Enterprise Software Redux:
An Open Letter to Click2learn CEO Kevin Oakes
Dear Kevin,
We’ve known each other for almost ten years, and usually I find myself agreeing with your industry analysis. Initially, I was moved by the arguments you made in “Supplier Savvy: Will enterprise software companies take over e-learning.” But then I had dinner with someone who had a different perspective…
A buyer’s perspective
A department head who’s been satisfied with Ingenium for quite some time told me he originally intended to just follow Click2learn's upgrade path to Aspen. But then he got a call from his company’s vice president of HR, who strongly encouraged him to look at the LMS module of their ERP system. A second call came from the head of sales operations, who strongly suggested he evaluate the LMS module of their CRM system. The customer was actually surprised he didn’t get a call from his CIO suggesting he look at the offerings of their primary database provider, too.
Based on that analysis, it seems as though Click2learn will have a deal. But there may be trouble down the road. I asked your client, “What are the odds that within three years one of the other systems will be adopted by the home office, and that you’ll be forced to adopt it too?” He agreed that this scenario is likely. Although this is only one anecdote, it reflects what I’ve been hearing from many training directors and CLO’s recently.
Warning signs for pure-play providers
First, the sheer fact that enterprise software companies are getting a ticket to the LMS dance is no small feat. Enterprise software providers, indeed, have been their own worst enemies in the past with lackluster and unfocused marketing efforts, but the current economic situation seems to have sharpened their skills. What should have been an easy, no-competition upgrade for Click2learn has—at the very least—added a lot of time and cost to this revenue stream.
Second, the training industry is hearing that the functionality of most ERP systems is comparable to the pure-play systems. Not only are ERPs being invited to the dance, their gowns look good and the judges think that they dance pretty well.
Third, the fact that traditional LMS providers offer a simple upgrade path is a powerful advantage, but one that LMS companies only have with existing accounts. Increasingly, LMS providers will face this same ease-of-installation—but from a competitors viewpoint: “We already use [name of any enterprise software provider]. Won’t it be easier to just add their LMS module?”
Fourth, performance management is a natural market extension for enterprise software companies. First, vendor supply chain was automated (ERP). Soon to follow, customer management processes (CRM) were automated. After suppliers and customers, employees are a natural next step. Slap a fancy name on it like human capital management (HCM) or the Siebel-coined employee relationship management (ERM), and the enterprise software players are in the game. OK, it’s not that simple; but is it really that difficult?
Finally, consider pricing. Of course, this is the advantage of most traditional LMS providers. To be sure, pure-play LMS companies are cheaper than the enterprise software companies, but how long will this advantage last? Some of the big IT companies have become very aggressive recently with their pricing. Meanwhile, I would bet that traditional LMS companies will have to increase pricing to improve their bottom lines.
Enterprise software dominance
Kevin, you’re right that many of the enterprise software companies have entered and exited the market many times. Unfortunately, I think it’s going to be different this time. SAP, Siebel, Oracle, and many others are actually showing up at the right training industry events--and they're actually looking pretty good.
If we review a classic product adoption spectrum, we see that the enterprise software companies are still in the early awareness and trial phases. The hard part is producing some installations and gaining experience and credibility. Once that hurdle has been crossed, though, the wins get much easier. I don’t think they’ll dominate the market overnight--it might take another three years, and the focus will be on Fortune 1000 accounts.
The future for LMS companies
What I've said here doesn’t mean that I think traditional LMS providers will become extinct. After all, there are still hundreds of lesser known CRM and ERP companies still competing with the big names that we all recognize. Corporate strategy and execution is a complex business, and e-learning providers have unlimited choices ahead. However, by taking a few pages from the history of CRM, we can see at least three strategic paths: