Training Outsourcing: Yesterday, Today, and Tomorrow

Over the years, providing high-quality training to employees has been somewhat problematic to many companies. While the need for well-trained people is obvious, many companies don't do a consistently good job of creating training internally. Others, however, have built very effective internal training departments. Still, most large organizations, sooner or later, will need to outsource the design and development of at least some training programs.

With that in mind, we talked to people in a variety of industries to determine what changes in outsourcing they've observed over the past few years, what their current outsourcing practices are, and how they view the future of outsourced training.

Our interviews were informal, conducted over the telephone. We selected people from Midwest-based Fortune 500 companies in the retail, chemical, manufacturing, automotive, public utility, insurance, and banking/finance industries. What follows is a summary of what they told us.

What trends have you seen in the past three to four years?

Many organizations have increased outsourcing due to internal staff reductions. The struggling economy has also sparked a trend toward more efficient technology-based approaches and increased use of off-the-shelf materials. In fact, technology-based learning has fed the outsourcing growth trend. Companies are buying more off-the-shelf content when historically they have developed the content (or had it developed) from scratch.

Respondents agreed that, in general, outsourcing of training design and development has increased as corporate staff positions have been reduced.

As a side note, a few respondents also mentioned that the end customers are now funding most training projects, and that customers in these functions sometimes recommend specific vendors to do the work. This is in sharp contrast to the past when many training departments had their own (often large) budgets and could support their customers' needs from that pool. It was noted that line function managers are looking hard at the expense of training and its anticipated return before approving funding.

What is your organization's position relative to outsourcing?

Outsourcing, while often considered essential, is managed to minimize cost and increase effectiveness through efficient project management, accurately defining learning strategy, maintaining good relationships with vendors, and shared responsibility.

Two respondents stated that, in spite of the general trend, their companies have cut outsourcing to approximately 50 percent of past levels and their goal is to cut back even more. To help facilitate this, their internal training groups have created project-level work templates to help develop training more efficiently.

Another major corporation that uses vendors for nearly all course design and development still develops its high-level learning strategy internally. They don't anticipate that will ever change.

A few respondents said that they use a model of shared responsibility and look to internal resources to add value to an outsourced project. In one company, all of the design and development of e-learning content is contracted, but programming is done internally. They emphasize that the "handoff" of projects like these is critically important, and that it takes a good working relationship with a vendor to make this work.

Another company takes care of project management internally and contracts the rest of the project on the outside. Yet another company responded that when the training involves corporate-sensitive content, they try to use internal resources to develop it.

What drives your decision to outsource?

Vendor training is chosen for specific well thought out reasons, such as to offer training in a timely manner or to create specialized learning since in-house trainer are often generalists.

Respondents agreed that the urgency of the project is still the primary driver for the decision to outsource. Even those companies that are trying to do more inside will go to the outside when the timing is tight. However, one major company had the opposite response: when they need to complete a project immediately, they do it inside.

In a few cases, the need for specialized content sends companies to the outside. Some said that they immediately think of outsourcing if a customer needs training on a specific process or engineering tool for which there are consultants on the outside who have expertise.

Some respondents added that they often try to buy or build training to suit multiple audiences across the corporation. This is in contrast to the old "not invented here" syndrome of years ago when many large companies had 10 or more versions of project management or FMEA training laying around on the shelves, each for a different department within the organization. The objective today is better stewardship of corporate training dollars.

How do you secure a vendor?

Each respondent reported having a formal process for outsourcing training. They all go through some sort of an RFP or RFQ process, usually monitored by the purchasing department, and most company purchasing departments require at least three bids. Some companies are permitted to sole-source projects, usually within certain dollar limits and with appropriate justification to purchasing.

One company uses an online reverse auction process for buying training design and development, programming, graphics, and language translation.

Many of the companies have created a process by which they pre-qualify vendors from a capabilities and pricing standpoint. The process usually requires that vendors be re-assessed every two to three years to remain on the "preferred" list. This prequalification simplifies and accelerates the award process once bids are received because all of the bidding vendors have met the standards of quality, capacity, experience, etc.

How satisfied are you with vendors?

Most respondents said that the satisfaction level was very high, and they are finding that outside resources are generally highly qualified. There is general satisfaction with the turnaround time, the ease of working with vendors, and the level of project management that vendors bring.

One company stated that, as they improve their internal project management expertise and gain more experience, they now know what to look for and how to work with a vendor, and that helps them achieve better results.

What is the future for outsourcing?

Most people agreed that the near-term will bring increased outsourcing as companies continue to focus on and hone their core businesses. In large part, that will be budget-driven as resources and money are closely scrutinized.

One respondent voiced concern over the growing trend of small- to medium-sized training vendors being "rolled up" into what he called "mega-training companies." He has noted a general degradation of personal customer service, responsiveness, and quality as his smaller, trusted vendors get folded into larger companies.

A few respondents observed that when the decision is made to develop training internally, the wide array of new training development work tools that are readily available will make it easier for individuals or small internal groups to do a better job of providing good training to their customers.

Summary

Because of the variety of training vendors in business today, it is not surprising that there was mixed reaction and that the levels of satisfaction vary somewhat. What is very clear is that outsourcing is alive and well and will continue to play a major role in the corporate training arena in the foreseeable future. Many respondents emphasized that vendors need to pay close attention to the customer, listen to the needs, work efficiently, and provide quality deliverables in order to keep the training outsourcing business thriving.

2006 ASTD, Alexandria, VA. All rights reserved.