Learning professionals are regularly being asked to address the complex and ever-changing needs of the business, while at the same time, deliver effective learning solutions with fewer and fewer resources.  To stay one step ahead, many are investigating the potential for outsourcing as a way of being able to deliver quality services in a cost effective manner.  In the last few years, both the size and scope of outsourcing in the learning marketplace have continued to grow.  IDC estimates the U.S. learning outsourcing marketplace alone to be approximately US$1.3 billion in 2005.[i]  This number is expected to grow over the next four years to US$3.3 billion, or just under 13 percent of the total learning marketplace.  Organizations are relying on outsourcing to:

• Design, deliver and coordinate learning activities on a worldwide basis to support global expansion.
• Develop more effective learning solutions to address a range of issues, including the challenges of an aging workforce, regulatory compliance, as well as increasingly more complex bundles of products, services and solutions.
• Reduce costs as companies face continued cost pressures that limit learning budgets and headcount, forcing leaders to continually "do more with less."
• Reap the benefits of enhanced technologies (such as learning management systems and distance learning) without the need for significant capital upgrades and additional technological skills.

Learning outsourcing is progressing through a transformation similar to that of other business processes and functions - from the outsourcing of individual processes, to integrated, multiprocess outsourcing that incorporates increasingly strategic capabilities.  For example, learning outsourcing started in areas such as hosting for distance learning and application management services.  Now, it has begun to incorporate processes including content design, development and delivery, as well as facilities management.  As the marketplace grows and matures, we expect to see continued out-tasking, more end-to-end outsourcing and an increased number of deals where learning is bundled with other human resources processes. 

Four Key Drivers 

Based on research[ii] and experience in the HR and learning outsourcing arena, we find there are four pivotal actions organizations should take as they begin to undertake an outsourcing effort:

1. Identify the appropriate leadership capabilities required to oversee the overall outsourcing effort.  Organizations need to identify an individual, or individuals, early in the outsourcing process who have the right skills and capabilities to lead an effort with the strategic importance, and complexity, of learning outsourcing.  The skills and competencies that are needed to lead an outsourcing effort are very different from the skills garnered from leading a functional department.  Michael Useem from the Wharton School of Business and Joseph Harder from the Darden School at the University of Virginia have identified six key leadership capabilities that are valuable in outsourcing arrangements.[iii]  These provide a relevant framework for the types of leadership skills needed by learning professionals as they take on outsourcing responsibilities.

-         Strategic learning vision - The leader of an outsourcing effort needs to have a solid understanding of the firm´s existing and future business needs and its current learning capabilities.  Further, the individual must be able to articulate how outsourcing can be a cost-effective alternative to internal resources and how an outsourcing vendor will fit into a larger portfolio of learning services.

• Analytical approach to problem solving - In a learning outsourcing environment, the leader must analyze and draw conclusions from key metrics, such as service level agreements, to validate that the vendor is delivering on its promised commitments. Also, he or she must be able to evaluate the results of learning programs and determine how those programs are contributing to the organization´s goals.
• Deal making - Leaders of an outsourcing effort need to understand both the current and projected capabilities of outsourcing vendors and make decisions regarding their viability as potential partners.  Once the potential vendors are determined, the learning outsourcing leader needs to work effectively with other organizational stakeholders, such as the legal and procurement functions, to put together a working arrangement that is agreed to by all parties.
• Partnership governance - Given the complexity and interdependence required for a successful outsourcing arrangement, the client and vendor are mutually dependent on one another. Therefore, the ability of a leader to maintain an effective relationship with peers on the vendor side is paramount.  This includes having the ability to address small problems before they intensify, while also protecting the company´s longer term interests.
• Change management- Given the magnitude of change associated with end-to-end outsourcing of a function and the size and magnitude of learning, an outsourcing leader must manage the information and involvement needs of a number of stakeholder groups.  This includes individuals at all levels - from internal customers; to staff whose jobs are being displaced or significantly altered; to personnel being relocated to a vendor organization - to meet the needs of the new environment.
• Program management - With numerous operational and transformational initiatives occurring simultaneously in a learning outsourcing environment, the leader must be a skilled program manager.  Among the key skills necessary is the ability to understand the links and interdependencies between projects, allocate and juggle resources, identify potential roadblocks and communicate status to a variety of interested parties.

Since one individual may not possess the full complement of skills required, companies should be open to supplementing with capabilities from inside, or even outside, the learning organization when managing a large-scale outsourcing effort. Figure 1 links key leadership capabilities with where they are likely to reside within an organization.

Figure 1. Identifying key leadership capabilities within the organization.

Source: IBM Institute for Business Value analysis. 

2. Create an overall transition management plan that identifies all the activities required to transfer responsibility to the vendor. Perhaps there is no other time during the outsourcing process that a company feels as vulnerable as during the transition of processes from the company to the vendor.  Not only is the organization literally "handing over" its processes (and in some cases, its people and systems), but at the same time, it needs to validate that everything works properly when the vendor begins operations.  A well-orchestrated transition management process can play an important role in facilitating the exchange of resources (both physical and know-how) and improving the odds that operations will run smoothly once the transition is complete.  

Within a learning outsourcing arrangement, six components of a transition plan should be addressed to ensure a successful handover to an outsourcing vendor:

-         Employee management - To avoid disruption of day-to-day activities while providing a seamless transition to the outsourced environment, companies need to address the concerns of three groups of impacted employees: those whose positions may be eliminated; those who will be transferring to the vendor organization; and those who will be remaining with the organization.  Each audience will require an appropriate suite of services and support to make their transition to new roles, whether outplacement counseling, new terms and conditions of employment, or training, coaching and managerial support. 

-         Delivery operations -Seamlessly transferring the delivery of classroom or distance learning content from the client to the vendor is a very important and visible component of an outsourcing effort.  Having extra resources available to answer questions, schedule courses and generally help ensure the smooth delivery of day-to-day learning operations is a critical component to building support during the initial weeks of the outsourcing relationship. 

-         Infrastructure-The client and the vendor need to work together to create a smooth facilities management transition.  This includes the transfer of classroom facilities and materials, workspaces for learning personnel, telephone, e-mail access and network connectivity.  Further, both the client and vendor should agree on protocols and facilities for business continuity services in the event of a large-scale business or technological failure. 

-         Knowledge transfer-An important part of the transition process is the exchange of critical knowledge between the client and the vendor.  Knowledge about current business initiatives (e.g., product rollouts, acquisitions) and available resources (e.g., who is available to train customer service representatives in the Philippines) are all important subjects that both a client and vendor need to be well versed in.  Techniques include the use of collaborative repositories to store and organize important forms of explicit knowledge, and expertise locators, which can identify key individuals and areas of capability in both the client and vendor organizations.

-         Portfolio management -Given the transformational nature of a learning outsourcing effort, interdependencies and conflicts that may arise often need to be managed jointly by both parties in an outsourcing arrangement.  To facilitate close coordination between the client and vendor, the companies should create a joint portfolio management process.  During the transition management phase, the client and the vendor should first rationalize the existing pipeline of improvement projects.  Then, both parties should build a master plan which incorporates both transformation and transition activities, milestones and deliverables.  

-         Change management-There are a number of organization-wide stakeholder change management challenges that need to be addressed.  For example, the internal "customers" of the learning organization need to be reoriented toward new contact personnel, new processes for designing, delivering and conducting training, and new learning management applications.  Gaining the buy-in of these stakeholders becomes critical, as they have the opportunity to undermine the transformation effort and potentially circumvent the learning organization as a whole.  Identifying influential leaders early in the process and developing strategies for involving them in the change process can make a difference in obtaining the early support of those who are valued by others in the organization.

3. Develop an ongoing governance and relationship management structure to address conflicts and build an effective working relationship between the client and the vendor. A learning outsourcing relationship represents a long-term partnership between two parties.  Like any relationship, both formal and informal guidelines influence how and when the parties interact, who takes responsibility for various items and how differences are settled.  By setting up a formal relationship management structure that begins at contract signing and evolves during transition and commencement of delivery operations, both sides can clearly identify who has responsibility for making certain decisions, how those decisions will be made and how the results will be communicated to others. 

Formal governance tends to focus on three primary levels: strategic, programmatic and operational.  Figure 2 outlines key issues within each of these levels.

Figure 2. Key relationship management issues.

Source: IBM Institute for Business Value analysis.

4. Build a measurement and reporting framework that communicates how well the outsourcing arrangement is operating. At the heart of any learning outsourcing agreement are service level agreements (SLAs). These measures are used to objectively quantify the performance to be provided to a client, report performance data to both the client and vendor in a consistent format, facilitate analysis of data across sites and regions and identify areas where improvements to service are necessary.  When developed and implemented effectively, SLAs can be a valuable tool to gauge vendor performance and communicate the effectiveness of the outsourcing arrangement back to the larger organization.

Learning outsourcing SLAs typically revolve around four measurement categories:

• Solution quality - How effective are the learning activities in contributing to the needs of the business?  This set of metrics is used to evaluate both content development and the impact the content has on the organization.
• Delivery/operations - How well do individuals from the outside provider perform their services?  This includes individuals such as course developers, instructors, facilities and help desk personnel.
• Technology - How effective and reliable are the technologies used to enable learning in the organization?  Technologies are often employed in learning outsourcing include learning management systems, distance learning applications and the accessibility and integrity of learning data.
• Customer satisfaction - To what extent are sponsors and end users satisfied with their learning efforts?

In addition to tracking SLAs (which evaluate whether the vendor is fulfilling the terms of the contract), both outsourcing clients and vendors need to be involved in gauging the effectiveness of the organization´s learning programs.  The ability to connect learning efforts with business outcomes is central to demonstrating business value to the line-of-business executives who influence the direction of resources and learning budgets.

Conclusion

Outsourcing the learning function is a bold move for many organizations.  To achieve the full value of a learning outsourcing partnership, organizations need to pay close attention to the leadership, transition management, governance and measurement activities early in the outsourcing relationship.  By following this recipe, companies can reduce the odds of early mishaps and improve the opportunities for realizing business value throughout the relationship.

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[i] McStravick, Peter., "U.S. Training Outsourcing Services 2005-2009 Forecast: Demystifying Training BPO.," IDC Market Analysis, #33451, May 2005.

[ii]  A more detailed description of this research is provided in Lesser, Eric and Joanne Stephane, "Preparing for Human Resource Business Transformation Outsourcing: Key Questions and Decisions," and  "Preparing for Human Resource Business Transformation Outsourcing: Risk Mitigation Strategies," IBM Institute for Business Value, March 2005. http://www-1.ibm.com/services/us/index.wss/ibvstudy/bcs/a1009194 and http://www-1.ibm.com/services/us/index.wss/ibvstudy/bcs/a1009195

[iii] Useem, Michael and Joseph Harder, "Leading Laterally in Company Outsourcing," Sloan Management Review, January 2000.