Training Outsourcing White Paper

Content

Development

Outsourcing

A Study in the Successes, Failures, and Best Practices

White paper by:William V. West

Author: Seven Attributes of Highly Effective Outsourcing

Vendors

Based on research conducted in cooperation with:

Brandon Hall Group, 2014

www.quantumconnect.com

Content Development Outsourcing: A study in the success, failures, and best practices Sponsored by the Brandon Hall Group, Inc. and the Quantum 7 Group, LLC. About the sponsors:

The Brandon Hall group is the preeminent research organization in the training industry since 1992 with more than 200,000 subscribers and 10,000 global clients. www.brandonhall.com The Quantum 7 Group is focused on the improvement of training organizations. They introduced the training industry's first ERP system, QuantumConnect, as well as a system focused on supporting the content review/testing/approval processes, called CommentConnect. www.quantum7.com

About the author:

William V. West is a long time provider in the training industry and advocate for continuous improvement in the field of instructional design. Founder of the Quantum 7 Group and author of the Seven Attributes of Highly Effective Outsourcing Vendors he is dedicated to supporting the success of the training industry for more than 25 years. Mr. West can be followed on Twitter @williamvwest.

This is a free white paper and can be distributed freely, but must include credits towards the Brandon Hall Group and Quantum 7 Group in all cases.

Success and failures of content development outsourcing

© 2014 Brandon Hall Group, Inc. and Quantum 7 Group, LLC Page 2

About the survey In 2014, we conducted an industry-wide survey of global corporations currently outsourcing their training content development. The focus of the survey was to:

• Identify factors that made outsourcing successful. • Discover the most common issues that led to failure. • Determine the cause of those failures. • Provide insight based on the data and best practices that would enable

corporations to implement a successful outsourcing program. What we discovered during the survey was a validation of many of the assumptions that we had made in the past, but also made new discoveries that have strengthened the best practices that we will present in this document. Overall, we "sliced and diced" the data to explore the correlations between the best practices of the highly successful outsourcing companies with the challenges that have often led to failure of outsourcing programs. The result was a very profound and clear set of recommendations for ensuring a successful outsourcing program.

Definition of content development outsourcing For the survey, we defined content development outsourcing to include the planning, design, development, and implementation of learning solutions that include instructor-led training (ILT), virtual instructor-led training (VILT), self-study, e-learning, mobile, social, and other emerging modalities. This definition also includes the contracting of third-party staff on an hourly or fixed-fee basis. The outsourced roles may include project management, instructional design, content writing, media development, courseware development, programming, subject matter expertise, translation, and other similar resources.

Who responded? We were very pleased with the diversity of the respondents and the balance of the demographics. The annual revenue of responding companies ranged from less than $50 million to greater than $50 billion. Nearly 25% of the respondents earned more than $10 billion per year, while 30% of the respondents earned less than $50 million. The remainder was fairly evenly distributed from $51 million to $10 billion. This gave us a diverse array of feedback of past practices and challenges regardless of the size of the company.



Likewise, the distribution of companies based on the number of employees was equally represented. Companies responding ranged from those with greater than 250,000 employees to those with less than 100 employees.

We expanded our analysis to identify if a company was located globally or domestically, and found it was a near equal distribution. We also assessed those that reported that they were achieving their key performance indicators (KPI). We found a fairly equal division between those that reported they were achieving most of their KPIs compared to those that were failing to achieve most of their KPIs. This was a vital indicator that led to our ability to contrast the successful outsourcing programs to those companies that were meeting their overall goals.



What is being outsourced? The chart below indicates the activities that are currently being outsourced. Not surprising, the vast majority of the activity involved the design and development of training programs, which includes the instructional design, content writing, and media development.

The charts below represent the volume of activity being outsourced. Approximately, 77% of all the companies surveyed outsourced all or some of their training content development. Of those who outsourced, approximately 35% outsource less than 10%, while nearly 25% outsourced more than 50%.



When we compared the numbers, 25% of those companies outsourcing in 2014 also plan to increase their outsourcing efforts in 2015. In 2015, 21% of those companies plan to outsource more than 50% of their content development. This is very good news to the providers of outsourcing services. However, it is not all good news. As we explore in this white paper, there is a high percentage of failure in outsourcing. As a result, 17% of all respondents plan to decrease their outsourcing volumes.

Why is content development being outsourced? We examined the key drivers to outsourcing. For the overall population, the key drivers were the ability to increase staff capacity, the ability to produce faster development times, and the lack of in-house capabilities. In short, they outsourced to supplement the capacity and capability of the current staff. When we examined those companies that outsource more than 50% of their overall content development, we noted that these companies followed the overall pattern but with a higher emphasis on capacity and speed. Also scoring high for the companies outsourcing more than 50%, was the ability to tap into innovations. One of the surprises in these results, is that reduction in cost ranked fifth for all populations. Price was not a driving force in the decision to outsource when compared to the need to increase capacity and capabilities of the organization.

21% of companies plan to outsource more than 50% of their content development in 2015.



Author’s Note: As we examined in the Seven Attributes, the objective to reduce costs and the need to negotiate price with the outsourcing provider are a necessary evil. While cost is not a driving force, it is always an expectation that the outsourcing initiative will cost less than a corporation's current ability to perform the activity internally. The negotiation of price and the continuous objective to reduce cost is always a persistent aspect of any outsourcing relationship. We will revisit this issue as we take a look at the challenges and best practices that have led to successful outsourcing relationships.

Overall satisfaction with outsourcing Strap yourself in. This is where the survey data became very enlightening. In short, very few companies are satisfied with their outsourcing efforts.

• The overall satisfaction rate was only 39%. • For those organizations outsourcing more than 50%, the satisfaction rate

was marginally higher at 50%. • The results were even worse when we examine those companies that

outsource between 20% and 50% (the largest population). Their overall satisfaction rate with their outsourcing programs was only 26%!



The quality and effectiveness of the work by the outsourcing provider was the primary indicator of satisfaction and the primary cause for firing vendors. When we isolate the population’s satisfaction with quality, we recognize that:

• Only 44% of the overall population was satisfied with the quality produced by their vendors. Looking behind the data we discovered that only 5% indicated that they were "extremely satisfied" with their quality.

• Of those companies outsourcing more than 50%, the satisfaction with quality was higher at 52%. However, only 3% of that population ranked quality as "extremely satisfied".

• For those companies outsourcing between 20% and 50%, their satisfaction with quality was 42%, but none of these companies indicated that they were "extremely satisfied".

These are startling results and it is a clear message to the vendors that they need to improve their performance.

Top challenges to content development

We examined the top challenges that were experienced by both in-house staff and within outsourcing programs. The results were very consistent across the



audiences. Overall, the top challenges were the content review, testing, and approval processes, along with the ability to form productive SME relationships. That was followed by the effectiveness of instructional design and project management. When we contrasted the results of the overall population of respondents with those respondents that indicate that they were highly satisfied with their outsourcing program, we found the results to be identical. However, there was a dramatic increase in the highly satisfied respondents stating that content review, testing, and approval processes were the largest challenge. Author’s note: The results show that the majority of the respondents all agree with the top challenges. The results that we present later in this report contrast these challenges with the initial criteria used to select the vendors and highlight the major discrepancies. In short, if we follow the data and correct the process used to select the vendors, as well as the criteria that we use to compare the vendors, we can directly address these challenges an increase the quality of the solutions and the success of the vendor relationship.

Failure of the vendors One of the measures of success in a vendor relationship would be the tenure of that relationship and the vendor's ability to maintain a long-term partnership with the client. The contrasting measure of failure is therefore how often the vendors are replaced. The effort to identify a vendor for any initiative, whether it would be a single project or a broader organizational outsourcing initiative, and to establish the relationship to successfully execute the goals is very expensive and time-consuming. The need to replace the vendors on a regular basis increases the overall cost of the outsourcing initiative and dampens the value that is achieved. According to the survey data, 63% of all the companies have had to replace all or some of their vendors over the past three years. This is a startling revelation. For those companies outsourcing more than 50% of their content development, more than 76% had to replace their vendors. Within that pool, 17% of the

The content review, testing, and approval process, along with SME relations, are by far the largest challenges to content development.

More than 63% of all the companies have had to replace all or some of their vendors over the past three years.



overall population has replaced more than 25% of their vendors. The result increased to 32% for those corporations outsourcing more than 50%. Authors’ note: These are all very disappointing results. When I wrote the Seven Attributes, I hypothesized that “nearly 50% of outsourcing relationships fail.” This was based on personal observation. The survey data unfortunately tells a dire tale. It is extremely difficult to support a healthy outsourcing practice within the training industry with so many vendors unable to sustain productive relationships with their clients. It is increasingly challenging to companies who wish to leverage outsourcing providers and do so successfully to achieve the goals they set forth.

Why are vendors being replaced? As we look behind the data, we start to understand the reasons that vendors are being replaced and the primary causes of failure of outsourcing relationships. We are then able to examine the correlations between these failures and the best practices to start to generate conclusions that can provide value to those making these decisions. The clearest failure is the vendor’s inability to produce quality and effective solutions. No matter how you dissect the data, this is the primary reason for all audiences. If the vendor cannot produce a solution that is effective at solving the business problem at hand, then they are not providing value and the client will eventually seek an alternative, replacement vendor for the next project.



Close behind the issues with quality are poor communications and vendors that are difficult to work with. This is also not news. The inability for the vendor to establish an effective working relationship with the client and the subject matter experts has been a very common issue with anyone that is outsourcing. This includes the relationship at the top, with the vendors account management, down to the course developers and their relationships with the stakeholders.

The third and fourth most common reasons for replacing the vendors are as much a cause as they are a consequence of the first and second reason. As we noted, the top two reasons are the lack of quality in their work and their inability to establish an effective working relationship. These issues end up producing delayed and expensive results. The third most common reason for failure is delivery delays and the inability for the vendor to meet the timelines. Subsequently, the fourth most popular reason for firing the vendor are cost overruns. Obviously reasons three and four are closely tied together. Author’s note: It is vital at this point that we remember these issues as we look at the selection vendor criteria later in the survey. The primary reasons that vendors are being replaced are due to quality and communications, followed by the inability to get the work done on time and on budget. We will see how the selection criteria directly influence these four challenges.



When we examine those organizations that outsource more than 50% of their content development, we find the same sequence of issues. In addition, we also find the vendors' inability to staff the projects in a timely manner and their ability to scale to the fluctuating needs of the client to be on par with the previous four reasons for replacing a vendor. This is sensible given you would expect that the organizations outsourcing more than 50% have needs of higher volumes and wider fluctuation.

A successful outsourcing relationship Across all the criteria that we use to examine the data, the factors influencing a successful outsourcing relationship were nearly identical. As expected quality ranks number one; nearly 100%. This is true for the overall population and for those outsourcing more than 50% of their development. It is also true for those respondents that consider themselves highly satisfied with their outsourcing. The second influencing factor is cost. While cost is not a driving factor in the decision to outsource, it's clearly an influencing factor in the success of the outsourcing relationship. As we noted in the previous section, cost overruns were a major factor in the failure of an outsourcing relationship.

Cost is not a driving factor in the decision to outsource, but it's clearly an influencing factor in the success of the outsourcing relationship.



The third and fourth influencing factors are trust and the instructional design expertise. These often go hand-in-hand in an outsourcing relationship. Fundamentally, the client needs to trust that the outsourcing partner will get the job done right and the outsourcing partner needs to have adequate instructional design skills to do so.

What are we doing wrong? So we all fundamentally agree with the mistakes that are being made and with the factors that influence a successful relationship. However, the major challenge with establishing a successful outsourcing relationship starts with the selection process. This is where the survey data exposes a stark discrepancy between those factors that we think are fundamental for success and the criteria that are being used to select the vendors. In short, we are assessing our prospective vendors by the wrong criteria. The top two issues we discovered that contribute to the success of an outsourcing relationship are the work quality and communications. However, when you review the popular selection criteria for vendors you will notice that the two key contributors to high quality and successful communications are the last criteria that is being assessed. Specifically, it is the maturity of the vendor’s instructional design methodology and the relationship with the account leaders that are being neglected in the selection process.

A successful outsourcing relationship starts with the vendor selection criteria.



There is a clear correlation between the instructional design methodology and the quality and effectiveness of the product being produced. Likewise there is a direct correlation between the effectiveness of the communications and the relationship with the account leaders. Very clearly, to achieve success and benefit from those factors that contribute to a successful outsourcing relationship we must elevate the importance of the methodology and the account management in our selection process.

As we discovered earlier, the third and fourth factors that influenced a successful relationship are the delays in delivery and the inability to achieve timelines, as well as excessive costs and overruns. In essence, it is the vendor's ability to complete the work efficient? When you assess the selection criteria used for vendors, the two criteria that directly influence the vendor's efficiency are the maturity of their development processes and the technology used to support these processes. Assessing the data, these two factors have a prominent position in the selection priority, but it is vital to highlight them because less than 60% of the respondents identify them as a high priority. These factors directly contribute to what corporations believe are the influencing factors for success and the key reasons that vendors fail. The lack of a mature development process and the technology to support that process are two vital factors that can result to the failure of the vendor. On the contrary, the data showed that the number one criteria that organizations were using to select their vendors is the qualifications of their staff. Certainly,



this is important. However, what the data concludes is that it does not matter how well the staff is qualified. If the vendor’s staff do not have a mature methodology guiding their designs and are not led by an effective account relationship, then they will struggle to meet the client’s vision. Further, if their qualified staff are not supported by a mature development process and/or not provided tools to support them on a day-to-day basis, then they will struggle to achieve their potential. The absence of any of these four factors—mature ID methodology, effective relationships, mature development processes, and supporting technology—will produce an ineffective infrastructure for them to succeed. They will be forced to make up their own methods and processes and accommodate for the lack of technology by conducting all of their business manually. This includes project management, content review process, course testing, version control, and SME relations. Manual processes add to the time and costs associated with the relationship, while also adversely affecting the consistency and reliability of the quality of the solution.

Summary The state of content development outsourcing is unacceptable. This is based on the data and results of the survey. More than 63% of overall outsourcing relationships fail. Greater than 72% of all relationships fail for those larger companies outsourcing more than 50% of their development. The respondents have identified that the following four issues are the biggest challenges for both internal development and outsourced development.

• Instructional design • Content review, testing, and approval • SME relations • Project management

Based on the results of the survey. The vast majority of the organizations agree that the quality of the solution and communications are the key to success. They also predominantly agree that delivery delays and cost overruns reduce the value of the outsourcing program. It is extremely challenging for corporations to gain the full value of their outsourcing programs when the

If the vendor’s staff do not have a mature methodology guiding their designs and are not led by an effective account relationship, then they will struggle to meet the client’s vision.



vendors failed to achieve a standard of quality on a consistent basis and perform within the timeline and budget that is available to the client. The success and failure of an outsourcing relationship starts with the selection process. Based on our exploration of the data and the best practices, it is clear that the selection criteria in the operations of the day-to-day relationship must include:

• An experienced account manager who understands the business, effectively leads, and produces a consistent customer experience.

• A well-conceived and tested instructional design methodology for consistent quality and effectiveness for all modalities, complexities, and volumes.

• An infrastructure to respond to the needs and scale without sacrificing quality.

• A refined development process for efficient delivery, on time, every time; in addition to facilitating an effective relationship with SMEs.

• Supporting technology to facilitate development and collaboration, reduce the overhead required to support the accounts, and eliminate manual processes (including the cascade of spreadsheets often found in content development organizations).

• Highly talented staff, supported by a healthy framework that enables them to thrive, to reach their potential, and achieve the client's vision.

• Innovation and the ability to explore and test new ideas, but do so in the context of environment where you can successfully complete the day-to-day solutions.



Final notes: For more information about the survey results, contact William V. West (Bill) at [email protected]. For more information and best practice in content development outsourcing, see The Seven Attributes of Highly Effective Outsourcing Vendors on Amazon or at www.sevenattributes.com. For more information on technology designed to support the development, review, testing, approval processes, SME relations, as well as online testing of eLearning, video, PSS, mobile learning and other modalities, visit www.quantumconnect.com This is a free white paper and can be distributed freely, but must include credits towards the Brandon Hall Group and Quantum 7 Group in all cases.

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Training Outsourcing White Paper