Innovation (or Lack Thereof) in the LMS Industry

Innovation (or Lack Thereof) in the LMS Industry

September 6, 2017
Learning Technologies

If you’re unhappy with your LMS, you’re in good company. The Learning Management System (LMS) is one of the oldest and most hated categories in enterprise software. According to a recent report from the eLearning Guild, fully one-third of organizations are “dissatisfied” or “very dissatisfied” with their LMS. In addition, over half of organizations are planning to change their LMS within the next year, and 89% within the next three years. Despite this level of dissatisfaction, there has been hardly any innovation in the corporate LMS industry over the past decade. Anyone who has ever worked at a large company is familiar with the uninspired experience of taking online compliance training, typically consisting of stagnant content delivered through antiquated Internet Explorer pop-ups.Software in other HR categories like recruiting, payroll, and benefits have improved dramatically - why hasn’t there been similar innovation in corporate learning and development? Read on to learn more.Has the LMS improved?Some may believe the LMS industry IS innovating through new standards like xAPI (Tin Can), the addition of gamification features, tracking of informal learning through 70:20:10 models, and new instructional concepts like MOOCs. However, we’d argue that corporate LMS innovation is still far behind that of other enterprise software categories and provides an unacceptable level of service to users.Common complaints from real customers about their previous corporate LMS include:

  • Inability to support HTML
  • Inability to support video
  • Inability to put multiple pieces of content in an ordered sequence
  • Inability to have a unique, linkable URL for a piece of content
  • Inability to support more than 500 users a day
  • Inability to accept email addresses longer than 30 characters
  • APIs that change monthly with no advance notice and aren’t backwards compatible
  • Hundreds of support tickets filed with no response

Solving basic pain points like these would be table stakes in any other enterprise software category. However, in the LMS world, Single Sign On (SSO) is still considered innovative, and SaaS simply means a hosted custom instance in the cloud (not multi-tenant or scalable). In fact, very few LMS vendors build, implement, and support their own software in-house.What drives innovation in enterprise software?To understand why the LMS industry isn’t innovating, we must first consider what drives changes in enterprise software. We believe all three of the drivers below are needed to create change in an industry:

  • Market: A large number of users (buyers) with unmet needs
  • Money: A compelling ROI story that drives budget
  • Migration: A migration process that minimizes risk, or alternatively, a product that can be adopted net-new.

Let’s look at the traditional LMS buyer, a Chief Learning Officer (CLO) or VP HR, to understand how these innovation drivers impact their organization. We’ll assume that the LMS market is large enough - there are plenty of research reports defining this multi-billion dollar market. We’ll focus specifically on the second two drivers, Money and Migration.Money: What’s the ROI story for the traditional LMS?Historically, the core business need for a corporate LMS is simple - compliance. Growing enterprises need to train a global workforce on a variety of topics including safety, harassment, bribery, and information security. Failure to do so exposes the organization to unacceptable risks for legal, financial, and security breaches. Thus, the corporate LMS was originally designed to optimize eLearning delivery and track completion records for audit purposes.In recent years, companies are shifting their L&D focus to also incorporate onboarding, skills development, and ultimately employee retention. Millennials in particular are highly motivated by career development, training, and acquiring new skills. However, while it’s tempting to tie training investments to employee retention, in reality, it is very difficult to directly attribute one to the other. Employee retention is impacted by so many factors including individual managers, life circumstances, performance, and overall business health - making it difficult for CLOs to develop a compelling ROI story and budget for further LMS investments.The exception to this is in sales training. For sales, training can be directly tied to revenue and productivity improvements, which is why we are seeing much more industry innovation in sales training software. Some of these innovations include video pitch practice, real time training cues inside, and sales role-playing and coaching tools.Migration: Can the traditional LMS be replaced?For innovation to occur, the new software must either replace the incumbent or be adopted net-new. When you consider that the business driver for an LMS is ultimately compliance and risk reduction, it becomes very difficult to justify a migration unless there is a clear business benefit and ROI. The migration itself introduces risk, so the organization’s bias will be not to change.New software targeting the CLO buyer have instead gone AROUND the traditional LMS by layering on additional functionality. These product ideas include curating web content and tracking progress within the LMS, or adding on a social layer that communicates with the LMS. Other startups are targeting small, fast-growing companies that have yet to adopt one of the enterprise HR product suites.If this is the case, what drove the innovation behind Skilljar?Skilljar’s LMS is designed specifically for customer and partner training. In industry jargon, this is known as the “extended enterprise.” Skilljar’s buyer is a training services team that reports into a revenue-facing corporate function, typically client solutions and services.Customer training teams are dramatically underserved by the corporate HR LMS product and meet all three of the innovation drivers above.

  • Market: Companies actually spend more dollars on external training than internal training, yet there’s been no product before Skilljar designed for this use case (source: Training Industry)
  • Money: Customer training has a clear ROI story where users who successfully complete training are much more likely to renew or expand their accounts. Customer training can also generate direct revenue, unlike a pure cost center.
  • Migration: The ROI story for customer training is compelling enough that companies are willing to switch out their previous systems, particularly given the technology barriers cited at the beginning of this article. Similar to upgrading a CRM or marketing automation platform, it is a hassle but can be done in a matter of weeks given enough pain with the incumbent. In addition, at Skilljar we see the market for net new implementations growing at least as fast as the market for migrations.

ConclusionThe LMS industry has suffered from a lack of innovation and product improvements for years, to the point where even supporting HTML and Single Sign On are considered special. While this seems strange on the surface, it makes sense once you consider that historically the business driver for a corporate LMS is compliance and risk reduction. Without the ability to develop a clear ROI story around employee retention, the risk of changing out a corporate LMS outweighs the potential benefits. Fortunately, Skilljar is designed for customer-facing education teams who are motivated to enable and empower their customers for long-term success.

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