Costs negate e-learning ROI

Computerworld - NEW YORK -- E-learning systems, cited in a recent study as yielding great returns on investment, may not be so great after all.
Learning officers at two Fortune 500 companies last week pointed out a "gotcha" that can negate the returns cited in the September report: vendors' insistence on applying per-seat licensing contracts to companies with large numbers of potential end users.
In the study, Wellesley, Mass.-based Nucleus Research Inc. analyzed thousands of corporate IT projects and found that e-learning and e-business integration were the technologies that yielded the highest returns (see story). But the findings may not have told the whole story.
Per-seat licensing of e-learning applications "remains a bone of contention between customers and vendors," said Peter M. Jones, vice president of e-learning at J.P. Morgan Chase & Co. in New York. When investing in the technology, Jones said, "you don't know if every single potential end user is going to use the system or whether they might use just a portion of it."
As with other types of software investments in which utilization rates are uncertain, using back-end reporting tools to determine usage levels on e-learning systems can be a handy option, said Pauline Morris, vice president of human resources, learning and development at New York-based Axa Financial Services LLC. But, she added, "we don't want to be the testing police."
Morris and Jones spoke with Computerworld last week prior to participating in a panel discussion here on corporate training strategies and the potential ROI of e-learning systems. The discussion was hosted by MetroSet, a user association focused on training technology that is open to learning officers in the New York area.
E-learning vendors need to understand that "you're not just selling a library of courses," said Rhoda Cahan, president of MetroSet and vice president of learning services at Computer Generated Solutions Inc. in New York.
"You need to have a strategic sales approach that benefits the customer's organizational structure," said Cahan, adding that some vendors are becoming more flexible with their e-learning software licensing.
One way to resolve the issue of per-seat pricing vs. a contract based on the content provided is to work under the assumption "that a certain number of people are going to use the course, and see if the vendor is flexible about scaling the contract cost up and down, depending on how many people actually end up using the system," Jones said.
Jones speaks from experience. Two years ago, prior to its merger with J.P. Morgan & Co., Chase Manhattan Corp.contracted with San Francisco-based DigitalThink Inc. to develop a customized e-commerce course for employees in 50 countries. Jones said he doesn't blame DigitalThink for the structure of the multimillion-dollar licensing arrangement, because per-seat pricing was the norm then. But the investment "didn't achieve the ROI that we expected," he said.
Though there are obvious cost savings that e-learning investments can produce, such as reduced travel expenses, the ROI of such projects can be hard to determine, said Morris.
"For us, the focus has been on cost avoidance," she said. "But we need to look at all aspects of the employee's relationship to learning and the impact on the bottom line." That includes weighing job satisfaction rates and other measurements against the e-learning courses that workers are taking, Morris said.

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