A bang just went off in the corporate training and HR market. One of the largest training content companies (Skillsoft) just finalized the acquisition of one of the largest learning platform companies (SumTotal Systems). In some ways this is like the makers of peanut butter and jelly buying the bakers of bread. The whole "sandwich" now comes from the same company. (One could call it "SkillTotal.")
While much of this deal was about growth, this acquisition represents the beginning of deeper integration between corporate learning and the LMS or learning technology market. Earlier this year Wiley acquired CrossKnowledge with this same goal: providing a more integrated, embedded, and engaging learning experience for corporate employees.
Let me give you some insights about what this all means:
1. The combined company has a new level of scale.
The combined company now has nearly 10,000 customers, more than 60 million users, and more than 2,400 employees around the world, making it among the largest corporate training providers. Skillsoft and SumTotal are both pioneers in their respective markets and each grew through a series of acquisitions. Skillsoft acquired Smartforce, NetG, ElementK, Mindleaders, Books24x7 and other smaller content providers. SumTotal is the combination of Click2Learn, Docent, Pathlore, GeoLearning, Mindsolve, and several other technology companies. So the new combined company has a very large customer base, enormous technology portfolio, and vast amounts of corporate training content.
While there are hundreds of other LMS and content companies, nearly all the others are smaller. With the exception of CrossKnowledge (now owned by Wiley), most content companies only sell content and most LMS companies only sell technology (although many LMS companies have reseller relationships with content providers). Companies have tried to do both over the years, but in almost every case the skills needed are quite different. Content companies need extensive expertise in instructional design, vertical content, and content management solutions while LMS companies need expertise in enterprise software, talent management technology, and ERP-like integration.
Skillsoft's acquisition of SumTotal gives the company both. The company now has a mature enterprise software business (which plays in all areas of talent management) as well as a large and mature training content business. The combination opens up a lot of new doors for innovation, better integration, and new customer value.
Scale brings value in many ways. With more customers and a larger sales force (the combined sales force is almost 4X the size of SumTotal's sales force), more consultants and third party providers are likely to migrate to the Skillsoft-SumTotal platform. There are more than 2,000 providers of content, tools, assessments, and platforms in this market, and many of them will now want to work with Skillsoft's platforms. The company almost rivals the ERP vendors for size and market reach.
2. Synergies. Expanded sales force for SumTotal. Technology team for Skillsoft.
How about company synergies? They fall into two major areas: sales and technology.
Skillsoft was always one of the leading sales organizations in this market. There isn't a corporate training manager that has not talked with a Skillsoft sales person, and most have purchased Skillsoft courses at one point during their career.
SumTotal is a well-established company in the LMS market and one of the top five market share leaders, but did not have a large sales force. (Read Bersin by Deloitte LMS 2014 for more details). The LMS market, which is now over $2.6 Billion in size, is growing at close to 24% annually – so there is a lot of buying going on. Together the company now has more feet on the street and can offer LMS to all content customers, and content to tall LMS customers.
The second synergy is technology. Skillsoft has been trying to build out it's technology capability for some time. While Skillport has become more of a scalable system each year, it could never truly reach enterprise LMS class, holding the company back from taking on a role as a customer's primary learning platform. This problem now goes away. Skillsoft can offer an enterprise class LMS as well as an entire suite of HR and talent management products, all integrated with content.
3. Improving the Learning Experience: Integrating content and technology.
The integration of content with platforms remains an opportunity as well. Over the last fifteen years the online learning industry grew into two marketplaces: content (e-learning) and technology (LMS and talent platforms). Customers purchased the two separately and only SCORM and hard work by vendors made sure that the two worked together.
Unfortunately this dual-industry structure has limited the industry's growth: user experience is inconsistent and many corporate training systems are hard to use, filled with duplicated content, and less engaging than integrated platforms like YouTube. People click on a course catalog, launch a course, a few windows open up, and the whole experience is messy. Mobile is even harder.
Even worse, it is very difficult to embed learning content into the flow of work. Consider a manager working on their goals or perhaps assessing their people and they need some help. Rather than just have a little window of training to view, the user has to browse to the course catalog to get a refresher. Nobody has time for this. Using the technology Skillsoft now owns (content plus tools like ElixHR), the company can now deliver real-time embedded learning in important new ways.
One of the stated goals for this merger is for Skillsoft to deeply integrate its content assets (which include courses, videos, and Books 24×7 online reference materials) into the SumTotal platform to create an integrated, holistic user experience. Now that all this content and technology is in one place, let's hope we see a whole new world of "integrated user experience" emerge. Today more and more learning experiences look like Ted or YouTube – its time for the LMS market to catch up.
The other major vendors (CornerstoneOnDemand, Saba, CrossKnowledge, and many others) have tried hard to build easy to use content interfaces, but never had the motivation to invest heavily. Skillsoft developed its OLSA technology for this exact purpose, but few vendors used it (one who adopted it was SumTotal). So let's hope that the combined company brings us a new learning experience which encourages other LMS vendors to follow its lead.
In the area of embedded learning, the company has a lot of innovation potential. SumTotal's Elixr product is context-intelligent middleware which enables any system to exchange information with the LMS and automatically launch content based on a user's activity. A major softwre vendor, for example, has integrated SumTotal into its CRM product so that sales people who open opportunities of a certain size and are not certified are automatically forced to take a course. The company has a similar interface available for Salesforce.
Imagine the on-demand learning applications possible: when a manufacturing person starts a machine they are not trained on, a course could pop open and they are forced to complete and pass it; when a service rep encounters a problem they are not certified on, the certification program automatically launches. The possibilities for "embedded learning" in the flow of work are endless.
4. Value to customers. Fewer vendors to deal with and potential price changes.
For the corporate training manager, Skillsoft is now a bigger one-stop-shopping vendor. For many buyers this makes life easier: the content must work well with the LMS and the talent management tools you get from SumTotal will presumably have deep integration with Skillsoft content. While Skillsoft content always worked with nearly every technology in the market, it is likely to work "better" with SumTotal over time.
SumTotal will still have to be an open platform. All the MOOCs (Udemy, Udacity, Coursera, EdX, NovoEd, and many more), content providers like Lynda.com, and hundreds of others will still want to work with SumTotal, and one could guess that they will feel even more pressure to do so.
We may also see Skillsoft decide to further discount its content for its LMS customers, making the synergies positive for total cost of ownership.
5. Competition. Increasingly strident.
In the learning market, Skillsoft now has even larger market share, giving the company more size and scale to use against competition. But with this size comes a much more complex set of competitors.
Now Skillsoft competes with entrenched, experienced technology companies like Workday, Oracle, SAP, Cornerstone, Saba, and other established LMS companies (most of which used to be partners). Each of these vendors are sophisticated and some have deep pockets. The Skillsoft sales force needs to be deeply trained and must learn how and when to position each product in an increasingly complex portfolio.
Will the integrated content-technology solutions be better than what companies can buy from others? Perhaps but not necessarily. These other vendors have very powerful systems, and each has unique capabilities. Cornerstone is among the most integrated talent platforms: Saba has unique learning capabilities; Workday is a leading next-generation HRMS and cloud ERP solution; SAP-SuccessFactors still takes a leadership position in the performance management and integrated global ERP market; and Oracle remains the #1 market share leader and clearly the #1 in recruitment technology. And all are building next generation analytics platforms, mobile, social, and easy to use interfaces.
So Skillsoft just jumped from a pond where they were a "big fish" into a pond with a lot of "many hungry sharks." This is going to force the Skillsoft executive team to learn the enterprise software business in a hurry.
6. Impact on the Industry.
I've been analyzing this industry for about 15 years now, and whenever this kind of acquisition happens it sets off a bunch of other falling dominos. The combination of content and technology of this scale could cause other LMS vendors to start scurrying around gobbling up other content companies. Bigger content players are likely to start to look for other platform partners as well. I know for a fact that many other companies in the publishing and recruiting industry want to get into this bigger space – so there is a lot of money out there looking for more deals like this. So we are likely to see more "content+technology" deals happen.
Will the combined company push more innovation? We certainly hope so. While Skillsoft has always been a market leader in revenue and market share, the company has not pushed the envelope in content and user experience innovation. SumTotal, by contrast, actually has a lot of innovative features in their products (even though many people are not aware of them). I would hope and ask that this combined company sees past "market share" and "growth" and start to take on a role as an innovative market leader. Go out and build something new that others have never done.
There are hundreds of opportunities for Skillsoft to lead this industry. The "bigdata" work with IBM is one: can Skillsoft really recommend learning to us in an intelligent way? Saba and [entity display="SAP" type="organization" subtype="company" active="false" key="sap" natural_id="fred/company/3756"]SAP[/entity] are moving this direction (creating the "Netflix recommendations for learning"). Could Skillsoft put their foot down and really make intelligent learning happen? Absolutely.
Another is embedded learning. Every role in business has "on-demand" learning issues. The sales training example I mentioned above is only one – imagine "on-demand" learning for customer service agents, medical professionals, repair professionals, and even financial professionals. Skillsoft could go after these markets with focused content integrated into the platform and sell something that people have never seen before. Let's hope (and I will push) that the combined company gives us these kinds of innovations. I know that other vendors are thinking this way.
And of course let's hope Skillsoft just makes corporate learning a more integrated, modern experience. The days of employees browsing through a course catalog and clicking on courses to see what to take just has to go. The MOOC marketplace, which now delivers almost as much training as all corporate training providers combined, has shown people what an easy-to-use, integrated learning experience looks like.
Will this deal disrupt the corporate training market? If they company is successful, the answer is yes. Once Skillsoft shows that content and platforms can be integrated in new and more compelling ways, standalone content providers are going to look for platform companies to buy or partner with. But Skillsoft has to execute.
Mergers are tricky and there is still a lot of work to do. If the combined team works closely together, focuses on innovative and integrated product strategies, and continues to take care of customers well, this merger could be a big success.