Report Shows LMS Market Growing Apace

If your company is one of the holdouts of joining the learning management system game, fear no more. You can now count your chips and play your hand with confidence. According to Josh Bersin, CEO of research and enterprise learning advisory firm Bersin &a

If your company is one of the holdouts of joining the learning management system game, fear no more. You can now count your chips and play your hand with confidence. According to Josh Bersin, CEO of research and enterprise learning advisory firm Bersin & Associates, the LMS market has grown in size and experience to enable all organizations to gamble sensibly and without worry. The LMS market grew 26 percent in 2005, reaching the $500 million mark in North America, and it has the potential to grow to the $3 billion mark because Bersin estimates only a sixth of the market has been tapped. Bersin explained that as far as the market is concerned, the early-adopter cycle, where people try things and certain organizations are more risk-prone, has evolved into an early majority phase. Now that learning organizations know what learning management systems are and what they can do, their interests have shifted to ask questions about implementation and available vendor services.

“Everybody doesn’t have an LMS yet, but everybody’s saying, ‘oh, if they have one, why don’t I have one?’” Bersin said. “They understand why they need them, but the issues they’re facing are, ‘Do we have the budget? Should we consolidate? Should we outsource it or run it internally? Should we replace some old system we have? Which vendor should we select? How do we implement it? Which team should run it?’ Those are the issues now. It’s become quite a good space, which is good for training organizations because they’re less worried about their vendor going out of business. At the same time that’s going on, there’s consolidation and companies are buying each other, and I think that will continue. The biggest vendor right now is SumTotal, but even though they’re the biggest, the market continues to grow so quickly they’re not in a dominant position. It’s not like Microsoft on PCs. There’s still a lot of competition.”

There are four reasons why organizations buy LMSs. The core reason is to manage and administer the learning function itself: classroom, enrollments, course catalog and instructors. The second reason is to facilitate e-learning. LMSs can be used as a platform and a toolset to build and manage e-learning programs. Third, there is an emergence of LMSs being adopted as an enterprise-wide learning application. No longer just a system for the learning department, now the LMS is a system for the entire company to use to deploy and manage any type of learning. Fourth, there’s a new talent management trend coming, where LMS systems are used to aid succession planning, performance management systems, performance appraisals, establishing goals and employee assessments as well as learning and development plans. Key technology trends and features support these top reasons to buy.

“One trend is for a lot of these systems to be run in an ASP or on-demand basis,” Bersin said. “That part of the market’s growing very quickly, especially for mid-market and smaller enterprises, mostly in response to the fact that there’s enough Internet connectivity that you don’t have to run the system in your own IT department. The suppliers can run them for you very efficiently. The second thing that’s kind of hot is content development tools embedded in the LMS. Most LMS vendors have a whole toolset, which they usually call an e-learning suite, to help you build content. That’s been an area that in certain smaller organizations tends to be a big requirement. Another area that’s become very common is analytics, which is software that helps you analyze all the data on learning and programs and costs, and all the things that are going on in the training organization. That’s become very big.”

Increasingly, learning leaders can leverage technology more tactically using today’s complex and varied LMS to help efficiently slice and dice data to aid measurement and strategic planning. Furthermore, Bersin said that the link between performance management and learning in the LMS system has evolved because learning organizations and HR departments, two functions not always traditionally aligned, are now seeing the value in joining forces. “Performance management is growing because we have an aging, retiring workforce,” Bersin said. “We also have a growing economy, companies are very distributed, and they’re looking for better ways to align and manage their employees given the changes. They want to identify critical skills gaps, put people in the right jobs and do succession planning. Back in the old days when companies were very hierarchical, things weren’t changing as fast. It was easier to do all that on paper. Now it’s much harder, so companies look over the wall at the training guys and say, ‘Hey, you have this big learning management system that has every employee in it, every training program, all the skills and competencies databases we need. Maybe we should use that.’ But the two systems have to talk to each other. There’s a natural trend for these two areas to converge.”