and those that offer it, should make it free. As for APIs, well that is another story.
If you as the customer want to create your own API/Mashup or find one on the net and want to integrate it into your paid LMS, the vendor will charge you.
Last year, they were doing it for free. In some cases, I have seen fees as high as 3K per integration. Two APIs? 6K, please.
So, whereas the power APIs afforded the customer – to offer and provide additional functionality or capabilities for their learners was available, now you can still do it -but for a fee.
Why the increase? I believe it is because many of the vendors do not want their customers to have such power. After all, if you can create a couple of APIs that provide strong social learning functionality, and the LMS vendor offers an add-on for social learning, do they really want you to put yours in? And for free? Heck, no.
The spin of course, is that open source systems enable APIs. Why the extra fee for a vendor to integrate it into their system.
They will argue it is time and labor costs for the person doing it. But here is something to think about.
When you purchase off the shelf 3rd party courses, either via Skillsoft, Rosetta Stone or whomever and need to integrate that into their system, they do it, and at no cost.
In many cases, it requires them to change the code on their side or have the off the shelf vendor change their code, and it typically takes a couple of days to make sure it works in the system, so this requires Q/A on your LMS vendor’s side.
There is a cost there, and time/labor on the side of the vendor’s person. Yet, they do not charge you for it.
No demand for HTML5, but just in case..
Ability to create HTML5 courses in RCATs. It is small for now, but there are more vendors offering it, then in 2010. Many vendors who screamed the favorite line of e-learning, “our customers aren’t asking for it, so that is why we are not implementing it”, have surprisingly changed their minds.
I love this trend, because it clearly says that the rapid content authoring tool vendors are becoming innovative.
Although this trend is growing, the products that you can buy today are very limited. However, in the coming months it is going to change
- Rapid Intake mLearning Studio is near launch. I have been privvy to see the inner workings of their mLearning studio, including the output of HTML5 video in a course, and it frankly is impressive
- Articulate. Yes, it is coming. The new projected launch date is this Summer, months ahead of schedule
Once Articulate launches, I suspect you will see a greater swath of vendors adding it to their feature sets.
Why? Sad to say, this is a lemming industry.
Sure, you have innovators out there, and yes, those that follow the same approach, can add new features, but a chunk of them do not.
Did I mention it is a lemming industry?
Open marketplaces for courses created by end users.
While a trend started in late 2009, grew a tad more in 2010 and continues to grow through the end of Q1 – is the marketplace of courses (buyers and sellers) of the same LMS, this other trend is a result of one company – OpenSesame.
I believed and still do, that the business approach of OpenSesame was going to be the long term winner.
Buyers and Sellers of courses who can then use the course in any learning management system, so they are not tied to one LMS, is happening. Today, there is a real tiny number of e-learning companies offering it, but considering only one truly began it in 2010, it makes sense that it is going to grow.
One of these new vendors has gone one step further. Every customer can in turn become their own affiliate and sell courses beyond just the marketplace. Genius!
Another vendor, Xplana.com allows you to create communities, share the content (courses, books, presentations, video, audio, images, etc.) with others, but you can purchase the content too, and I said content.
Not just courses, but presentations, materials, video, audio – all user generated content. And here is a bonus – it is geared towards the academia market, which makes it very unique.
While it does not really follow the OpenSesame approach, it does something very cool
- You can share the content in Facebook with your Facebook friends
- Share via Twitter
If you have a LMS, you could link to your own community and thus the content. People do this all the time, with web conferencing solutions that are not integrated into their system, or video being streamed on another server, etc.
So, you now have an open marketplace with a social learning twist to it. Genius!!
Mobile Learning and Tablets
Still going strong and growing. As I have said before, mobile learning and tablets is going to end up being the biggest thing in the last 10 years in the e-learning industry. Prior to the tablets, m-learning really wasn’t in the masses eyes. Yes, there were plenty of vendors out there, but from the masses, it wasn’t that big. The tablets are changing that.
For those who still believe that companies are not going to buy tablets for their employees, think again:
- Tablets are being purchased in the Oil & Gas industry, especially for those on the platforms
- Tablet growth is being seen in the Construction sector
- A recent study found over 40% of CIOs saying that tablets would be purchased in 2011
- The use of tablets in academia (higher education) continues at phenomenal growth
- 1 million iPad2 tablets were sold in the first weekend it launched, it took over 25 days to sell 1 million units of the iPad
- Video means – web conferencing capabilities, which will boost the e-learning market, faster processors a gain for the web conferencing market and WBT courses
- Apple is launching an iTunes university or along those lines, so end users can take courses
These trends and a few others are starting to peek up, and will continue to do so. Some, I hope die – like the extra costs for APIs and e-commerce, but realistically they won’t. Too much money involved.
Lite LMSs by the way, continue to show growth. Certain global markets are equally showing growth – postively, and some are slowing. The capability of HD video for web conferencing is small, but it is a trend developing, the irony of course, is that it is still better to have your video – web cam, or video streams in standard (as you do now), rather than increase the frames per second for HD.
Growth in number of new vendors coming into the space. So for every vendor that leaves the market, another one is coming in.
In my LMS directory (which includes LCMS, Learning Portals) there are 369 vendors. Lots of competition.
Adobe Learning Suite only works on 32 bit computers. So, for those of us who have a desktop or laptop with 64 bit, it does not work.
People who are using Captive 5.0 are telling me of problems when they try to use a SWF from the program into Articulate. The issue is caused by the fact that Captivate supports only Actionscript 3. As a result of this issue, people have to insert the SWF as a web object.
I am still hearing of problems with Captivate 5 and SumTotal. Hopefully, SumTotal will release an update to solve this. Apparently, people who are using Saba’s system had a Captivate 5 issue, but Saba solved it with their last update.
If you are having problems with a rapid content authoring tool and your LMS, please let me know. While I won’t be able to solve the issue, I will be writing an article in a few weeks, noting these issues, with the hope that the vendors in question work to solve them now, rather than later.
Equally, if you are having LMS issues, email me as well. Identify the problem, the vendor too. This will be part of the article.
It is known in the industry, that only a small few every complain loud enough for the vendor to fix it, and when they do, they tend to solve it for those that are griping, not for everyone else – via an update.
Let’s change that, once and for all.
Craig, thanks for your complimentary words about OpenSesame! We’re hopeful that our marketplace will continue to drive innovation in the elearning sector while making selecting, purchasing and deploying content easier for training managers. We’re always interested in feedback and suggestions, as well.
I liked your comment on how vendors are starting to charge for free bees especially with so much new happening in the LMS world, users have started to take so much for granted. Users expect to pay for new innovations and technology, not for features that were already a part of LMS.
I just found your blog while searching for info on LMS pricing models. Although you didn’t quit hit on my issue and thoroughly enjoyed reading it and will again. It is time to renew with my hosted LMS provider and they are forcing a built in increase year-over-year with a multi-year contract. Wow… I didn’t see that one coming. Anyway, great job.
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