In-house vs Outsourced corporate training
The informal sector employs 90 percent of India’s workforce and only 2.3% of the country’s workforce is skilled formally. By comparison, skilled professionals make up 68% of UK’s and 74% of Germany’s workers. In South Korea, they make up 96%. India has an acute shortage of technical know-how that is essential for growth in a global knowledge market.
Organizations in both sectors agree that learning and development (L&D) is essential for business growth. One study in the US found that firms which invested the most in training their staff experienced 86% higher returns than companies that had invested the least.
Indian companies don’t invest in their employees as much the American ones. On an average, American companies spend 8-10% of their employee budget on training. Indian companies spend only 1-2%. The difference in the budgets is also significant. While companies in the US spend over $ 100 billion on their employees per year, companies in India spend less than $1 billion. Nonetheless, this number is expected to grow as 89% of Indian organizations promise to spend more time, energy, and money on making their workforce more competent. The important question facing Indian business leaders, then, is – how to accelerate business growth with learning and development interventions in an increasingly competitive global economy?
Two options present themselves. An organization can manage the learning and development of its employees internally, or they can outsource it to companies that specialize in technical and corporate training. The former model was popular in the 90s and maybe in 2000s. Between 1997 and 2007, around 2000 corporate universities propped up in the US alone. Their key features were a dedicated in-house facility – with either real classrooms or online – and a curriculum that was in line with the company’s ambitions. Companies were quick to realize, however, that this model wasn’t sustainable.
In 2001, Jeanne Meister reported in ‘The Chronicle of Higher Education’ that 60% of course design in the 100 best corporate universities was being outsourced – first to local universities and institutes; and then to “ed-tech” or companies that helped the transition to online corporate training.
Corporate training with education technology is the way forward if we are to reap the demographic dividend.
Corporate universities are expensive and difficult to maintain. 40% of the companies that participated in an American survey said that they spent close to 50% of their employee budgets on administration. 61% of the companies expected this administrative spending to increase. Further, most respondents believed that technology was the solution to administrative deficiencies. Besides, most corporate universities took a one-size-fits-all approach to training, which was destined to fail. Courses had to be personalized according to the goals of the organization, of course, but also according to the learner for it to be effective and worthwhile. This was easier for companies to achieve through outsourcing as Meister observed in 2001.
The benefits of outsourcing corporate training outweigh the benefits of training in-house; more so for small organizations than big. Companies with less than 1,000 employees have to spend around $ 1,000 per head on in-house training, while big corporations with over 10,000 employees have to spend less than half that amount (around $ 447 per person).
Both sets of organizations, however, enjoy many benefits by outsourcing their learning and development responsibilities.
Advantages of Outsourcing the Training Activities
- First, they can focus on their business activities instead of focusing on skill training.
- Second, they can expect ed-tech companies to deliver innovative programs because their very survival in the market is dependent on the quality of their service and the relations they build with corporate clients.
- Third, outcomes are easily measurable and available for verification to the employer in real-time and in a comprehensive fashion.
- Fourth, content is customizable according to requirements.
- Fifth, companies gain access to the talent that their training partners nurture.
- Finally, programs can be scaled up and down conveniently to meet needs without wasting resources.
The international market for Corporate Learning Management Systems is expected to grow at over 24% CAGR by 2022. Online technical training, in the Indian case, is a tool for inclusion, personalization of training and growth. It is easily accessible, dynamic, efficient and scalable. It allows companies to track progress in real-time, boost performance, increase compliance, reduce cost, and make learning available on-demand to those who seek it. It helps corporates train anyone on any content that can be accessed using any device, anywhere, anytime. az