It would be natural to assume that a great deal of due diligence goes into the selection process. And usually it does. The amount of inspection on the fea- tures of a system, its functions, its roadmap is incredible – the typical LMS RFP has a “thump” factor that rivals any college thesis.
But in my experience, there is room for improvement.
Three years ago, someone accidentally copied me on an internal e-mail string from a company that was evaluating learning management systems. Scanning the e-mail immediately reminded me of a topic that has bothered me for some time: buyers of an LMS system often spend too much time on extremely de- tailed feature and function issues, and not enough time on some very basic business areas that probably have more to do with long term success or failure of the LMS system.
The typical LMS RFP has a “thump” factor that rivals any college thesis.
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Saying that, you might think I’m about to pick on some poor unsuspecting soul who simply clicked too quickly (who hasn’t?) and unwittingly exposed internal selection faults. Actually, the e-mail exchange I wasn’t supposed to see pleas- antly surprised me. It showed a business maturity, and that there are buyers who understand how to access various free and public sources for business information. The e-mail exchange went essentially like this (I’ve edited some of it to protect the people and the vendors involved, but kept much of the flavor of the actual exchange):
--- From: Evaluator
To: Decision Maker
Hi, just got back from vacation. This is a call that the VP of (the vendor) asked me to arrange. The purpose of the call is to insure that our mutual expectations are in alignment as we progress to the next level of the evaluation. The topics we will discuss include: 1) Product Gaps (High Level)
2) Potential Cost
3) ROI/Business Case (Highlights) 4) Procurement Expectations
We are scheduled to speak tomorrow at 9:30AM EST.
--- From: Decision Maker To: Evaluator
Can you send me a quick briefing on our thoughts about this vendor to prepare for this call? Strengths and weaknesses from a business and relationship level as well as technical. Thanks
--- From: Evaluator
To: Decision Maker
Here it is. Also I attached their answers to our RFI
questions.
--- From: Decision Maker
To: Evaluator
This is good stuff. Can you also do some business analy- sis on all 3 companies? I’d like to see that as a part of the company analysis - not just technical but busi-
Buyers of an LMS system often spend too much time on extremely detailed feature and function is-
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ness as well. Before we could partner with a company we’d have to consider their viability, profitability, industry benchmarks (are there any Gartner-like analyses comparing the 3 vendors?), etc. I’d like to know if I am dealing with a company that will be around in 5 years.
--- From: Evaluator
To: Decision Maker
I agree. I did the earlier doc in a couple of hours. I can formalize what I did for (the first vendor) and re- peat for (the other two vendors). I can get public info like the 10K. However, if you want the Gartner, IDC, Forrester reports then it will cost money. I do have contacts at IDC which can “donate” reports. I also have contacts at Hoovers for company info. Also there are E- Learning communities that I can tap into for free or at least at lower cost. I will do a matrix type so it’s easier to read and analyze.
--- From: Decision Maker
To: Evaluator
We’re on the same page. Get the free stuff from the rags and if there are IDC freebies available that’s a bonus. Hoovers is great. 10k, annual report, news releases, and computer rags. Matrix comparison with supporting docu- mentation.
---
What this exchange showed me is that this company understands the business side of selecting a partner, which surprisingly is often the most under-explored area in the vendor selection process. Buyers generally do a pretty good job drilling deep into product functionality and features, in my experience. What I think is a bigger issue is the lack of financial inspection done by the industry. This is important because, in my opinion, more LMS projects go awry because of the financial instability of the vendor than any other factor. We’ve had sev- eral LMS company flame-outs because, while marketing hype was plentiful, adequate financial backing wasn’t. In addition, it’s easy to rattle off the names of many LMS products killed in the wake of a company sale. In an industry that has already proven to be prone to frequent mergers and acquisitions, buyers need to think about what would happen to their LMS if the vendor was ac- quired.
More LMS projects go awry because of the financial instability of the vendor than any other factor.
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But, too often that doesn’t happen. Part of the reason is that the learning com- munity has historically not been experienced in buying technology. It should come as no surprise that the “Decision Maker” in the e-mail exchange above was a Chief Information Officer (CIO). CIOs do this all the time. They have worked with enough large and small technology providers in the past to un- derstand where the potential risks are more likely to reside.
Financial risks aren’t just limited to whether the vendor will stay in business or not. It involves the company’s ability to invest in product development, fund the necessary resources to effectively implement and integrate the system, cor- rectly staff customer service and support, and retain key employees.
Unfortunately for buyers, the learning technology industry is composed mostly of private companies, with only a few public companies in the mix. But if the buyer is evaluating public companies, they should certainly take advantage of the fact that all of the company’s financial information, and a great deal more, is available for free in public documents. One of the most useful forms to re- view (as the e-mail exchange highlighted) is the quarterly 10Q’s and annual 10K’s that public companies file. These documents typically contain much more information than you’ll find in a press release, and provide a wealth of information on the company’s financial state. The Investor Relations page of public company’s Websites usually have links to the latest quarterly earnings report and recorded management conference calls (where the Q&A by analysts can be very revealing, and at worst entertaining), as well as other financial fil- ings and information on analysts who follow the firm.
But, given the fragmentation of the vendors in the industry today, it’s almost assured that buyers will be evaluating LMS’ from private companies. Like the public companies, most of the private companies also have their financials au- dited. Most probably also have investors and a board of directors that they pre- sent to on a quarterly basis, and regularly provide with financial and other company information. So, even though they are “private,” there’s nothing stop- ping a buyer from asking a company to provide their audited or un-audited fi- nancial statements, and other information that gives the buyer insight into the financial health of the provider.
This is critically important because selecting an LMS is usually a decision that has long-lasting effects. There are more than a few bodies buried along the road of failed LMS projects. No matter where a buyer gets financial informa- tion, it’s also worth talking to senior management of the vendor in order to bet- ter understand the numbers. It’s often hard to get the full story of a vendor re-
There are more than a few bodies buried along the road of failed LMS projects.
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lying solely on the data, and hard to fully understand what the long range plans are for that company.