VET News

Training Companies are Drowning in Software

Training Companies are Drowning in Software

The economics of education are changing rapidly, driven by both cultural and technological advancements. Like any economic change, there are bound to be winners and losers here. Savvy training companies will look strongly at one place for guidance on how to navigate this - the immutable evidence of the numbers.

Troublingly, VET industry revenue saw its sharpest ever decline in the 2015 - 16 financial year (down 3.4%). The silver lining is that the industry’s revenue-per-employee (i.e. for every dollar spent on wages, how much was made in revenue) has nearly doubled in the last decade and has stayed relatively stable - RTOs now make $148,000 for every employee on the books. This is important information, because despite the overall revenue decline of the industry, training companies are over three times as profitable as the average of all industries.

Technology is driving much of this increased profitability. The cloud-revolution has delivered enormous efficiency gains to the training industry, as office-workers, trainers and management have been able to reduce administration time required to develop and deliver training. This is great, but training organisations must now avoid the trap of trading expenses elsewhere.

Capital-intensity, specifically the spend on technology and software, has increased steadily over the last five years. With this, a new problem has emerged that the entire service-based economy is facing - the invisible cost of software.

The vast majority of enterprise software is marketed in either one of two ways - take an existing set of tasks the organisation was doing and make it more efficient by doing it online (where it can be easily shared and worked on by multiple team members), or harness the power of cloud-technology to do work that simply wasn’t possible before (like deliver learning content to students via the internet). The promises are increased efficiency, increased quality, or some mixture of both. The cost is charged as a one-off fee, or a recurring subscription fee, and the ROI is usually marketed as these fees taken off of the return from increased revenue, repeat-purchase or whatever common business metric most aligns with the seller’s service spot.

What’s often missing in the marketing is the total cost of ownership - the cost of replacing existing software, the cost of training staff how to use the new software, the cost of business disruption while systems are activated or switched over, and increasingly, the cost of integrating and maintaining multiple software systems across the enterprise.

SMEs typically run 5.5 different software applications per employee. For a company with 75 employees, that’s 572.9 hours per-year spent on just logging into applications, and that’s just the start of the problem. Duplication of work, where information is manually entered into multiple systems, is a whole new productivity issue brought about by the cloud-revolution, as is reconciliation and maintenance of data records. Business reporting visibility is another major issue, as management struggles to gather and connect information generated through all of the applications used across different company departments or teams. Perhaps worst of all, Oracle has identified that increased customer churn is the primary outcome of system-integration issues, as the overall customer experience decreases due to fragmentation of customer-data, which results in inconsistent company-experience, and customers having to repeat information to different service workers.

RTOs taking a technology-competitive stance will know this problem all too well. A typical training-company software stack consists of a CRM, Student Management System, Learning Management System, Content Management System (which your Website is built in), Document Management System, Marketing Automation, Finance/Accounting System, Quality Management System, Survey System and other compliance-related systems. Student information will typically pass through, or have data relationships, in every single one of these systems, which is a double-edged sword. Each of these different systems brings unique capabilities by increasing both quality of service and efficiency of service delivery. However, when there is interdependence of these systems, unless each is integrated extremely well with the others, there is the likelihood of significant business overhead.

Key to successfully harnessing these technologies is a focussed approach at optimising the entire student journey as a whole, rather than optimising particular touch-points (represented by different software systems). Think of these software systems like notes on a piano, think less about how they all sound individually, but how they sound when struck together as a chord.

To find out more about aXcelerate go to www.axcelerate.com.au

For fresh insights into Edutech and the VET Industry, check out www.vetexpress.axcelerate.com.au

Reay Mackay

Managing Director, aXcelerate

Velg Training acknowledges and thanks its sponsors for their valuable support and commitment to the National VET Conference.

Date posted Aug 24, 2017