By our estimates, more than 700 LMS vendors compete in today’s learning platforms marketplace. These LMS vendors range from global software companies to tiny cloud vendors. Why are there so many? How do they all survive? Who is doing all this buying?
I believe a combination of cloud computing, SaaS-based business models and the rise of extended enterprise learning help explain the spike.
The Impact of the Cloud and SaaS Business Models
The cloud has lowered the barrier of market entry for LMS vendors. New LMS vendors with minimal investment can create a SaaS cloud LMS of limited scope to target a specific business problem, industry or region with a low-cost solution.
The SaaS model implies that the vendor puts its LMS online in the cloud, and all of their customers access the same LMS via a web browser. Every customer has its own unique, secure area with its own content, users and business rules, and is unaware of any fellow clients on the common platform. This approach eliminates many technical considerations and implementation tasks/fees. It also simplifies the process, and cost of support and maintenance. This makes it a good deal for buyers and sellers if buyer requirements match seller functionality.
In a SaaS model, customers pay a monthly or annual fee to use the platform — forever. So with each new customer, the vendor builds an incremental, predictable, profitable and recurring revenue stream. Revenue is reinvested in expanding functionality to broaden the vendor’s market and price point. It’s a great business model, and I know over 100 vendors who think so, also!
Extended Enterprise is the Growth Sector
If the cloud and SaaS model made new vendors possible, then extended enterprise learning gave them something in which to specialize.
Corporations have the need to train both internal employees and their extended enterprise audiences — channel partners, customers and prospects. The responsibility to train these distinct learner audiences many times falls to unrelated business units. Each business unit can have its own budgets and buying cycles. The purchase point for employee LMS initiatives is typically in human resources, while the purchase point for extended enterprise initiatives can be in sales, marketing, channel management or customer service departments. Unless these groups explicitly decide to work together, they won’t. This leads to multiple LMSs in the same corporation.
Because extended enterprise LMS buyers are not from HR, they do not know the HR nomenclature, making it tough for them to describe their requirements and communicate with HR-focused LMS vendors. Extended enterprise buyers know, for example, that they want to easily train their customers with online training, but do not know the terms LMS, authoring tool or SCORM. They have a business problem they want to solve, and are looking for the most direct path to qualified, specialist vendors.
In reaction to the market demand, LMS vendors have been founded specifically to target customer, channel, franchise, dealer, customer or prospect use cases. With unique audience and purchase points, these vendors leave employee learning behind and compete freely anywhere in the global extended enterprise marketplace. There is no dominating vendor in extended enterprise learning, encouraging even more vendors to enter the market.
LMS Vendor Market Growth: Conclusion
All of this has led to a fragmentation of the corporate LMS market. There is now an LMS for every industry, need and budget — from individuals to the largest global corporations. Due to a better license model and technical efficiency of the cloud, new LMS vendors have flooded the market. Many have chosen to target the extended enterprise market because of the independent, non-HR buying point. Taken together, it is a perfect storm for fierce competition. Fun times ahead!
Thanks for reading!
Want to Learn More? Webinar Replay
In recent years, innovation has radically redefined the term “LMS.” Yet even as organizations replace old-school learning management systems with next-generation alternatives, exciting new solutions continue to emerge.
What does it all mean? How can you make sense of this complex world, where more than 700 learning platforms already compete for your business? Join John Leh, CEO and Lead Analyst of Talented Learning, for his annual LMS market review — including key trends and vendors to watch.
In this information-packed session, John draws upon intelligence from more than 3 years of relevant research and consulting, as he shares an independent snapshot of:
- A snapshot of today’s diverse LMS landscape
- What trends are driving LMS development and buying decisions
- Which vendors are leading in each LMS category
- How innovation is shaping market dynamics
- What buyers should expect to see as 2017 unfolds
Need Proven LMS Selection Guidance?
Looking for a learning platform that truly fits your organization’s needs? We’re here to help! Check our LMS Buyer Services — or submit the form below to schedule a free preliminary consultation at your convenience.