'The IT training market in the UK is now back to the size it was before the slump at the start of the decade,' says David Pardo, managing director of consultancy IT Skills Research. 'We estimate it was worth £530 million in 2007, up 10.5 per cent year-on-year. However, it's only really in the last quarter of 2007 that the training companies did really well, and not all of them have seen growth last year. It’s not the sort of stable growth we were seeing in the 1990s.'
What has led to the industry's reviving fortunes? 'The IT industry has been gradually recovering from the slump in the early 2000s and the training market tends to follow that trend,' says Pardo. 'The less financially stable firms have disappeared from the market during the lean period and the companies that are left are now profiting from stream-lining during harder times. After a low in 2003, the market has seen four years of year-on-year growth.'
The IT training companies have also benefited from the rise in popularity of the so-called best practice and professional courses, such as Prince2 and ITIL®. They are also now claiming to be selling more management and leadership courses. The following article goes into more detail on 'what's hot' subject-wise.
Why do individual companies do well?
The health of the market as a whole has clearly helped individual training businesses, but not all have seen revenues grow this year. So IT Training asked companies what they see as the factors for financial success.
Not all companies agreed on what makes a good business, generally believing their model to be unique. A unique selling point is of course known to be an important factor in business, so we'll look at that in more detail later, but first, there were some common factors that this year's high-flying companies viewed as underpinning a training company’s success.
Firstly, most firms highlighted the need to be customer-focused, an important part of which is listening to what your customers want.
Melanie Franklin, CEO of Maven Training, says: 'Listening to clients and potential clients, and giving them what they want is important. I talk to delegates at training centres and at exhibitions, and I deliver training. I ask what problems they want solving.'
The next related issue is how to meet the clients' needs. The general consensus seems to be that means offering high quality courses in the right subjects at the right price, in the right place at the right time.
In order to get quality, one point agreed on by companies is that a training business needs good trainers. Eddie Kilkelly, managing director of ILX Group, says: 'Training is a people business. You have to have the right people in business, and be focused on people. If don't get that right, you can lose customers.'
Paul Stevens, managing director of Assima (DACG), agrees: 'Companies who tried out bringing in their own contractors are now coming back to consultancies like us because it is a safer option and we can vouch for the quality of the trainers that we supply.'
Franklin also stresses that good venues are essential. 'I think it's important to use a professional training environment - with the right chairs, good lighting, and proper desks. There needs to be plenty of space and good facilities.’
Franklin, for instance, attributes much of Maven Training's success to increased flexibility in locations with more regional delivery, and courses being offered at evenings and weekends to suit contractors and project-based staff.
'As I used to manage IT staff, I understand the pressures of trying to cram in training between projects. You need a frequent course schedule so that it fits your window.'
Being customer focused is the essence of the first three points that John Kauffman, managing director of QA-IQ outlines in his summary of what a successful business needs:
- Offer a range of solutions that meet market needs.
- Deliver the highest quality possible.
- Do number 1 and 2 to create value for the customer.
- Do all of the above and making money for yourself.
QA-IQ is currently looking at creating some public-private partnerships, so that customers can use them as a vehicle to access public funding.
'This will mean that our customers can take advantage of funding that the government is prepared to offer,' says John Kauffman, managing director of QA-IQ.
'We are working on several projects with government bodies or government-funded agencies. I expect we'll be able to make two announcements about these in the next six months. By the year end I'd expect to have three of four state-funded projects.'
Concerning Kauffman's fourth point on his list for success, one important issue for the bottomline, training businesses tend to agree, is high attendance figures on public schedules.
'Having the highest attendance possible is one fundamental point in doing well,' says Ian Johnson, managing director of Xpertise. 'Related to that is making sure that you have classes to suit your audience.'
Richard Chappell, UK MD, Learning Tree International, agrees that offering the right subject areas can make a difference to a company's fortune: 'Last year we benefited, like other companies, from the popularity of the Prince2 and ITIL® curricula.'
In the enterprise resource management field, Stevens says activity in training solutions depends on systems' rollout. Last year, a lot of companies’ installed new SAP and or systems or upgraded them, which helped drive business.
To be flexible to industry demand and keep costs down, Kilkelly suggests it is important not to own too many fixed assets (ie training facilities). He also thinks that being innovative and investing in new products is important for a company's success.
Landing long-term large contracts also help a training company's finances and stability. Xpertise's revenue increased by 40 per cent last year, which Johnson thinks is due in part to the company increasingly having large customers and longer contracts. He says having sound finances helps win bigger customers and longer term contracts.
One customer of the training companies with an overview of the market is independent managed service provider Knowledge Pool, which contracts a range of training providers.
James Cook, partnership director, says: 'From our point of view as a customer with clients who have a variety of needs, we see two sort of companies that work well: Either a broad range of generically available courses - good quality, run at a competitive price, good schedule and spread of courses. These suppliers have volume.
'The second model is to specialise in a subject area, such as project management. These companies don't have a broad offering, but add value in certain subjects. They increase quality, focus on good trainers, and sometimes have different sort of venues (eg with more break-out areas), or can be specialist, for example with Cisco certification you need to invest in its servers.'
What's the niche?
As well as companies specialising in subject areas, some focus on a delivery method or other unique selling point. Firebrand Training, for example, offers a fairly wide curriculum, but has specialised in offering boot camp style learning, It had 35 per cent year-on-year growth last year.
Then there's Learning Tree, which uses 'real world' trainers and non-vendor courseware.
'Learning Tree is for people who don't want Gospel according to Gates,' says Chappell. The company bounced back in the year ending September 2007 when operating income increased by 100 per cent, which so far has increased again in FY08 by around 50 per cent. Chappell thinks the company's strategy of sticking to high quality training and steering away from managed services is now paying off.
'I think there is no one reason for our change in fortunes. We have been focusing on the basics. For a few years when people kept falling off the edge, we stuck to our guns.'
Add-ons to classroom training, such as e-learning, is another arena that training companies see as a way of gaining an advantage.
Stevens says: 'E-learning aspects of our business are strong, as more companies are looking to move in that direction. They see it as a cost-effective way to replace and support users. Most people are wise enough to blend it - they are mixing it with ILT. There is more maturity in that area as users have become used to it via e-learning programmes at work or applications at home.
His view is echoed by Kilkelly: 'If you offer truly blended solutions, the market is not so commoditised. We develop our own e-offerings, which is about 40 per cent of our business. We're incredibly profitable because it's not just classroom interventions. We provide a range of consultancy, interventions, classroom and e-learning.'
Another popular extension of the business is to offer a managed service, with companies such as QA-IQ and Xpertise in the arena, as well as KnowledgePool.
Johnson says: 'Our managed service business has been important for our growth - I think customers are now looking at outsourcing with more gusto.'
Paul Jefferson, CEO of KnowledgePool, too thinks it is a growing market: 'I have no doubt the managed service market has accelerated in last few years. Learning managed services are still in their infancy in the UK, compared for example to HR outsourcing. All the drivers are there to influence L&D managers to outsourcing. The pressure on L&D departments is to be more strategic, and support business objectives. By outsourcing they can free up their team. They will also be looking to manage cost if there is a downturn.'
Companies such as Assima DACG occupy a slightly different niche again in the market. Stevens explains: 'We offer an entire solution for a large programme, including a training programme. We provide trainers and technology, and post-go live support etc. Our solution is for event-based projects, such as a roll-out of a new system, which can mean we work with a company for two, three or four years. It's not really a managed solution, as we don't meet all of a company's training needs.'
So last year was a pretty good one for the industry, but what of the future? So far, most training companies say they have seen no impact of the credit crunch, partially due to cushioning from longer term contracts.
'The crunch point for the training industry will come once contracts are up for renewal and will depend on the state of the economy and IT industry at that point,' says Pardo. 'We also know from our research that training buyers' budgets will be tight this year. However, I think, having been through lean times at the start of the decade, this time round training companies ought to be in better shape to withstand a possible downturn.'
