The E-learning Curve at Edublogs

It’s just over two months since I posted on Recession and the Challenge to E-learning. It’s a subject that I said I would monitoring as the “Credit Crunch” became a downturn, which may or may not lead to a recession.

As a reminder, at the time I suggested that the appropriate social and economic innovations required to support e-learning were now sufficiently embedded (compared to 2001) the ensure the e-learning industry would certainly survive and maybe even thrive an economic downturn. I tempered this assertion by asking

will the positive economic, organisational, and social value of e-learning outweigh traditional human responses to recessionary times? What strategies can we use to ensure the survival of and even the growth of e-learning as an industry in these changing times?

Now read on…

Some preliminary evidence is now emerging which may indicate that the E-learning Industry is doing quite in the current economic climate. Electric News Net (ENN) has reported that SkillSoft and ThirdForce two of the largest Commercial-Off-The-Shelf (COTS) producers of e-learning content have posted profits for the last quarter and the year, respectively.

According to ENN,

e-learning firm SkillSoft posted another great set of quarterly results with revenues up by 34 percent and profits nearly quadrupling. Coming off the back of a third quarter where profits nearly trebled SkillSoft managed to perform even better in the fourth quarter as it posted profits of USD34.3 million, up from USD8.2 million for the same quarter the previous year.

SkillSoft say that the increase in revenue was down to:

• higher-than-planned rates of contract retention and renewal
• incremental revenues of USD4.6 million related to the amortisation of deferred revenue acquired by SkillSoft in the acquisition of NETg
• incremental revenues from NETg customer contracts which were renewed after acquisition

ThirdForce has seen its operating profit up by 160 per cent for 2007, while revenue increased by 35 per cent for the same period. Since acquiring MindLeaders, the US has become a key market for ThirdForce, and the company says it is targeting US companies in the sub-Fortune 1,000 sector. In the UK, ThirdForce is continuing to see growth in its core hospitality market, adding a number of multi-year contracts with major clients during 2007.

Analysis
At face value, these results look very positive, but these revenue reports are now a matter of history. Certainly in the case of ThirdForce, the results are based on performance before the current downturn really began to bite, and as such I don’t know if the results can be interpreted in terms of how the organization is performing in 08H1. It will be interesting to see how their strategy of growing their presence in the sub-Fortune 1,000 marketspace, given the fact that both SkillSoft and ThirdForce are headquartered in the Euro Zone, and given the current Dollar weakness against the Euro.

Similarly, a presence in the UK market would have at one time been viewed as a triple-bound low-risk revenue generator, but again, the current Sterling to Euro differential may mitigate against growth in that territory.

Dilemma
Consider the dilemma for both organizations: they both have substantial interests in territories with weakening currencies. Their sales and revenue numbers for 2008 - say arbitrarily $10M or €7.7M - would have been agreed in 2007Q3, and strategies would have been put in place to meet those objectives. Now, even if the sales teams hit their targets numerically, they are struggling in a weakened Dollar situation where their $10M is now worth €6.3M - a substantial shortfall in revenue.

However, what’s more interesting to me is how both organizations customers’ intention to either renew or extend their current contracts with the two content providers. In my view, this indicates the increasingly positive reaction in industry to e-learning as means of meeting employee training and development requirements. Is it trend that will be reflected across markets generally?

We’ll see.

It’s still early days, and no doubt I will be returning to this topic presently.

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