CORPORATE E-LEARNING: EXPLORING A NEW FRONTIER
Keith Bachman, CFA kbachman@wrhambrecht.com 415.551.8600
鈥淚n a time of drastic change, it is the learners who inherit the future. The learned find
themselves equipped to live in a world that no longer exists.鈥?
Eric Hoffer, in Vanguard Management, 1989
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Corporate e-Learning
TABLE OF CONTENTS
Executive Summary .....................................................................................................................................1
st
Education in the 21 Century 鈥? Creating a Learning Economy.......................................................................2
Why e-Learning?...........................................................................................................................................3
The Solution 鈥? Bring Learning to People .......................................................................................................6
Definitions: e-Learning versus Online Learning..............................................................................................8
Key Trends 鈥? The End of Learning as We Know It ........................................................................................10
The Corporate e-Learning Market 鈥? The Pie is Big ......................................................................................13
Market Segmentation 鈥? Claiming a Stake on the New Frontier ...................................................................18
Valuation 鈥? Comparing the Incomparables ..................................................................................................22
Soft Skills Training Industry 鈥? Content is King .............................................................................................24
IT Training Industry 鈥? Fast Out of the Gate ..................................................................................................25
Scrutinizing Online Training 鈥? Is c-Learning Going to Disappear?.................................................................27
Building Blocks for Success 鈥? Who Will Be the Winners?..............................................................................28
Conclusion 鈥? The e-Learning Revolution Has Just Begun .............................................................................31
Endnotes....................................................................................................................................................32
Public Company Profiles.............................................................................................................................33
Centra Software, Inc. (CTRA)..............................................................................................................................34
Click2learn.com (CLKS) ......................................................................................................................................36
Learn2.com, Inc. (LTWO) ...................................................................................................................................38
NETg (H) ............................................................................................................................................................40
ProsoftTraining.com (POSO) ...............................................................................................................................42
RWD Technologies, Inc. (RWDT)........................................................................................................................44
SkillSoft Corporation (SKIL)................................................................................................................................46
SmartForce, PLC (SMTF).....................................................................................................................................48
SmartPlanet (ZD).................................................................................................................................................50
Private Company Profiles ...........................................................................................................................52
Cognitive Arts Corporation .................................................................................................................................53
CyberStateU.com, Inc. .........................................................................................................................................55
Docent, Inc. .........................................................................................................................................................57
eMind.com, LLC .................................................................................................................................................59
Headlight.com .....................................................................................................................................................61
InterWise .............................................................................................................................................................63
KnowledgePlanet.com..........................................................................................................................................65
Ninth House Network .........................................................................................................................................67
Pensare, Inc. ........................................................................................................................................................69
Saba Software, Inc. ..............................................................................................................................................71
SMGnet, Inc. .......................................................................................................................................................73
Teach.com ...........................................................................................................................................................75
TrainingNet, Inc. .................................................................................................................................................77
UNext.com ..........................................................................................................................................................79
WBT Systems.......................................................................................................................................................81
Glossary.....................................................................................................................................................83
Important Note...........................................................................................................................................88
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EXECUTIVE SUMMARY
This report focuses on corporate training, one of the five segments of the education and training market. In
particular, we identify key drivers, perform preliminary market segmentation, and estimate growth for market
segments and product groups of the technology-based corporate training industry. We outline major trends and
likely winning strategies for companies targeting the corporate e-learning market, which we also refer to as e-
training market. Since the e-learning industry is a relatively new, unexplored frontier, this report is intended to
provide a concise overview of the key aspects of this emerging market and to offer a framework for analysis for
industry players and the investment community.
How Large Is the Market? How Quickly Is It Growing?
鈥? Corporate e-learning is one of the fastest growing and, we believe, most promising markets in the
education industry. While the market is currently relatively small and early stage, it is poised to explode.
We expect the online training market to nearly double in size every year through 2003, reaching
approximately $11.5 billion by that time. Investment opportunities in online pure plays will emerge, as
numerous e-learning companies are now preparing to tap the public markets.
鈥? Soft skills training outpacing IT. Online IT training is already a $0.87 billion industry. It has outsized the
market for soft skills training fourfold since its emergence. However, at a stunning 123% CAGR, the soft
skills training market is growing twice as fast as the IT training market and should surpass it by 2003.
鈥? Market share and growth rates vary widely among the three major e-learning market segments:
Content, Technology, and Services. With 66% market share, Content is the largest segment, growing at
an annual rate of 74%. However, Services is the fastest growing segment, surging ahead at a CAGR of
111%.
What Are the Key Trends?
鈥? Branding is the key strategy element e-learning providers should focus on. Low market transparency and
limited knowledge of e-learning products will likely represent serious challenges for corporate customers in
the next several years. We believe companies will increasingly prefer the 鈥渟afe choice鈥? and retain e-learning
providers with established brand names.
鈥? Customer priorities shift away from stand-alone training courses. Corporations increasingly demand a
more comprehensive 鈥渙ne-stop-shopping鈥? approach to meet their training needs, leading to convergence
within the e-training industry. Value-added services in particular 鈥? such as needs assessment and custom
curriculum design, online mentoring and performance support, reporting and tracking, and hosting 鈥? are
expected to fuel market growth in the next several years.
鈥? Consolidation activity should accelerate. High fragmentation, long development cycles, and other
inefficiencies make the e-learning industry ripe for more intense M&A activity.
鈥? Technological barriers are diminishing. The main hurdles to e-learning, such as lack of interactivity,
content availability, technology standards, and bandwidth, are currently being addressed. Especially the
continued adoption of broadband should facilitate higher use rates of media-rich e-learning products.
Who Will Be the Winners?
鈥? First movers that manage to build a brand name quickly will likely be among the market leaders.
To succeed, it will be key to combine a quality product with value-added services and a national presence.
鈥? To secure sizable market share, competitors need to play on all three major fronts 鈥? Content,
Technology, and Services 鈥? and to deliver an integrated, complete e-learning solution. Such a strategy
implies entering strong partnerships or acquiring complementary content, technology, and know-how.
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EDUCATION IN THE 21 S T CENTURY 鈥? CREATING A LEARNING ECONOMY
鈥淓ducation is about to change. Fundamentally. Why? Because almost
everything we know about education is up for grabs: the way it is funded,
designed, managed, and even delivered. Around the world, wholesale efforts at
education reform are already underway; and 鈥? these changes are taking place
in 鈥淚nternet time.鈥? This is the new education economy 鈥? the global education
economy.鈥?
The New Education Economy, 1999
Economy is evolving to a knowledge-based economy. In the last four decades, economic and
technological forces have transformed the U.S. economy from a production-based economy to a service-
based economy. In the old economy, corporate value and value creation were defined primarily through
physical and financial assets. The new economy puts a premium on intellectual capital. However, the life
of knowledge and human skills today is shorter than ever, increasing the pressure to remain at the
forefront of education and training throughout a career. In the midst of globalization and technological
revolution, four-year degrees are just the beginning of a forty-year continuing education. Life-long
learning may be considered merely a buzzword today, but it is quickly becoming an imperative.
A paradigm shift in the way education is viewed and delivered. At the beginning of the new
millennium, corporations view learning increasingly as a competitive weapon rather than an annoying
cost factor. Business success depends more and more on high-quality employee performance, which in
turn requires high-quality training. Corporate executives are beginning to understand that enhancing
employee skills is key to creating a sustainable competitive advantage. In the quest to remain competitive
in today鈥檚 labor-tight market, companies are exploiting advances in technology to train employees more
rapidly, more effectively, and at less expense than in the past.
Huge knowledge gaps demand educational system reform. The new global economy poses more
complex challenges to workers, requiring higher levels of education, computer literacy, critical thinking,
information analysis, and synthesizing skills. However, educational deficiencies have brought America to
the edge of a widening knowledge gap. The U.S. is lagging behind educational levels of other industrial
nations in several key indicators. U.S. students, for example, still trail students from other developed
countries in mathematics and science achievement, according to the U.S. Department of Education. Even
more alarming is that the literacy proficiency of a substantial proportion of the U.S. labor force is limited.
More than forty percent of the labor force perform at the two lowest levels on government literacy scales,1
suggesting that many workers lack the skills needed to interpret, integrate, and compare information
using written materials common to the home or workplace. The chasm between the higher demands of a
knowledge economy and the educational status of the workforce is deep and must be addressed if the U.S.
is to remain competitive internationally. A thorough reexamination of curriculum and teaching methods
as they relate to labor market preparation is needed. Academic and corporate environments must be
redesigned to adequately prepare people to function in an information society.
The $772 billion education industry is the second largest sector of the U.S. economy. The
education and training industry can be divided into five segments: childcare, K-12 education, post-
secondary education, corporate training, and continuing education. We estimate the education market to
total approximately $772 billion in 2000. At nearly 9% of GDP, the huge market size makes the
education and training industry the second largest economic sector in the U.S., next only to healthcare.
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EXHIBIT 1: EDUCATION AND TRAINING MARKET IN 2000
Continuing
Education
Corporate
Childcare
$12 billion
Training
$40 billion
$66 billion
Postsecondary
Education
$268 billion
K-12
Education
$386 billion
Sources: National Center of Education Statistics, Digest of Education Statistics, Training Magazine, Bureau of Economic Analysis,
Primark Decision Economics, and WR Hambrecht + Co estimates
WHY E-LEARNING?
鈥淪ocial, technological, and economic drivers are transforming education
around the world. As globalization encompasses local economies like never
before, the development of a skilled workforce becomes a genuinely
international concern. And as human capital becomes the chief source of
economic value, education and training become lifelong endeavors for the vast
majority of workers.鈥?
Peter J. Stokes, Eduventures.com, 1999
Technological changes increase complexity and velocity of work environment. Technology has
changed the way we live, work, think, and learn. Today鈥檚 workforce has to process more information in a
shorter amount of time. New products and services are emerging with accelerating speed. As production
cycles and life spans of products continue to shorten, information and training quickly become obsolete.
Training managers feel the urgency to deliver knowledge and skills more rapidly and efficiently whenever
and wherever needed. In the age of just-in-time production, just-in-time training becomes a critical
element to organizational success.
Lack of skilled labor drives need for learning. With unemployment rates at historic lows and a
widening skills gap among the workforce, corporations compete fiercely for skilled workers. According to
PriceWaterhouseCoopers, 70% of Fortune 1000 companies cite lack of trained employees as their
number-one barrier to sustaining growth. Business managers realize that corporations that offer ongoing
education and training enjoy a higher rate of employee retention and the benefits of a better-skilled
workforce. As a result of the rising importance of training, an increasing number of corporations have
hired Chief Knowledge Officers (CKOs) or Chief Learning Officers (CLOs) to plan and coordinate
training programs.
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Fierce competition in most industries leads to increasing cost pressures. With traditional training
methods, companies generally spend more money on transporting and housing trainees than on actual
training programs. Approximately two-thirds of training costs are allotted to travel expenses, which
represents a major drain on bottom-line profitability. In today鈥檚 competitive environment, organizations
can no longer afford to inflate training budgets with extensive travel and lodging. If opportunity cost is
taken into account, the actual costs of training are even higher. Time spent away from the job traveling or
sitting in a classroom reduces per-employee productivity and revenue tremendously.
Globalization of business is resulting in manifold challenges. Advances in information technology and
falling trade barriers facilitate business around the globe. As borders become less meaningful, global
competition intensifies. International expansion and accelerating M&A activity have led to larger and
more complex corporations. Today鈥檚 businesses have more locations in different time zones and employ
larger numbers of workers with diverse cultural backgrounds and educational levels than ever. Thus,
more information has to be delivered in increasingly larger organizations, challenging internal planning,
logistics, and distribution. Corporations worldwide are now seeking more innovative and efficient ways
to deliver training to their geographically-dispersed workforce.
EXHIBIT 2: WHAT IS DRIVING E-LEARNING?
DEMAND SUPPLY
鈥? Internet access becoming standard
鈥? Rapid obsolescence of
at work and at home
knowledge and training
鈥? Advances in digital technologies
鈥? Need for just-in-time training
enable creation of interactive,
delivery
media-rich content
鈥? Search for cost-effective ways to e-Learning 鈥? Increasing bandwidth and better
meet learning needs of globally
delivery platforms make
distributed workforce
e-learning more attractive
鈥? Skills gap and demographic
鈥? Growing selection of high-quality
changes drive need for new
e-learning products and services
learning models
鈥? Emerging technology standards
鈥? Demand for flexible access
facilitate compatibility and
to lifelong learning
usability of e-learning products
e-Commerce / e-Business
Sources: SRI Consulting and WR Hambrecht + Co
Social and demographic changes direct education toward older target groups. Organizations and
training providers need to evaluate whom they train and how. Today, traditional students in higher
education 鈥? age 18 to 22 鈥? make up less than 20% of all students. The fastest growing group attending
higher education institutions are working, part-time students older than 25.2 This new group of 鈥渓earning
adults鈥? is seeking education principally to advance their careers and increase their salaries. For
universities and business-to-consumer (B2C) training providers, these individuals are excellent candidates
for education delivered to their homes or offices. Declining birth rates, aging population, and lack of
skilled labor also require an objective evaluation of the training needs of older age groups. In the new
economy, even senior workers, including those nearing retirement, need to be trained. Broader acceptance
of new training delivery options among older workers should facilitate the training process. Americans
over 50 years old are already the fastest growing user group of the Internet today.3
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Knowledge workers require greater flexibility in the workplace. Globalization, competition, and
labor shortages cause employees to work longer, harder, and travel more than previous generations did.
At the same time, these workers require more independence and responsibility in their jobs and dislike
close supervision. Today鈥檚 knowledge workers have a non-traditional orientation to time and space,
believing that as long as the job gets done on time, it is not important where or when it gets done. By the
same token, they want the opportunity to allocate time for learning as needed. Modern training methods
need to reflect these changes in lifestyle.
Learning has become a continual process rather than a distinct event. In the new economy,
corporations face major challenges in keeping their workforce current and competent. Many past training
practices are unable to meet these challenges. Traditional training is often unrelated to new business
initiatives or key technology drivers. In 鈥渏ust-in-case鈥? fashion, courses are given and then forgotten, often
without improving the performance of workers. While learning is not a one-time activity, training has
traditionally been treated as such. To retain their competitive edge, organizations have started to
investigate which training techniques and delivery methods enhance motivation, performance,
collaboration, innovation, and a commitment to life-long learning.
Explosive growth of the Internet provides delivery vehicle for education. The emergence of online
education is not only a matter of economic and social change, but also of access. IDC estimates that, by
2003, the number of Internet users worldwide will grow to about 502 million, up from 87 million in
1997, representing a CAGR of 34%. With an estimated 103 million users in 2000 鈥? or 40% of the
projected 2000 total 鈥? the U.S. has the largest share and highest penetration of the Internet. The U.S. is
also the leading nation in ecommerce. By 2003, one-fourth of all U.S. business-to-business purchasing will
be done online, as predicted by The Boston Consulting Group. The increasing integration of the Web and
American culture is also evidenced by tremendous annual user growth. In 1997, only 15% of the U.S.
population used the Internet 鈥? then mostly a domain of educational institutions and businesses. As shown
in Exhibit 3, a stunning 63% of Americans will be surfing the Web in 2003, more than doubling the
usage in 1999. Through its increasing reach and simplicity of use, the Internet has opened the door to a
global market where language and geographic barriers for many training products have been erased.
EXHIBIT 3: INTERNET USER GROWTH AS A PERCENTAGE OF TOTAL U.S. POPULATION
70%
60%
CAGR: 28%
50%
40%
30%
20%
10%
0%
1997 1998 1999 2000 2001 2002 2003
Sources: International Data Corporation, U.S. Census Bureau, and WR Hambrecht + Co estimates
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THE SOLUTION 鈥? BRING LEARNING TO PEOPLE
鈥淲e need to bring learning to people instead of bringing people to learning.鈥?
The MASIE Center, TechLearn 鈥?99
st
Technology has revolutionized business; now it must revolutionize learning. In the 21 century,
people will have to learn more than ever before. Especially for global organizations, live classroom-based
training is becoming too costly and cumbersome. Even if employees had the time to attend all the courses
and seminars and to read all the books and reports they should to remain up-to-date in their area of
work, the cost of such learning would be prohibitive. The need to transform how organizations learn
points to a more modern, efficient, and flexible alternative: e-learning. The mission of corporate e-
learning is to supply the workforce with an up-to-date and cost-effective program that yields motivated,
skilled, and loyal knowledge workers.
Anywhere, anytime, anyone. The Internet can offer the logical solution for a company鈥檚 education and
training objectives. We estimate that approximately 80% of the professional workforce already uses
computers on the job. Technical obstacles, such as access, standards, infrastructure, and bandwidth, will
not be an issue two years from now. The growth of the World Wide Web, high-capacity corporate
networks, and high-speed desktop computers will make learning available to people 24 hours a day, seven
days a week around the globe. This will enable businesses to distribute training and critical information to
multiple locations easily and conveniently. Employees can then access training when it is convenient for
them, at home or in the office.
Substantial cost savings due to elimination of travel expenses. When delivered through technology-
based solutions, training is less expensive per end user due to scaleable distribution and the elimination of
high salaries for trainers and consultants. The biggest benefit of e-learning, however, is that it eliminates
the expense and inconvenience of getting the instructor and students in the same place. According to
Training Magazine, corporations save between 50鈥?70% when replacing instructor-led training with
electronic content delivery. Opting for e-training also means that courses can be pared into shorter
sessions and spread out over several days or weeks so that the business would not lose an employee for
entire days at a time. Workers can also improve productivity and use their own time more efficiently, as
they no longer need to travel or fight rush-hour traffic to get to a class.
Just-in-time access to timely information. Web-based products allow instructors to update lessons and
materials across the entire network instantly. This keeps content fresh and consistent and gives students
immediate access to the most current data. Information can be retrieved just before it is required, rather
than being learned once in a classroom and subsequently forgotten. Training Magazine reported that
technology-based training has proven to have a 50鈥?60% better consistency of learning than traditional
classroom learning (c-learning).
Higher retention of content through personalized learning. Technology-based solutions allow more
room for individual differences in learning styles. They also provide a high level of simulation that can be
tailored to the learner鈥檚 level of proficiency. With 24 x 7 access, people can learn at their own pace and
review course material as often as needed. Since they can customize the learning material to their own
needs, students have more control over their learning process and can better understand the material,
leading to a 60% faster learning curve, compared to instructor-led training. The delivery of content in
smaller units, called 鈥渃hunks,鈥? contributes further to a more lasting learning effect. Whereas the average
content retention rate for an instructor-led class is only 58%, the more intensive e-learning experience
enhances the retention rate by 25 鈥? 60%.4 Higher retention of the material puts a higher value on every
dollar spent on training.
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Improved collaboration and interactivity among students. In times when small instructor-led classes
tend to be the exception, electronic learning solutions can offer more collaboration and interaction with
experts and peers as well as a higher success rate than the live alternative. Teaching and communication
techniques which create an interactive online environment include case studies, story-telling,
demonstrations, role-playing, simulations, streamed videos, online references, personalized coaching and
mentoring, discussion groups, project teams, chat rooms, e-mail, bulletin boards, tips, tutorials, FAQs,
and wizards. Distance education can be more stimulating and encourage more critical reasoning than a
traditional large instructor-led class because it allows the kind of interaction that takes place most fully in
small group settings. Studies have shown that students who take online courses are typically drawn into
the subject matter of the class more deeply than in a traditional course because of the discussions they get
involved in.5 This engagement is further facilitated by the fact that instructors do not monopolize
attention in an online environment. Another study found that online students had more peer contact with
others in the class, enjoyed it more, spent more time on class work, understood the material better, and
performed, on average, 20% better than students who were taught in the traditional classroom.6
Online training is less intimidating than instructor-led courses. Students taking an online course enter
a risk-free environment in which they can try new things and make mistakes without exposing themselves.
This characteristic is particularly valuable when trying to learn soft skills, such as leadership and decision-
making. A good learning program shows the consequences of students鈥? actions and where/why they went
wrong. After a failure, students can go back and try again. This type of learning experience eliminates the
embarrassment of failure in front of a group.
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DEFINITIONS: E-LEARNING VERSUS ONLINE LEARNING
EXHIBIT 4: NEW LEARNING TERMS
e-Learning The term e-learning covers a wide set of applications and processes,
= Technology-based Learning including computer-based learning, Web-based learning, virtual
classrooms, and digital collaboration.
We define e-learning as the delivery of content via all electronic
media, including the Internet, intranets, extranets, satellite
broadcast, audio/video tape, interactive TV, and CD-ROM. Yet,
e-learning is defined more narrowly than distance learning, which
would include text-based learning and courses conducted via
written correspondence.
For the purpose of this report, the term e-learning is used
synonymously with technology-based learning.
Terms like e-learning, technology-based learning, and Web-based
learning are defined and used differently by different organizations
and user groups. Moreover, use of these terms is constantly
changing, as the world of e-learning evolves.
Online Learning Online learning constitutes just one part of technology-based
= Web-based Learning learning and describes learning via Internet, intranet, and extranet.
Levels of sophistication of online learning vary. A basic online
learning program includes the text and graphics of the course,
exercises, testing, and record keeping, such as test scores and
bookmarks. A sophisticated online learning program includes
animations, simulations, audio and video sequences, peer and
expert discussion groups, online mentoring, links to material on a
corporate intranet or the Web, and communications with corporate
education records.
In this report, the term online learning is used synonymously with
Web-based learning or Internet-based learning.
We use the term e-training to describe corporate training conducted
e-Training
via e-learning.
= Corporate e-Learning
Source: WR Hambrecht + Co
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EXHIBIT 5: SUBSETS OF DISTANCE LEARNING
Distance Learning
E-learning
Online Learning
Computer-based
Learning
Source: WR Hambrecht + Co
EXHIBIT 6: SYNCHRONOUS VS. ASYNCHRONOUS LEARNING
Synchronous Course Delivery Synchronous learning stands for a real-time, instructor-led online
learning event, in which all participants are logged on at the same
time and communicate directly with each other.
Examples include virtual classrooms, audio/video conferencing,
Internet telephony, and two-way live satellite broadcasts of lectures
to students in a classroom.
Asynchronous Course Delivery Asynchronous learning describes a learning event in which people
cannot communicate without time delay.
Examples are self-paced courses taken via Internet or CD-ROM,
videotaped classes, streamed audio/video Web presentations, Q&A
mentoring, online chats and discussion groups, and e-mail.
Source: WR Hambrecht + Co
For further reference, a glossary of e-learning terminology appears at the end of this report.
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KEY TRENDS 鈥? THE END OF LEARNING AS WE KNOW IT
鈥淥nline learning is not the next big thing; it is the now big thing.鈥?
Donna J. Abernathy, Editor of Training and Development, 1999
Branding: quality is key. With new content providers, technology suppliers, and service vendors
emerging on a weekly basis, it is becoming more difficult for corporations to decide which training
provider to choose. Quality, price, and sophistication of courses and technology vary widely. Today, a
corporate training department that wants to purchase an online course on leadership, for example, has no
efficient means to compare dozens or even hundreds of leadership courses from different vendors. Low
market transparency and limited knowledge of e-learning products will likely represent serious challenges
for corporate customers in the next several years. We believe companies will increasingly prefer the 鈥渟afe
choice鈥? and retain providers with established brand names. Brand is and will continue to be the most
important factor influencing the competitive landscape. Corporate buyers will be willing to pay a
premium for a quality product to avoid even costlier mistakes. E-learning providers are currently
addressing the main factors constituting a brand, such as quality, consistency, competency, reputation,
and a loyal and recognized customer base. We believe that the players that successfully create a brand that
implies trust with corporate buyers in 2000 and perhaps the first half of 2001 will be the winners in this
market.
Traditional training companies adding the 鈥渆鈥? to learning. Heavily classroom-learning focused
players, such as Provant, DeVry, New Horizons Worldwide, ExecuTrain, Global Knowledge Network,
and SMG, have been adjusting their strategies and moving quickly into the hot technology-based training
market to secure a piece of the pie. Companies that do not enter the e-learning business now will become
footnotes in the competitive landscape. Traditional content providers are facing the problem of deciding
how much of their product line should remain in c-learning and how much should be moved into e-
learning, reflecting the change in learning habits of their customers. While only about 20% of corporate
training took place electronically in 1999, the number is estimated to rise to 40% by 2003.7 This
development mirrors the dramatic change in revenue sources of major players between 1997 and 1999.
Until last year, on-site training accounted for the lion鈥檚 share of revenues for most traditional c-learning
companies. For those who decided to test new waters with both feet, however, revenues from online
training have caught up quickly and should rise further.
One-stop shopping becoming all the rage, as importance of value-added services rises. As
technology-based training becomes an increasingly popular method of delivering training courses,
customer priorities are shifting away from stand-alone training courses to more comprehensive and
convenient training solutions. One factor driving the demand for value-added services is that vendors sell
increasingly complex e-training programs, which require more assistance with integration and
implementation. According to a survey conducted by IDC, approximately 75% of corporate training
managers acknowledge that value-added services play an important role in selecting an external training
provider. Services which currently dominate demand are custom curriculum design and development, pre-
and post-training mentoring and support, training effectiveness analysis, reporting and tracking tools, and
advisory services on how to integrate new e-training solutions into an organization鈥檚 education strategy.
Training vendors are now responding by creating 鈥渆nterprise training management solutions鈥? that offer a
full suite of products and services ranging from initial skills-gap analysis, course development, assessment,
and delivery, to course registration, tracking, and hosting.
Consolidation activity accelerating. High fragmentation and long course development cycles make the
e-training industry ripe for consolidation. While the 鈥渘ot me鈥? mentality is still widespread among players
in the industry, it is clear that independence may become too costly. Small size not only makes for
inefficient course production but also prevents creating and capturing brand recognition and market share
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quickly enough, a critical factor to win the race for market leadership. Another reason for accelerating
M&A activity is the increasing tendency of corporate customers to satisfy all their training needs with one
integrated provider. We expect to see more training vendors buying their way into skills and capacities
they do not possess to be able to offer a complete learning solution. As competitors determine customer
needs and refine their strategies, there will be more movement and positioning in the emerging e-learning
market in the next several years.
E-learning partnerships are increasingly common. A lot of players are not willing to jump on the
M&A bandwagon so early in the e-learning game. Instead, publishers of content are entering into
strategic alliances and partnerships with education technology vendors, training services suppliers, or
other content providers to enhance their product offerings, expand their distribution channels, explore
new market segments, and capture a larger share of the fast-growing IT and soft skills training markets.
Others team up with learning portals or even diversified ecommerce sites, leveraging their distribution
capabilities in order to reach a broader audience. Since partnerships are critical in growing an Internet
business, we should see many more of them in the year ahead. However, part of the value of a partnership
is its exclusivity. Currently all the players appear to be partnering with each other. Partnerships that are
easily replicable do not necessarily carry a significant value proposition.
Outsourcing: slowly but surely. An increasing number of companies are outsourcing part or all of their
training activities to outside consulting firms or training companies in order to reduce their overall
education training and administration costs. In 1999, 24% of all corporate training was outsourced, with
IT training making up the largest share by far, accounting for 63% of the total.8 However, with only 5%
year-over-year growth, the trend towards outsourcing training is moving more slowly than expected, most
likely because of the lack of quality content in the market. A study conducted by Training Magazine in
the fall of 1999 even concluded that the trend towards outsourcing does not seem to exist. We view this
as only a temporary pause until supply and demand for training content, technology, and services are
more balanced. Competitive pressures and cost-cutting should force corporations to continue outsourcing
their training activities, leading to the double-digit growth rates we have seen in previous years.
Competition should pick up. We anticipate competition in the corporate e-training market to heat up
over the next few years, especially in the IT training industry, where lack of customized and high-quality
content is not such an issue. Strong market growth and relatively low barriers to entry are attracting new
market entrants in both product segments (soft skills and IT training), including competitors from related
business areas such as the consulting industry. As new players appear on the scene and more enterprises
outsource their training activities, we expect training suppliers to compete more vigorously for market
leadership on the basis of brands. We also think that, in this early-stage market, prices for brand products
will be relatively unaffected by the battle for market share and may even increase.
World of training is converging. The trend towards convergence in corporate training can be observed
in different areas: 1) Since corporate customers no longer want to employ several different content,
services, and technology providers to meet their educational needs, training companies have started to
play on all three fronts; 2) Many IT and computer-training vendors are expanding their product lines with
management and soft skills training, while soft skills training providers are eyeing the technical arena; 3)
A number of major corporations have started to centralize their training operations, which entails
shutting down their stand-alone IT training departments and integrating them into their core corporate
training groups; and 4) Corporate trainers report that e-learning and c-learning are blending rather than
one ruling out the other.9 That is, the strongest use of online learning seems to be an extension rather than
a replacement for classroom learning.
Development cycles will collapse. Not too long ago, content developers had four-to-six months to
create an average two-hour learning program. Increasing competition and the velocity of the new
economy no longer allow e-learning companies to spend six months or even six weeks on the
development of a course. In the IT and software industries, for example, R&D cycles have accelerated
with staggering speed, and user software has been commoditized. Similar developments can be expected in
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the e-learning industry. Development cycles are predicted to shorten by 20% every year to two or three
weeks by 2004.10 This imperative will drive more template-based designs and fewer custom graphics.
Learning objects will be created in smaller chunks and reusable formats. As a consequence, the industry
will become more efficient and competitive.
Technology making quantum leaps and standards emerging. Technology infrastructure, especially
for bandwidth, varies widely in corporate America. Lack of compatibility between existing learning
technologies and current IS infrastructure is one of the main barriers to adopting Web-based training. We
are convinced that the move to defined, open standards is crucial to the continuing successful adoption of
e-learning, especially as it begins to transition beyond early adopters into the rapid growth phase of the
market. Authoring tools will need to operate across different platforms and communicate with other tools
used to build learning systems. Content and courseware must be reusable, interoperable, and easily
manageable at many different levels of complexity throughout the online instructional environment.
Enterprise learning systems have to accommodate numerous and varied learner requirements, needs, and
objectives. Corporate customers need to be able to easily track content created by multiple content
providers through one training management system and search vast local or distributed catalogs of
content to identify learning objects or modules on a particular topic. The race for education technology
standards is on. Advances in a wide range of technologies supporting diverse education and training tasks
are currently being made. Issues such as content interoperability, metadata tagging, and bandwidth are
being addressed. But the industry still has some homework to do to create the flexible, adaptive, and
integrated learning systems needed to push e-learning into the mainstream.
Market share of live Web-based course delivery expected to surge. Less than a third of all Internet-
based training purchases currently include synchronous course delivery.11 As new technological standards
and increasingly robust and interactive e-learning solutions emerge, we expect to see the arena of live
online collaboration move forward dramatically. One reason is people鈥檚 desire to interact while learning.
Students want to sense the online presence of their teachers and peers and to communicate with them in
real-time. Once such technology is widely available and increasingly user-friendly, corporations are likely
to make increasing use of virtual classrooms for employee training. Another likely reason for adoption is
the cost efficiency and convenience provided by synchronous content delivery. Real-time collaboration
technology offers many deployment opportunities beyond employee training. Traditional in-person
meetings, such as executive briefings, new product roll-outs, client presentations, and sales force briefings,
can be held online without loss of auditory/visual inputs and 360-degree interaction. We expect
companies that offer easy-to-use online collaboration technology and integrate voice communication,
content and application sharing, conferencing, instant messaging, and other collaboration tools
supporting real-time interaction to enjoy strong growth in the next few years.
Stronger demand for 鈥渟urrounds鈥? of instructor-led classes should spur growth. One of the hottest
growth areas in online learning is the creation of Internet/intranet meeting places (鈥渟urrounds鈥?) for
instructor-led classes to provide community, communication, and supplemental materials online. An
increasing number of educational institutions and corporations are utilizing online authoring and delivery
systems to build surrounds supporting the learning process.12 This new learning model facilitates studying,
note taking, class discussions, and 鈥渃atching up,鈥? all of which enhance classroom instruction. Surrounds
also help to overcome anxiety and reservations, especially among older age groups, and build learner
acceptance and familiarity with online learning. In our view, this step-by-step solution should make more
learners willing to take pure Web-delivered classes, contributing to the rapid growth of the industry.
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THE CORPORATE E-LEARNING MARKET 鈥? THE PIE IS BIG
E-learning is penetrating all areas of corporate training. In 1999, corporate America spent $62.5
billion on educating and training its workforce. At $3 billion, the technology-delivered corporate training
segment occupied only a fraction of the total market, but has been growing rapidly (see Exhibit 7).
Technology-based training solutions are changing the way corporations deliver training in nearly all
segments of the business process. What started out with IT training has found its way into management,
sales, customer service, and professional development training. The number of e-learning pilots conducted
in the corporate world has increased dramatically over the last 2 years. In 1999, approximately 92% of
large corporations implemented Web-based learning pilots.13 A large majority of Fortune 500 companies
today already uses some form of e-learning to deliver professional development and training to their
employees.
Soft skills and IT training each account for 50% of training budgets, but IT training is leading in adoption
of e-learning. The corporate training market is divided between two broad product groups: 1) business
and soft skills training, encompassing areas such as general management, leadership, communication,
team building, sales and marketing, human resources, and professional development; and 2) IT training,
comprising application development tools, application software, and system infrastructure software. Both
segments accounted for roughly half of the total domestic spending on training in 1999, as shown in the
table below. However, of the $15 billion outsourced, almost two-thirds were invested in IT training. The
stronger emphasis on IT training is even more striking in the e-learning segment, where growth of IT
training has been surging ahead of soft skills, accounting for $2.3 billion, compared with $0.7 billion for
soft skills education. Traditionally, content providers have specialized in either soft skills training or IT
and desktop training. In recent months, we have observed these areas beginning to overlap, as soft skills
training providers add IT training courses and vice versa.
EXHIBIT 7: CORPORATE TRAINING MARKET SIZE BY TRAINING PRODUCT
AND DELIVERY METHOD IN 1999 ($ BILLION)
IT TRAINING SOFT SKILLS TRAINING
Total Corporate Training Market $31.19 $31.31
Outsourced Training Market 9.45 5.55
Technology-based Training Market 2.27 0.72
Web-based Training Market 0.87 0.20
Source: Training Magazine, International Data Corporation, and WR Hambrecht + Co estimates
75% of corporate training is still instructor-led. With approximately 75% market share, instructor-led
training is still the delivery method of choice for both soft skills and IT training. The remaining 25% is
delivered by various technologies 鈥? including the Internet, intranets, CD-ROM, satellite broadcast, and
audio/video 鈥? and plain text.
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EXHIBIT 8: TRAINING DELIVERY METHODS IN 1999
Soft Skills Training
IT Training
Text-based Text-based
5% 8%
Technology- Technology-
based based
24% 13%
Instructor- Instructor-
led led
71% 79%
Source: International Data Corporation, 1999
Traditional models are losing ground. While traditional classroom training accounted for the lion鈥檚
share of corporate training in 1999, we see learning gradually tilting towards technology-based delivery.
The cost effectiveness, flexibility, and convenience, as well as increased quality and availability of e-
learning, should contribute to broader deployment of the new delivery medium among organizations
worldwide. A survey conducted by Corporate University Xchange suggests that the overall share of
classroom training will decline from 80%14 to 60% by 2003, doubling the current share of electronic
training delivery.
EXHIBIT 9: E-LEARNING MARKET GAINING MARKET SHARE
100% c-learning
80%
80%
60%
e-learning
60%
40%
40%
20%
20%
0%
1999 2003
Source: Corporate University Xchange, 1999
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CD-ROMs and video tapes are losing market share to the Internet. Of all technology-delivered
training, the largest portion is currently made available on CD-ROM, followed by online training via
corporations鈥? internal computer networks and videotape (see Exhibit 10). These numbers should change
rapidly, as Internet-based learning is gaining momentum, growing at 83% per year, according to IDC. We
believe CD-ROMs 鈥? while growing slowly 鈥? will be an important delivery medium for several years to
come because of their ease of use, the rich medium they provide, and their large storage capabilities. By
2001, however, the Web will likely become the largest electronic delivery vehicle for corporate training
and, by 2003, should exceed the use of CD-ROMs by the factor of four.
EXHIBIT 10: DELIVERY FORMAT MIX OF TECHNOLOGY-BASED TRAINING, 1998
Soft Skills Training
IT Training
Satellite
Satellite
Broadcast
Video Tape Broadcast Other
14.7%
6.8% 2.6% 1.8%
Video Tape
32.0%
Internet/
intranet
CD-ROM
CD-ROM
27.7%
36.0%
62.9%
Internet/
intranet
15.6%
DELIVERY FORMAT MIX OF TECHNOLOGY-BASED TRAINING, 1999
Soft Skills Training
IT Training
Satellite
Satellite
Video Tape Other
Broadcast
Broadcast
4.7% 7.1%
11.5%
1.8%
Video Tape
21.2%
Internet/
intranet
38.4%
CD-ROM
CD-ROM
32.4%
Internet/
55.1%
intranet
27.8%
Source: International Data Corporation, 1999
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Dramatic growth of the Internet as delivery medium in IT industry. The rising power of the new
learning paradigm can be demonstrated best in the IT industry. The information technology industry, an
area that requires constant education of its workers, has exhibited the highest demand for online
education in recent years. In 1998, Web-based training accounted merely for a quarter of e-learning in
this sector. However, it should represent nearly 80% of all technology-delivered IT training by 2003,
growing twice as fast as the overall e-training segment (see Exhibit 11). The gain in popularity can be
explained by the fact that vendors are gradually overcoming obstacles such as limited course availability,
lack of human interaction, uncertain quality of content, and lack of tools to monitor student progress.
EXHIBIT 11: GROWTH OF ONLINE VERSUS TECHNOLOGY-DELIVERED IT TRAINING
CAGR 33%
8.0 $6.7
CAGR 65%
7.0
$5.3
6.0
Revenue ($bil.)
5.0
4.0
3.0
$1.6
2.0
$0.4
1.0
0.0
1998 2003
Internet-based Training
Technology-based Training
Source: International Data Corporation, 1999
Web-based training market poised for staggering growth. More than 70 million people worldwide
received some form of education via the Internet in 1999.15 We believe this represents just the initial
impact of online learning on education, training, and information exchange. In the not too distant future,
training for virtually every professional job should be available on the Internet. Revenues from Web-based
training are forecasted to climb from $550 million in 1998 to $11.4 billion in 2003 (see Exhibit 12). A
stunning CAGR of 83% makes online education the hottest trend in corporate training.
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EXHIBIT 12: GROWTH OF THE U.S. INTERNET-BASED TRAINING MARKET BY TRAINING PRODUCT
7.0 $6.1
$5.3
6.0
CAGR Soft Skills: 123%
CAGR IT Training: 65%
5.0
$4.1
Revenue ($ bil.)
4.0
$3.1
$2.7
3.0
$1.7
2.0 $1.4
$0.9
$0.4 $0.6
1.0 $0.2
$0.1
0.0
1998 1999 2000 2001 2002 2003
Soft Skills Training
IT Training
Source: International Data Corporation, 2000
Online soft skills training market growing twice as fast as IT training segment. While spending on IT
and soft skills education has been split fairly evenly in corporate training departments, IT training has
dominated the Web-delivered training segment since its emergence. Between 1997 and 1999, the IT online
training market outpaced soft skills training fourfold. The Internet seemed to be a more natural medium
for teaching desktop applications, networking, or Internet skills than for imparting business management
or customer service skills. The limited availability of customized and quality content contributed to the
slower growth of online soft skills training market. We expect the mix of IT and non-IT training to shift
dramatically in the next three years. More existing soft skill courses will likely be reformatted for online
use, vendors will likely increasingly adopt a 鈥淲eb-first鈥? delivery strategy, and more IT training providers
will likely ramp up soft skills content offerings. Exhibiting a CAGR of 123%, the business and soft skills
training segment is catching up quickly and should, according to IDC estimates, finally surpass IT training
by 2003.
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MARKET SEGMENTATION 鈥? CLAIMING A STAKE ON THE NEW FRONTIER
E-learning industry is in early phase of development and highly fragmented. The technology-based
education sector is an immature, dynamic market that has not been well defined. With high fragmentation
and low transparency, it shows all the characteristics of a very young market. The global e-learning
industry comprises approximately 5,000 participants offering every imaginable method of e-learning. The
vast majority of e-education companies are private. No single competitor in the e-training market
accounts for 5% market share or more. Recognizing their inefficiencies, market participants have started
to consolidate.
Intensity of competition low. E-training vendors, especially in the soft skills segment, have experienced
little direct competition so far. The explanation for this phenomenon is threefold: 1) demand for e-
learning is tremendous; 2) business strategies and target groups of market participants vary widely, and
there is little overlap in their product lines; and 3) transparency and information flow in the market are
still low. Training companies generally focus on their clients鈥? needs and many have little knowledge of
what their competitors are doing. In many cases, they do not even know who their potential competitors
are.
E-training market rapidly transforming and segmentation just beginning. Across the country,
training companies are rushing to stake out territory on the electronic frontier. The shape of the just
emerging industry is changing monthly, as training providers are trying either to find a defensible position
in one of the existing market segments or create new ones. We expect five market dynamics to contribute
to the transformation of the e-learning industry in the next several years:
鈥? emergence of new Internet technologies and training delivery methods
鈥? innovation of new learning products and value-added services
鈥? compression of research and development cycles
鈥? acceleration of consolidation activities and formation of partnerships
鈥? entrance of new competitors and emergence of market leaders
Content, Technology, and Services are the three major market segments. The emerging e-learning
market already shows a high degree of complexity, which could allow us to break it up into 50 or more
market segments. However, three general market segments currently exist that capture the general trends
of the industry: Content, Technology, and Services (see Exhibits 13 and 15).
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EXHIBIT 13: E-LEARNING MARKET SEGMENTS
CONTENT KEY PLAYERS
Content providers author and publish intellectual property that Pure online plays 鈥? Publishers:
may use a variety of training delivery methods and media. This SmartForce, Ninth House Network, Teach.com,
segment includes customized and off-the-shelf courseware, DigitalThink, NETg, Cognitive Arts, SMGnet, SkillSoft,
synchronous and asynchronous course delivery, linear and Internal and External Communication (IEC)
branched content, and complex multimedia simulations for soft
skills and/or IT training.
Pure online plays 鈥? Licensers:
Certain e-learning vendors license content from large
brandholders among academic institutions or professional Pensare, UNext.com, eMind.com, University Access
associations and develop libraries of online classes targeting the
B2B, B2C, and post-secondary education markets.
Traditional classroom training companies:
Several publishers of content have started to add services, such
Provant, New Horizons Worldwide, Learning Tree
as custom curriculum design, skills assessment and testing,
International, DeVry, ARIS Corporation, Franklin
strategy and development consulting, program implementation
Covey, Global Knowledge Network, ExecuTrain
and integration support, coaching and mentoring, training
effectiveness analysis, and hosting, to their product offerings.
TECHNOLOGY KEY PLAYERS
Technology vendors provide creation and capture tools, Learning Management Systems & Authoring Tools:
enterprise systems, and learning-specific hardware enabling the Saba Software, Docent, Click2learn.com, WBT Systems,
creation, deployment, delivery, and management of technology- Lotus Development Corporation, Teamscape, Pinnacle
based training. Multimedia, LearningByte International, Macromedia,
EduNeering
Within these three technology segments, the education
technology market includes companies offering one or more of
the following products: authoring and Web publishing tools,
Virtual Classrooms & Conferencing Technology:
capture and edit tools, training management and administration
InterWise, Centra Software, LearnLinc Corporation, One
systems, ERP systems, knowledge management systems,
Touch Systems, PlaceWare
performance support systems, collaborative software & virtual
classroom technology, distribution hardware, interaction
hardware, audio/video streaming and conferencing technology,
testing and assessment tools, simulation tools, and other
enabling technologies.
SERVICES KEY PLAYERS
Service providers offer a variety of learning-related services,
which we have categorized in three groups: portals, learning
service providers (LSPs), and other professional services.
Portals provide consolidated access to learning and training
Portals & Communities:
from multiple sources by aggregating, hosting, and distributing
content. A number of portals operate online communities, either Click2learn.com, Headlight.com, TrainingNet,
as stand-alone learning communities or in combination with KnowledgePlanet.com, Learn2.com, eMind.com,
course offerings. Certain content providers and tool companies SmartPlanet.com, HungryMinds.com, Pro2Net,
have launched portals in addition to their original core business. University.com
Most of the distributors and communities target other market
segments, such as the post-secondary and continuing education
markets, as well.
LSPs, a specialized type of ASP, offer learning and content
management services, training delivery software, and/or other LSPs:
enabling technologies and services on a hosted/rental basis via
Eduprise.com, KnowledgePlanet.com, Infonautics,
diverse business models. Categories of LSPs also include
Knowledge Navigators, MindLever.com
providers offering assessment and testing services, certification
Certification & Testing Services:
and degree granting, online tutoring and mentoring, Internet-
based collaboration services, and media production and delivery CyberStateU.com, ProsoftTraining.com, HyCurve,
services. Brainbench, MeasureUp, Virtual University Enterprise
Other professional services include contract content
developers, consultants, Web integrators and hosts, and Other Services:
network and IT service providers.
RWD Technologies, LearningByte International,
Eloquent
Source: WR Hambrecht + Co
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Content is the largest market segment, but services is the fastest growing. Among the three market
segments 鈥? content, technology, and services 鈥? market share and growth rates are expected to vary
considerably. Content, growing at a CAGR of 74%, should continue to be the largest segment in the
training market, according to IDC estimates. By 2003, it is predicted to account for $6.2 billion in
revenues, up from $735 million in 1999. However, its overall market share is expected to decline from
66% in 1999 to 54% in 2003, giving up territory to the services segment. Training services, such as
systems integration, needs assessment, hosting, maintenance, and online mentoring, are forecasted to be
the fasted growing component of the market, growing at 111% annually. Within the next three years,
services are expected to double their current market share, reaching 36% in 2003, or $4.1 billion in
revenues (see Exhibit 14). The smallest element of the training market consists of delivery technologies,
including training management systems, authoring tools, add-on tools, collaborative software, and virtual
classrooms. The technology segment is expected to have an annual growth rate of 80% through 2003.
EXHIBIT 14: GROWTH OF THE U.S. INTERNET-BASED TRAINING MARKET BY MARKET SEGMENT
7.0
$6.2
6.0
Combined CAGR: 83%
5.0
$4.1
$3.9
Revenue ($ bil.)
4.0
$2.4
3.0
$2.3
2.0 $1.3
$1.2 $1.1
$0.7 $0.8
$0.5 $0.6
1.0 $0.4
$0.4
$0.1$0.1 $0.2 $0.2
0.0
1998 1999 2000 2001 2002 2003
Tools/Technology Services/Hosting Content
Source: International Data Corporation, 2000
Lines between the three major segments already blurring. Many training providers have begun to
branch out into other areas in response to the needs of their customers. Click2learn.com, the authoring
tools and learning management systems provider, now aggregates and sells third-party online courses as
well. Learn2.com, originally an e-learning portal and community, moved into content production through
last year鈥檚 acquisition of ViaGrafix. SmartForce expanded from content into community portals by
acquiring Scholars.com. eMind.com launched its operations as a blend between a content publisher and a
distributor of online courses. IEC custom designs custom content and also develops training management
and performance support systems. LearningByte International complements its e-learning consulting and
content development services by marketing authoring software. In an effort to offer a value-added,
complete e-learning solution, certain publishers and resellers of content, such as Pensare, Ninth House
Network, DigitalThink, SmartForce, Teach.com, and KnowledgePlanet.com have begun to integrate
technology, communities, hosting, and/or other services into their original product lines. We expect to see
more 鈥渂order hopping鈥? in the short term and reiterate that the definitions of training market segments
are changing as rapidly as the landscape of the entire education industry.
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EXHIBIT 15: CORPORATE E-LEARNING UNIVERSE
Technology
Content
Learning Tree Centra Software
WBT Systems
SMGnet
NETg
InterWise
KnowledgeNet
Pinnacle Multimedia
Int./Ext.
SkillSoft
Communication LearnLinc
ExecuTrain One Touch Systems
Pensare
Cognitive Arts Teamscape
Ninth House Docent
KnowledgePlanet
Global Knowledge Network
Macromedia
DigitalThink Lotus Development
SmartForce
UNext.com
New Horizons Teach.com Saba Software
ProsoftTraining
RWD Technologies
Provant DeVry LearningByte
Learn2.com Click2learn.com
eMind.com
CyberStateU.com
Headlight.com HyCurve
Knowledge Navigators
Eduprise.com
TrainingNet
MeasureUp
Infonautics
Hungry Minds
Brainbench
SmartPlanet
Services
Source: WR Hambrecht + Co
E-learning providers competing with traditional c-learning vendors. In addition to facing 鈥渋ntruders鈥?
from other e-learning segments, online plays compete with mature classroom training and performance
improvement providers that are just beginning to discover the world of e-training. The question is how
quickly can traditional on-site training providers expand or refocus their operations to garner market
share in the e-learning space. We are convinced that vendors that miss the market and cannot offer an e-
training opportunity shortly will be left behind. C-players to watch are Achieve Global, ARIS
Corporation, Development Dimensions International, DeVry, ExecuTrain, Franklin Covey, Global
Knowledge Network, Learning Tree International, New Horizons Worldwide, and Provant, all of which
are in different stages of getting their feet wet in the Internet. What will likely occur is the merger of
鈥渃licks鈥? with 鈥渂ricks,鈥? as in many other industries. Traditional c-learning companies may get frustrated
with their own attempts to enter this market and decide to acquire an online presence for time-to-market
advantage. Alternatively, e-learning companies that have highly valued public currency may in fact go
shopping for a physical presence and more content to enhance their revenue streams.
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Lots of portals appearing on the e-learning scene. The learning portal game is new, but exploding.
We estimate that in 1999, about 100 learning portals went into business claiming to be the primary
destination for learning on the Internet. Barriers to entry are low, since the cost of building an online
portal is relatively small. Demand exists, since content providers need portals as partners to expand their
distribution capabilities and customers are hungry for electronic training delivery. For a new portal, it is
key to aggregate as much content as possible in the shortest amount of time in order to gain visibility and
market share. We predict that new market entrants will come up with more diverse business models and
increasingly offer value-added services to differentiate themselves from the competition. In particular, a
number of portals will likely add authoring and collaborative tools to their product mix. In 2000, we
expect to see even more new market entrants than in 1999, causing stiffer competition and beginning
consolidation. While more competition is healthy, only so many Amazon.coms can and will survive. And,
as with Amazon, first movers with established brand names should have a competitive advantage. Within
the next 12 鈥? 18 months, the learning portal war may well be over.
VALUATION 鈥? COMPARING INCOMPARABLES
Variety of business concepts and lack of market depth complicate comparative valuation analysis.
Even though players within each of the three segments may look very much alike, a closer look reveals
significant differences with respect to business concepts, target groups, and strategy. It is difficult to find
two e-learning companies that do the exact same thing. Their products, services, partners, and customers
vary so widely that an attempt to compare them in a meaningful way is a challenge. In our analysis, we
have separated e-learning content companies from traditional c-learning vendors because their business
models differ with respect to growth rates, scalability of revenues, cost and product pricing structures,
competitive situation, deployment of technology, etc. On the other hand, we group technology and service
providers together since their products and services often overlap.
E-learning companies trade at revenue multiples seven times higher than c-learning companies.
Our analysis reveals significant differences in valuation between e-learning and c-learning companies.
While the e-learning-focused companies trade at a median of 10.2 times calendar year (CY) 2000
revenues, traditional c-learning companies trade at 1.5 times CY 2000 revenues. The market obviously
perceives significant differences in future revenue growth potential between different business models
within the B2B education industry. This may be explained by both the differences in scalability between
business models and secular shifts in customer demand. Moreover, e-learning companies do not face the
challenge of changing their business strategy. Most brick-and-mortar companies, on the other hand, are
currently transforming their business models to reflect the growing demand for online learning, which
poses certain risks and uncertainties with respect to their future revenue streams and, thereby, valuation.
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EXHIBIT 16: COMPARABLE COMPANY ANALYSIS
Corporate e-Learning Universe
Gross
($ in millions, except per share data)
Price 52-Week 52-Week Market Enterprise Revenues EV / Revenues Price / Revenues Margin
Value (1)
Company Name Ticker 2/28/00 High Low Value Preferred IBD Cash LTM CY2000E LTM CY2000E LTM CY2000E LTM
e-Learning Focus: Content
DigitalThink, Inc. DTHK $1,164.8 $0.0 $0.0 $23.3 $1,141.5 $7.2 NA 159.0x NA 162.3x NA 49.5%
$37.13 $38.50 $20.00
SkillSoft Corporation SKIL 210.6 20.7 0.5 0.5 231.3 2.4 NA 97.6 NA 88.8 NA 79.0%
16.75 21.00 13.75
(2)
SmartForce, PLC SMTF 2,240.4 - 6.7 69.5 2,177.5 197.8 154.8 11.0 14.1 11.3 14.5 85.0%
43.25 47.50 8.56
Average $ 1,205.3 $ 2.4 $ 31.1 $ 1,183.4 89.2x 14.1x 87.5x 14.5x 71.2%
Median $ 1,164.8 $ 0.5 $ 23.3 $ 1,141.5 97.6x 14.1x 88.8x 14.5x 82.0%
e-Learning Focus: Technology & Services
Caliber Learning Network, Inc. CLBR $83.4 $51.7 $14.1 $15.3 $133.8 $26.0 $68.2 5.1x 2.0x 3.2x 1.2x 45.1%
$6.75 $9.50 $1.06
Centra Software, Inc. CTRA 770.2 - 0.7 7.9 763.0 8.6 NA 88.8 NA 89.6 NA 80.0%
33.13 38.50 25.00
Click2learn.com CLKS 243.8 - - 19.5 224.3 34.7 42.8 6.5 5.2 7.0 5.7 53.7%
16.56 22.94 3.66
Infonautics, Inc. INFO 115.6 - 3.5 2.5 116.6 22.0 NA 5.3 NA 5.3 NA 69.8%
9.81 17.38 3.63
Learn2.com, Inc. LTWO 306.0 - 0.5 11.5 294.9 13.6 30.0 21.7 9.8 22.6 10.2 76.2%
6.00 10.00 2.72
ProsoftTraining.com POSO 248.1 - 3.6 1.0 250.7 10.5 21.3 23.9 11.8 23.7 11.6 5.8%
17.25 19.25 2.00
RWD Technologies, Inc. RWDT 126.8 - 1.1 28.2 99.7 124.4 NA 0.8 NA 1.0 NA 19.3%
8.75 19.25 6.41
Average $ 270.5 $ 3.4 $ 12.3 $ 269.0 21.7x 7.2x 21.8x 7.2x 50.0%
Median $ 243.8 $ 1.1 $ 11.5 $ 224.3 6.5x 7.5x 7.0x 7.9x 53.7%
Average e-Learning Companies $ 551.0 $ 7.2 $ 3.1 $ 17.9 # $ 543.3 42.0x 8.6x 41.5x 8.6x 56.3%
Median e-Learning Companies $ 245.9 $- $ 0.9 $ 13.4 # $ 241.0 16.4x 9.8x 16.9x 10.2x 61.8%
c-Learning Focus
Aris Corporation ARSC $195.8 $0.0 $0.0 $10.5 $185.3 $118.0 $133.0 1.6x 1.4x 1.7x 1.5x 49.1%
$15.50 $15.75 $4.94
DeVry, Inc. DV 1,235.1 0.0 20.0 39.8 1,215.3 469.2 563.8 2.6 2.2 2.6 2.2 43.7%
17.75 31.88 15.63
Franklin Covey Co. FC 164.3 76.8 81.4 26.4 296.1 558.6 NA 0.5 NA 0.3 NA 66.2%
8.13 13.31 5.94
Learning Tree International, Inc. LTRE 602.0 0.0 0.0 45.0 557.0 193.6 200.9 2.9 2.8 3.1 3.0 61.3%
27.81 33.88 6.00
New Horizons Worldwide, Inc. NEWH 144.0 0.0 12.1 4.3 151.8 111.5 148.8 1.4 1.0 1.3 1.0 54.9%
15.06 20.25 10.94
Provant, Inc. POVT 131.4 0.2 54.5 7.4 178.8 184.4 258.9 1.0 0.7 0.7 0.5 58.8%
7.06 26.00 6.88
Average $ 412.1 $ 28.0 $ 22.2 $ 430.7 1.6x 1.6x 1.6x 1.6x 55.6x
Median $ 180.0 $ 16.0 $ 18.4 $ 240.7 1.5x 1.4x 1.5x 1.5x 56.9x
Total Average $ 498.9 $ 12.4 $ 19.5 $ 501.1 26.9x 5.1x 26.5x 5.1x 56.1x
Total Median $ 227.2 $ 2.3 $ 13.4 $ 241.0 5.2x 2.5x 4.2x 2.6x 56.9x
(1) Enterprise value is defined as market value plus interest-bearing debt, plus minority interests, plus preferred stock, less cash and cash equivalents.
(2) Along with a major strategy shift in late 1999, SmartForce changed its revenue recognition model. As a result of this accounting change, revenue estimates for 2000
do not reflect the true revenue growth rate. Before the change in revenue recognition, CY 2000 revenues were estimated at approximately $245 MM.
SOFT SKILLS TRAINING INDUSTRY 鈥? CONTENT IS KING
Tremendous opportunities, but lack of high-quality content is hindering growth. The online training
market for soft skills is estimated at $560 million in 2000. With 3-digit annual growth rates, it is expected
to top the IT training market within 3 years. The large opportunity in the soft skills training industry
stems from the variety of skills that can be trained and improved. Even though demand for high-quality
Internet-delivered content is booming, suppliers cannot deliver the breadth of desired content at this time.
This inability to deliver will likely keep the market share for instructor-led training artificially high in the
short term.
Long development cycles call for consolidation. One reason for the lack of quality Web-based content
for soft skills training is that the industry is characterized by longer research and development cycles than
the IT training industry. Time-to-market is particularly long for complex, media-rich, highly interactive,
and/or customized solutions. Moreover, many e-education providers are tiny businesses that do not have
the development capacities to bring products to market more quickly. Adding to the problem are serious
challenges of recruiting skilled labor. As a consequence, many publishers of courseware still have a very
limited library of training titles. However, time-to-market is critical to capturing a larger market share.
This is even more true for an Internet business. Although some suppliers already employ third-party
developers, we doubt many competitors will be able to grow fast enough internally to secure a sizable
piece of the pie.
Custom-developed content in high demand. Approximately 40% of training budgets is spent on
customized training products, leaving the remaining 60% to off-the-shelf products.16 Training areas
enjoying the highest increase in demand are professional development, customer service, team building,
leadership, and communication. Despite accounting for a smaller share of the market, demand for custom
content is rising more quickly than demand for off-the-shelf products. In particular, large corporations
value customized, high-quality training as a key differentiator in competition. The true market
opportunities for custom content are still untapped, as many corporations hesitate to outsource a larger
proportion of their training due to the lack of targeted content and custom training services in the market.
Partnerships with universities on the rise. A recent development in the soft skills training space is the
growing number of partnerships between e-learning vendors and academic institutions to create 鈥渧irtual
universities鈥? online. These universities are intended to offer higher education courses, corporate training,
and certification programs. Two e-learning players leading this initiative are Pensare, partnering with
Harvard Business School Publishing, Duke University, Wharton School of Business, and University of
Southern California, and UNext.com, collaborating with Stanford University, Columbia Business School,
University of Chicago, and the London School of Economics. This business model combines two groups
of market participants with mutual interests. Academic institutions, the major producers of branded
educational content, recognize the need to offer and distribute their degree programs online, but generally
do not have the technical or financial capacity. E-learning companies, on the other hand, see the
opportunity of building a brand more quickly and less expensively using the 鈥淚ntel inside鈥? concept. As
more competitors enter the market, we believe that accreditation of the new online universities and
exclusivity of partnerships will be essential differentiators among e-learning competitors.
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IT TRAINING INDUSTRY 鈥? FAST OUT OF THE GATE
Strong growth in IT training industry driven by rapid obsolescence of knowledge. Global spending
on IT training was sluggish in 1998. This sluggishness could be attributed to slimmer training budgets,
lack of major new product releases, decreasing cost of training courses, and increased outsourcing of the
IS function. IDC predicts that in the next four years, the worldwide IT training market is poised for
stronger growth, rising from $18.4 billion in 1999 to over $27.8 billion by 2003, which represents an
average CAGR of 11%. The need to update employee skills in the implementation of complex
technologies is one of the most important drivers of IT training. 鈥淚nternet time鈥? makes the delivery of
timely and relevant IT training a more significant problem than ever before. It has become crucial for
companies to train IT professionals before information is obsolete. Other factors fueling industry growth
are the continuous introduction of new technologies and the release of new software products.
Market share of e-learning and instructor-led training is evening out. In 2000, the U.S. IT education
and training market is projected to be a $10.6 billion industry, accounting for approximately 53% of the
global IT training market. Technology-based training will make up 30% of the total, or approximately
$3.2 billion. Whereas instructor-led training barely budges with a CAGR of slightly more than 3%,
technology-delivered training is prospering at more than 33% annually (see Exhibit 17). By 2003,
e-learning is projected to be a $6.7 billion industry, with a 46% share of the overall IT training market.
EXHIBIT 17: U.S. IT TRAINING REVENUE BY DELIVERY SEGMENT
15.00
12.50
6.66
5.57
10.00 4.26
Revenue ($ bil.)
3.19
2.27
1.59
7.50
1.25
5.00
7.81
7.58 7.53
7.43
7.18
6.76
6.11
2.50
0.00
1997 1998 1999 2000E 2001E 2002E 2003E
Instructor-led & Text based Technology-based
Source: International Data Corporation, 1999
Web-based IT training taking off. We expect to see significant changes in the delivery format mix in the
years ahead. The days of CD-ROMs and videotape are numbered, as the Internet as training delivery
medium is capturing virtually all the market growth. While CD-ROM training is stagnating and training
via videotape is declining at an annual rate of over 18%, online training is exhibiting 56% incremental
growth for 1999鈥?2003 (see Exhibit 18). IDC projects that online learning will account for nearly 37% of
the overall U.S. IT training industry in 2003, up from 9% in 1999. One of the primary influences is
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bandwidth. In the corporate environment, bandwidth has vastly improved in the last few years, and is
expected to continue as the adoption of switched Ethernet grows. DSL and cable modems to the home
will likewise increase bandwidth to the home. Continued improvements in network infrastructure do not
bode well for companies that rely exclusively on physical delivery of educational material and will
facilitate the growth of Web-based training. Another reason for this surge is that many individuals seeking
IT training are, by definition, comfortable with using technology, leading to less resistance to
implementation and usage.
EXHIBIT 18: U.S. TECHNOLOGY-BASED IT TRAINING REVENUE BY DELIVERY MEDIUM
7.0
6.0
5.0
Revenue ($ bil.)
5.3
4.0
4.1
2.7
3.0
1.7
2.0 0.9
0.4
0.2
1.0 1.5 1.6 1.5
1.4 1.3
1.1
1.1
0.0
1997 1998 1999 2000E 2001E 2002E 2003E
CD-ROM, Video & Satellite Web-based Training
Source: International Data Corporation, 1999
Shortage of skilled IT professionals hampering growth. The worldwide lack of IT workers is a critical
concern and is expected to continue in the new millennium. In the U.S., there is a current shortage of
722,000 IT workers, a number forecasted by IDC to reach 847,000 in 2002. Competition for the most
talented employees causes inflation of salaries, IT project delays, and increasing employee attrition.
Complicating matters, knowledge and skills necessary to be competent in IT advance just as rapidly as
technology itself. Staying competent and learning continuously has become one of the most important
issues of the IT workforce, creating huge opportunities for IT training providers.
Trend toward IT certification growing rapidly. The market for IT certification breaks down into vendor-
specific programs, such as Microsoft鈥檚 MCSE and MCP, Novell鈥檚 CNE and CIP, and Cisco鈥檚 CCNA, and
vendor-neutral certification, such as the Computing Technology Industry Association鈥檚 A+ and I-net+,
ProsoftTraining鈥檚 CIW, and HyCurve鈥檚 Internet Professional programs. Whereas vendor-specific programs
have dominated the market in previous years, the recently emerged vendor-neutral certifications are catching
up quickly, as they provide a skill set covering various types of products and platforms from different
vendors and, thereby, increase employee flexibility on the job. The number of IT certifications offered has
exploded over the last two years. New programs, such as Linux and Internet certifications, are continuously
emerging. We estimate that the total number of certifications available to IT professionals in 2000 will
exceed 200. Certification establishes an independent, widely accepted standard, makes employee skills
measurable, and eventually leads to higher productivity, which explains the high demand certification
programs are enjoying. According to our estimates, corporate customers will spend approximately $1.5
billion for IT certification training and testing in 2000. We expect spending on certification programs to
grow more rapidly than the overall IT training industry, averaging a CAGR of roughly 15% through 2003.
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SCRUTINIZING ONLINE TRAINING 鈥? IS C-LEARNING GOING TO DISAPPEAR?
鈥淲hat kind of [computer] network would make it possible to bump into
someone on the way to class and make a new friend, to carry on a heated
discussion after the end of the hour, to catch the professor鈥檚 eye and exchange
an instantaneous glance in which boredom or alertness is tacitly expressed?鈥?
Andrew Feinberg, Ph.D., University of San Diego, 1999
Human interaction a critical component of professional development. We believe there are situations
in which classroom training cannot be replaced. Certain content 鈥? because of its nature, relative value, or
importance 鈥? is not suitable for technology-based delivery. While online training is especially well suited
for the acquisition of IT skills, it has certain limitations in the arena of soft skills training. Strategy
training, for example, still needs to be done face-to-face in most cases, since this area involves continuous
give and take. Other educational content that does not translate well into a virtual environment is
material requiring significant hands-on application, with a strong emphasis on peer review and
collaboration. Examples include classes taken to improve writing, communication, or presentation skills,
where the perception of eye contact, body language, facial expressions, as well as direct dialogue and
sharing of experiences are necessary for the comprehension of the subject matter and the success of the
course.
Not everyone is best served by electronic instruction. Certain groups of employees do not want to
miss the 鈥渆dutainment value鈥? of a live experience and desire the total interactivity with a human trainer.
Others are simply uncomfortable with computers. For a number of individuals, technology-based training
is not the most efficient learning method, as their learning style is auditory or kinesthetic as opposed to
visual. The classroom also provides guidance and structure. These elements are important for individuals
who lack the motivation and confidence to succeed in a self-study-only program. These needs are
currently best addressed in c-learning, but can and will likely be addressed in future e-learning projects as
well.
Instructor-led training will continue to play a role in delivering information. We believe technology
will be used to leverage and expand the reach of c-learning, rather than replace it completely. This applies
especially to K-12 and post-secondary education. The efficient acquisition of knowledge is only a fraction
of what going to college means. Face-to-face interaction with professors, living away from one鈥檚 parents,
and socializing with a diverse group of people also contribute to the educational experience.
Organizations have to decide when and how e-learning should be deployed. The question is not so
much whether or not online education measures up to or poses a critical threat to classroom learning.
Instead, educational institutions and corporations need to think about context-specific needs and make
sure that, for a given set of learners, those needs are in fact being met.17 In situations where the primary
objective is the rapid, efficient acquisition of specific knowledge sets, we believe technology-based
learning will be the method of choice. Increasingly, corporations will consider technology-delivered
training whenever there are a large or widely dispersed number of employees, high costs of classroom
delivery, high employee turnover, and/or the need for uniformity of content.
Shortcomings of e-learning? E-learning may require more dedication and discipline than c-learning.
Frequently, it also does not yet yield the degree of interactivity and collaboration offered by classroom-
based training. However, for many business professionals seeking a reputable continuing education, this is
not the issue anymore. Many of them are happy to put up with the insufficiencies of distance learning in
order to enjoy its unparalleled convenience. E-learning may not be perfect, but it is practical. Moreover,
in the future, we see e-learning models being structured to bring measurable participation and results.
While technology-based learning is unlikely to completely replace the college experience, it offers vast
opportunities for corporate training and continuing education.
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BUILDING BLOCKS FOR SUCCESS 鈥? WHO WILL BE THE WINNERS?
鈥溾?ost of what people in the industry call 鈥淲eb-based training鈥? does not
begin to use the true power of the Internet. Many interactive training vendors
are missing the point of the Web and simply creating HTML versions of their
CD-ROM-based training.鈥?
Ben Watson, SmartForce, 1999
First movers who manage to build a brand name quickly are becoming market leaders. First
movers and market leaders are known by their brand recognition, market share, and revenue growth. To
secure a leading position in the e-learning market, participants must provide a quality product, reach
critical mass, and establish a national presence within a short amount of time. Industry players should
also form strong partnerships and expand their product offerings to be able to offer one-stop-shopping
solutions. A wider range of quality content and value-added services, combined with appropriate channel
partners, is the recipe for developing a strong brand and solid client base, and capturing significant
market share. We made the observation that corporate customers are relatively price-insensitive when it
comes to high-quality training products. In addition, they do not tend to switch providers and technology
easily once they have signed up. The brand loyalty of corporate customers, coupled with a first-mover
advantage, should help successful e-learning providers build a strong market position. Competitive
factors, such as quality content, proprietary technology, integrated services, well-established customer
relationships, exclusivity of partnerships, and experience, should create significant barriers to entry. We
anticipate leaders to emerge in all market segments within the next 18 months.
Successful e-training solutions must offer high level of interactivity. In our opinion, virtual
collaboration between participants is the most important element of successful implementation of online
education. The true power of the Web lies in its ability to create collaborative learning communities that
introduce real-time human interaction.18 However, reality is still far away from this vision. Of all training
delivered via the Web in 1999, the percentage in which students interacted with other people online was
only 36%, representing a decline of 14% from the previous year, according to Training Magazine.
Considering that technical obstacles have diminished over the last two years, these numbers are alarming.
Transforming education from a mechanical process into an exciting, interactive learning experience is one
of the primary reasons for considering Web-based training delivery. We advise training vendors to take
advantage of the full range of tools to create a dynamic online classroom with powerful interactive
features that include the use of streaming media, personalized skills assessment, application exercises, case
studies, simulations, video clips, role-playing, knowledge base access, peer and expert communities,
virtual classrooms, online mentoring, discussion groups, and online chats. Interactive learning programs
should not only lead to higher user retention, motivation, and completion rates but should also address
most of the problems with online training discussed in the previous section. We are convinced that the
ability to entice the learner will be a key differentiator among competitors.
Scalable business models should be more profitable in the long run. High-quality technology-based
training courses, tutorials, and multi-media simulations are expensive and time-consuming to develop. To
capture significant market share, it will be imperative for training vendors to leverage their branded
content by making it scalable in terms of development, delivery technology, and/or distribution. We
expect successful companies to emphasize the production of quality off-the-shelf content using template-
based, reusable learning objects to speed up R&D. In addition, market participants who license their
teaching products to organizations in volume, deploy a course delivery platform able to support millions
of users, and utilize multiple and effective distribution channels should be able to enjoy an exponentially
growing revenue stream and significant economies of scale. Thereby, these players not only benefit from
reduced R&D cost per unit but also minimize time-to-market, which is a critical competitive factor in the
fast-paced world of the Internet.
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Global reach crucial for becoming a market leader in the e-learning business. This conclusion is
based on two distinct developments: 1) Global firms, a customer group most e-training vendors are
targeting, are beginning to show an inclination toward using large multinational training suppliers to
meet their employees鈥? training needs. They will be looking to achieve economies of scale and a global
consistency in the quality and content of the training services being delivered. 2) The world is hungry for
education made in America. U.S. educational institutions enjoy an excellent reputation worldwide,
making America the number-one destination for foreign students every year. What if we could turn
education into an export good delivered directly to desktops in Japan, France, or Canada? The market
opportunities for corporate training and continuing education are huge. The largest market next to the
U.S. is Europe; but Asia/Pacific, Canada, and a number of developing countries exhibit strong demand as
well. Accelerating growth of Internet usage should boost the demand for online training solutions abroad.
Many countries which were initially slow to adopt the Internet are catching up, with growth rates far
exceeding those in the U.S. Between 1997 and 2003, the Web penetration in Western Europe and
19
Asia/Pacific is projected to grow at a CAGR of roughly 40%. Although U.S. training vendors are already
scrambling to meet just domestic demand, we find it is not too early to develop and implement a global
strategy. One of the advantages of running an Internet business is that it does not require maintaining
offices around the world to have global reach. However, we feel that executing certain strategic
acquisitions and implementing key partnerships will be necessary to secure a strong position in the
worldwide market.
Offering a complete solution for enterprise-wide learning creates competitive advantage. The top
three criteria corporations apply to select a training provider are quality content, training delivery media,
and value-added services. Competitors eyeing the trendy one-stop-shopping idea cannot limit their
offering to a series of training titles. Within the next few years, we expect content to provide less
differentiation, since corporate customers are beginning to demand a more consultative approach to
meeting their training needs. They will require the integration of off-the-shelf and customized content,
business skills as well as IT training, delivery methods ranging from classroom- to technology-based
training, and value-added services. We believe that vendors planning to offer a full suite of products and
services will not always initiate large-scale internal expansions but will likely extend their product mix
through acquisitions or partnerships with other providers. Training suppliers who manage to combine a
number of key characteristics and launch innovative training models should have a powerful learning
solution.
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EXHIBIT 19: CHARACTERISTICS OF A COMPLETE E-LEARNING SOLUTION
鈥? Organizational and individual needs assessment
1. Assessment and curriculum design
鈥?
and development Setting competency standards of performance
鈥? Goal setting and incentives
鈥? Roadmap to educational success
鈥? Proven, high-quality intellectual capital
2. Branded educational content
鈥? Timely, relevant, and consistent information
鈥? Keeping fast-changing content current, dynamic, and refreshed
鈥? Off-the-shelf and customized
鈥?
3. Broad and easy access to Anyone, anytime, anywhere, any subject
鈥?
information Multiple technology-based delivery methods
鈥? Synchronous and asynchronous
鈥? Enabling just-in-time training
鈥? Rich multimedia experience
4. Engaging user experience
鈥? Realistic simulations and role playing
鈥? Video-based teaching and storytelling
鈥? Advice and explanations from experts/mentors
鈥? Animated case studies and examples
鈥? Interactive games, activities, and music
鈥? Personalized and/or real-time online mentors
5. Regular reinforcement
鈥? Web-casts, interviews, live events
鈥? Practical exercises and application
鈥? Facilitated workshops and discussion groups
鈥? Desktop advice, special events, and updated learning opportunities
鈥? Weekly newsletters and relevant articles
鈥? Access to fellow learners, instructors, business leaders, and experts
6. Collaborative online communities
鈥? Access to system knowledge base
鈥? Private company and global communities
鈥?
7. Centralized tracking and Easy and automatic knowledge management
鈥?
administration Tools to evaluate progress of individuals or groups
鈥? Assessment metrics to pinpoint employee needs and goals
鈥? Measuring return on investment
鈥? Leveraging existing open industry standards
8. Scalable Technology
鈥? Scalable to any size enterprise
鈥? Flexible technology to include groups of workstations or the entire
organization
鈥? Easy integration with client鈥檚 internal systems
鈥? Delivering media rich broadband experience
鈥?
9. Organizational consulting, Integration with existing curriculum and training delivery system
鈥?
implementation, and integration HR and IT Administration training
鈥? Employee incentive and accreditation programs
鈥? Performance reviews
鈥? Cultural support for self-study
鈥? Customized management training support
鈥? Behavioral change measurement and reporting
Sources: Ninth House Network and WR Hambrecht + Co
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CONCLUSION 鈥? THE E-LEARNING REVOLUTION HAS JUST BEGUN
The next few years should see revolutionary changes. We believe e-learning will change the way
corporations deliver training in nearly all segments of the business process. Increasing global competition,
rapid technological advances, demographic changes, and the emergence of a service- and knowledge-
based economy force organizations to train and re-train their workforce in new ways. We believe that
companies that deploy and effectively utilize e-learning will have a distinct competitive advantage. The
Internet presents companies with numerous possibilities for leveraging knowledge and education
resources. It redefines e-learning not only in terms of better delivery, but also more current, dynamic
educational content, more personalized, relevant learning experiences, and more collaboration with
experts and peers. The main obstacles to e-learning, such as bandwidth, content availability, technology
standards, and service integration, are currently being addressed and should not be significant issues two
years from now. Market dynamics over the next several years can be expected to be dramatic, as the
shape of the e-learning market develops.
Tremendous opportunities for corporate e-learning. We believe the B2B e-training space is the most
promising market within the education industry. While currently a relatively small and early-stage
industry, it is poised to grow exponentially in the next several years. The Internet has affected and
transformed nearly all sectors of the economy, but has been slow to penetrate the education market. We
believe the education industry will inevitably catch up and massively distribute knowledge over the Web.
We expect corporations to be the fastest to explore this new frontier and to adopt Web-based learning on
a broad scale. Companies face more economic and social pressures to find new ways of training delivery
and encounter fewer regulatory, bureaucratic, financial, and technical barriers to implementation of e-
learning than other segments of the education industry. E-learning providers that target the corporate
market should be the movers and shakers in the education industry in 2000 and 2001.
Exciting investment opportunities in the e-learning space, as number of IPOs is exploding. With
barely a handful companies in each segment, the public e-training market mirrors the immaturity of the
entire industry. The small group of pure-play e-learning companies in the public market today includes
SmartForce, DigitalThink, SkillSoft, Click2learn.com, Learn2.com, and Centra Software. We predict that
the days of market immaturity are numbered. Between 1990 and 2000, venture capitalists and other
investors have invested roughly $10 billion in private education firms;20 and many of these companies are
now entering or getting ready for the public markets. In the next 18 months, the stock market should see
dozens of e-learning companies popping on the scene, giving investors a much broader choice of pure-play
e-learning opportunities. We believe investors who do not pay attention to this burgeoning market will
miss significant investment opportunities.
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ENDNOTES
1
U.S. Department of Education, National Center of Education Statistics, 鈥淓ducation and the Economy: An
Indicators Report,鈥? 1997.
2
U.S. Department of Education, National Center of Education Statistics, 1997; Arthur Levine, Columbia
University, 1999.
3
Ken Dychtwald, Age Wave LLC, 1999; TechLearn 鈥?99.
4
The Research Institute of America found that 33 minutes after a lecture is completed, students usually retain only
58% of the material covered in the class. By the second day, 33% is retained, and three weeks after the course is
completed, only 15% of knowledge is retained. Jack E. Bowsher, 鈥淩evolutionizing Workforce Performance: A
Systems Approach to Mastery,鈥? 1998; D. Peoples, Presentations Plus, 1992; Training Magazine, 1998.
5
Greg Kearsley, A Guide to Online Education, 1997; Dennis A. Trinkle, 鈥淒istance Education: a Means to an End,
No More, No Less,鈥? The Chronicle of Higher Education, 1999; Colin McCormack and David Jones, 鈥淏uilding a
Web-based Education System,鈥? 1997.
6
Jerald G. Schutte, 鈥淰irtual Teaching in Higher Education: The New Intellectual Superhighway or Just Another
Traffic Jam?,鈥? California State University, 1996.
7
Corporate University Xchange, 鈥淎nnual Survey of Corporate University Future Directions,鈥? 1999.
8
Training Magazine, 鈥淚ndustry Report 1999 鈥? An Overview of Employer-sponsored Training in the United
States,鈥? 1999; International Data Corporation, 鈥淲orldwide and U.S. IT Education and Training Markets, 1998 鈥?
2003,鈥? 1999.
9
The MASIE Center, 1999.
10
Bill Communications, Online Learning News, 1999.
11
International Data Corporation, 1999.
12
The MASIE Center, 1999.
13
The MASIE Center, 1999.
14
Includes text-based training.
15
Communications International, 1999.
16
International Data Corporation, 鈥淧urchase Requirements for Interactive Business/Soft Skills Training,鈥? 1999.
17
Risks and opportunities of e-learning are discussed in The Education Economy, January 1999.
18
Ben Watson, SmartForce, 1999.
19
International Data Corporation, 鈥淭he Global Market Forecast for Internet Usage and Commerce,鈥? 1999.
20
Six billion dollars have been invested between 1990 and 1999. An additional $4 billion is estimated to be invested
in 2000. 鈥淭he Education Quarterly Investment Report: A Decade of Private Investment in Education,鈥?
Eduventures.com, 1999.
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PUBLIC COMPANY PROFILES
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CENTRA SOFTWARE, INC. (CTRA) v LIVE E-COLLABORATION WWW.CENTRA.COM
430 Bedford Street Revenues: $8.6MM (FY 99)
Lexington, MA 02173 Employees: ~120
T: (781) 861-7000 Founded: April 1995
CEO: Leon Navickas
Highlights
鈥? Centra Software is one of the pioneers in online collaboration and learning. The Company provides a
complete suite of products to support a spectrum of live e-business events, including e-learning, online
meetings, collaborative ecommerce, and virtual teamwork.
鈥? Centra鈥檚 collaborative software allows reaching users behind firewalls and proxy servers over low-
bandwidth and dial-up connections.
鈥? Centra was the first company to offer a complete live Web-based learning system scaleable from tens
to tens of thousands users with a common management and administration environment. The
Company also pioneered the integration of live, self-directed, and asynchronous learning modes in
one interface.
鈥? The Company鈥檚 flexible, scaleable, and fully integrated solution and rapidly expanding blue-chip
customer base should allow Centra to leverage its first-mover advantage and expand on its market
leadership.
Company Profile
Centra Software develops and markets Web-based Java applications software and services for the delivery
of instructor-led training, self-paced learning, integrated live demonstrations, presentations, and meetings
via corporate intranets, extranets, and the Internet. The Company targets Global 2000 companies and
other large organizations in a broad range of industries, as well as government agencies and higher
education institutions. Centra鈥檚 solution consists of three key products, Centra 99, CentraNow, and
CentraBCN. Centra 99 is a software application with integrated multi-way, voice-over IP capabilities,
shared workspace environment, and user interface enabling live conversation, collaboration, and content
TM
sharing. Capabilities also include live application sharing; interactive Body Language functions for
TM
instant polling, surveys, and feedback; Web Safari ; interactive whiteboard and text chat; breakout
rooms and labs; event recording and playback; just-in-time content updates; and advanced Internet
networking technology such as HTTP tunneling for firewall compatibility and IP multicasting for
TM
bandwidth efficiency. The no-install Centra Conference , intended for one-to-one interaction and large-
TM
scale Web presentations and Centra Symposium , designed for highly interactive events such as hands-on
learning, workshops, coaching, and teamwork, are part of the Centra 99 system. Centra 99 also supports
other application-specific user interfaces such as CentraNow and fully integrates with Microsoft
Backoffice and Digital Dashboard. The system is sold on a rental or purchase basis starting at $25,000.
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CentraNow is a live, voice-enabled Web collaboration service designed for spontaneous meetings accessed
through a Web browser. The system allows firms to deliver live online sessions to their customers and
partners that integrate PowerPoint presentations, shared applications, live Web pages, and audio
conversations. CentraNow enables individuals to schedule a meeting, invite participants by e-mail, and
lead a collaborative session without technical assistance or pre-installed software. CentraNow provides a
foundation for the Centra B2B Network, a consortium of partners using CentraNow to deliver business
collaboration and industry-specific events to new user communities on the Web. Centra BCN (Business
Collaboration Network) is a global e-business network for content and service providers (including
Centra 99 users) that enables content aggregation and distribution, as well as hosting of B2B live
collaborative events over the Web. Embedded within Centra BCN is the Centra B2B Network where users
can find industry-specific business events, content, communities, and services such as those from Ariba
and Rosenbluth International.
In addition, Centra offers hosting services to outsource the administration of customers鈥? e-business
collaboration operations. Centra鈥檚 services also include a range of consulting offerings as well as training
on the Company鈥檚 products. Centra has entered into agreements with DA Consulting Group, Deloitte
Consulting, and PricewaterhouseCoopers to integrate its products and services into their offerings, with
the goal of increasing the market awareness of Centra鈥檚 products and services and creating alternative
distribution channels. The Company has offices in Lexington, Massachusetts, Atlanta, Chicago,
Philadelphia, Washington D.C., San Mateo, California, the U.K, and Japan.
Major Clients
Ariba, Oracle, Compaq, Hitachi, Ascend Communications, Juniper Networks, NEC America, Nortel
Networks, Bay Networks, Novell, Ameritech Mobile Communications, AT&T, Bell Canada, MCI
WorldCom, Viacom, Advest, American Fidelity Group, Applied Systems, Nationwide Mutual Insurance,
Federated Department Stores, Kraft Foods, Sony, Merck, Kaplan Educational Centers, Ziff-Davis
Education, First Consulting Group, United States Army, James Madison University, University of
Tennessee
VC/Affiliation Partners
Burr Egan Delegae & Co., North Bridge Venture Partners, Commonwealth Capital Ventures, The Career
Group, Scripps Ventures, Polaris Venture Partners, idealab!, HarbourVest Venture Partners, Goldman
Sachs Group
Competition
InterWise, LearnLinc Corp., Lotus Development Corp., PlaceWare, WebEx
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CLICK2LEARN.COM (CLKS) v SINGLE-SOURCE SOLUTION WWW.CLICK2LEARN.COM
th
110 110 Avenue NE, Suite 700 Revenues: $34.7 MM (FY 99)
Bellevue, WA 98004 Employees: ~350
T: (425) 462-0501 Founded: December 1984
CEO: Kevin Oakes
Highlights
鈥? Click2learn.com is one of the market leaders in the technology segment, providing a complete suite of
authoring tools and learning management systems, as well as value-added services.
鈥? In the fall of 1999, Click2learn entered the content aggregation and distribution business by
launching a learning portal. The Company is aggressively expanding its new line of business and has
formed partnerships with numerous content providers.
鈥? The Company recently introduced Corporate e-Learning Site, a training solution that offers corporate
clients a combination of e-learning content and browser-based authoring, publishing, and learning
management tools on a fully outsourced basis. The user interface of each Corporate e-Learning Site
can be configured to match the look and feel of a company鈥檚 existing Web site or intranet.
鈥? A fully integrated product mix, combined with an experienced management team and a strong client
base, should allow Click2learn to expand on its leading market position.
Company Profile
Click2learn.com (formerly Asymetrix Learning Systems) provides off-the-shelf and customized software
applications and services to create, deploy, and manage Internet-based training. The Company鈥檚
authoring tools include: 1) ToolBook II Instructor, a high-end multimedia development system for
creating sophisticated online learning applications; 2) Toolbook II Assistant, an easy-to-use package that
assists first-time developers through every step of creating and deploying an interactive course using
wizards, templates, and online guidance; and 3) IconAuthor Net Edition, an advanced tool for creating
interactive learning applications for CD-ROM, network, and Internet delivery. In addition, the Company
offers authoring support products such as Digital Video Producer and Web3D. Librarian and Ingenium
are Click2learn鈥檚 training management systems that let administrators assign and track online learning
programs as well as instructor-led classes.
In addition to its e-learning technology business, Click2learn.com is rapidly establishing a learning portal
to aggregate and distribute content in the areas of IT and soft skills training to industry professionals,
corporate intranets, Web portals, consumers, students, and higher education institutions. The Company
offers its products on a subscription basis through its Web site and also sells third-party CD-ROM, video,
audio, and print educational materials. For larger organizations, the Company creates a custom version of
the portal designed to meet the specific needs of the corporate customer. The content is delivered through
an open standard ASP model, completed with sophisticated learning management features and
functionality that allows organizations to assign courses and track users鈥? progress and test scores.
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Click2learn has assembled over 2000 online education and training courses and formed content
distribution relationships with NETg, Skillsoft, Competence Software, Crisp Publications, Learn2.com,
netSyndicate, Skills Online, FirstNet, Macmillan Publishing, InfoSource, and other content developers.
The Company鈥檚 professional services, which account for 55% of sales, include custom application
development, organizational assessment, instructor-led training, system implementation, technical
support, and comprehensive consulting services. Click2learn鈥檚 partnership with Go2Net allows it to
provide online education and training services across the Go2Net network, while an alliance with
VerticalNet, a leading operator of B2B vertical marketplaces, will give it access to 20 vertical portals.
Click2learn has established relationships with a significant portion of the Fortune 500 companies and is
working with them to transition their training and education programs to online models. Click2learn has
offices in 14 states and the UK.
Major Clients
Arthur Anderson, Prudential, PriceWaterhouseCoopers, American Airlines, Boeing, Hewlett-Packard, U.S.
Air Force, GTE, Lucent Technologies, MCI, ADC Telecommunications, Liz Claiborne, Duracell, Duke
University, California State University, NYUonline, U.S. Learning Systems, McLeodUSA, Administaff
VC/Affiliation Partners
Vulcan Ventures, Vault.com, Vignette, Maxim Training, U.S. Learning Systems, Marshall Capital
Management, Velocity Business Publishing, Go2Net
Competition
Lotus Development Corp., Macromedia, Docent, Saba Software, WBT Systems, KnowledgePlanet
(formerly KnowledgeSoft), Teamscape, Pinnacle Multimedia, TrainingNet, Headlight.com, Learn2.com
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Corporate e-Learning
LEARN2.COM, INC. (LTWO) v CONSUMER PORTAL WWW.LEARN2.COM
1311 Mamaroneck Avenue, Suite 210 Revenues: $13.6 MM (CY 99)
White Plains, NY 10605 Employees: ~300
T: (914) 682-4300 Founded: 1993
CEO: Stephen P. Gott
Highlights
鈥? Learn2.com is taking a broad approach to e-learning by offering a wide range of learning services and
products to different education market segments via a learning portal. Its strength is in the consumer
market. By marketing its site as a destination site, it should be able to attract more unique users in the
future.
鈥? Learn2.com鈥檚 recent contract with EarthWalk, a leading supplier of emerging technology to the
education market, will allow its e-learning solutions to reach a customer base of 2,400 school districts
nationwide.
鈥? The Company鈥檚 strategy is to achieve additional competencies through acquisitions. Through last
year鈥檚 acquisition of ViaGrafix, Learn2.com鈥檚 product line has grown to include over 1,200 training
courses.
鈥? Over 130 Learn2.com courses have been approved by 51 states and territories and the National
Association of State Boards of Accountancy (NASBA) to provide Continuing Professional Education
(CPE) credits to CPAs.
Company Profile
th
Learn2.com (formerly 7 Level) is a leading learning portal that markets a broad spectrum of interactive,
customized, and off-the-shelf online and physical learning products, as well as various services and
technologies, targeting the consumer market, Fortune 1000 companies, government agencies, and
educational organizations. The Company鈥檚 products and services are delivered via the Internet, intranets,
CD-ROMs, and videotapes. Approximately 90% of Learn2.com鈥檚 content is developed in-house. Through
its Tutorials.com Web site, Learn2.com markets interactive multimedia tutorials, including desktop
application software, computer programming, life skills, and language courses to consumers, students,
and work-at-home professionals. Learn2.com is also an Internet learning community that offers consumer
tips and step-by-step instructions on a variety of skills, activities, and tasks, amounting to about 8000 free
tutorials.
Solutions for corporations and organizations are offered through 3 product lines: 1)
Learn2University.com is operated on an ASP basis and includes a catalog of over 250 interactive
multimedia tutorials on desktop applications, IT, programming, network training, Microsoft
Certification, the Internet, finance, and soft skills enhancement. Value-added services include
administration, reporting, tracking, and assessment, as well as Learn2 Help, a service that enables users to
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Corporate e-Learning
e-mail their questions to an expert; 2) StreamMaker鈩? is a courseware authoring tool that allows custom
tutorial and content creation for streaming purposes. The tool utilizes patented technology to produce
fully synchronized, interactive, CD-ROM-quality multimedia streams that can be delivered through the
Internet and intranets. StreamMaker has been licensed to IBM, Inuit, and other content developers on a
revenue sharing basis; and 3) Agent7鈩? stands for customizable 鈥淟earning Agents鈥? that deliver online
help desk support, customer service, and information on new product launches. Agent7 also serves in a
variety of e-commerce-related functions, including site navigational host, site salesperson, and product
training agent.
Learn2.com is actively building its local and international distribution network through alliances with
Microsoft, Pinacor, AOL/Netscape, IBM, Linkshare, Hungry Minds, Headlight.com, and Click2learn.
Moreover, the Company is increasing its customer base through the expansion of its courseware to the
Linux market, K-12, and the continuing education markets, as well as through agreements with
Beyond.com to sell learning products to government agencies. Learn2.com has facilities in White Plains,
New York, Golden, Colorado, Sausalito, California, and Pryor, Oklahoma.
Major Clients
MTV.com, Bloomberg.com, U.S. Department of Labor, AOL, Beyond.com, Pinacor, Patriot Computer,
SegaSoft (Heat.net), CompUSA, RadioShack, Best Buy, Staples
Competition
Click2learn.com, HungryMinds, Headlight.com, SmartPlanet, University.com, About.com, eHow.com,
How2.com
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Corporate e-Learning
NETG (H) v XTREME LEARNING WWW.NETG.COM
1751 West Diehl Road, Suite 200 Revenues: ~$130 MM (FY 99)
Naperville, IL 60563 Employees: ~550
T: (877) 561-6384 Founded: 1997 (acquired by Harcourt)
CEO: Gary Lopez
Highlights
鈥? With an established international presence and a client base that includes most of the Global 100,
NETg is one of the major players in the online IT training market.
鈥? NETg plays on the content as well as the technology front, allowing the Company to offer clients
certain authoring capabilities, a training management system, and Web hosting along with
courseware.
鈥? NETg is growing at solid 25-30% annually, with operating margins expected to increase from the
current 4-5% to 10-15% in 2000. In fiscal 1999, the Company increased net earnings by 25%.
鈥? Through its Learning Management Alliance Program鈩?, NETg is pushing forward the development of
e-learning technology standards. This may prove to be a wise move, since making NETg鈥檚 courseware
compatibile with all major learning management systems should support its strong position in the
industry.
Company Profile
NETg (National Education Training Group), a subsidiary of Harcourt General, is a leading developer of
technology-based IT training courses targeting large corporations in the U.S. and abroad. The Company
has a portfolio of more than 600 off-the-shelf multimedia courses in several languages, covering courses
on strategic subject areas such as: desktop computing, information technologies, Internet/Intranet, and
IBM mainframe computing. Course topics include: Microsoft, Cisco, and Novell Certification training;
networking; COBOL and Java programming; databases; Web development; and ecommerce
implementation. NETg also offers a selection of general management and personal development courses.
The Company鈥檚 courses are highly interactive, using real-life simulations, streaming audio/video, online
mentoring, and expert support. Courseware is based on a flexible, open architecture and delivered
through the Internet, corporate intranets, and CD-ROMs.
All of NETg鈥檚 Skill Builder庐 courses are based on a Learning Object鈩? architecture, which allows the
manipulation of content and customization of courses for organizations and individuals. Courses are
modular in structure, with each course comprising several independent learning segments, called NETg
Learning Objects (NLOs). Each NLO teaches a specific skill and can exist independently from the course,
enabling customers to 鈥渕ix and match鈥? objects from different courses to create a hybrid, customized
course that meets a learner鈥檚 needs and skill level. This structure also facilitates just-in-time learning, as it
allows learners to access one object and learn one skill when they need it. NLOs are built from a single-
file training format so that each NLO-based course can be delivered via a range of training delivery
options.
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NETg recently introduced Xtreme Learning, a Web-hosted solution. In the initial stages of the program,
customers will be able to access 300 of NETg鈥檚 existing courses, including 12 modular courses designed
specifically for fast delivery and easy customization. Each Xtreme Learning site includes a catalog of
courses accessible to users, online mentoring, a discussion room, an innovation center with information
on course design principles, a news section with updates about the training industry, and a reporting
service to track course usage and training effectiveness. Xtreme Learning is delivered and hosted entirely
through the Internet; no data is stored on the client鈥檚 servers. This allows any company with Internet
access to offer online training to its employees without worrying about internal technology constraints or
infrastructure integration. Xtreme Learning can be customized to look like the customer鈥檚 intranet, and
can also be branded as the customer鈥檚 own training service.
In addition to developing content, NETg offers SkillVantage庐, an open learning management system that
supports the use of NETg鈥檚 course library as well as third-party courseware. In 1999, NETg has initiated
the Learning Management Alliance Program鈩? to promote technology standards in the Web-based
training industry, allowing for compatibility across vendors. Partners in the Learning Management
Alliance Program鈩? include WBT Systems, Saba, Click2learn.com, Pinnacle Multimedia, Syscom,
KnowledgePlanet.com (formerly KnowledgeSoft), Infotec, Pathlore, and Knowledge Networks.
Major Clients
Over 2000 corporate customers, including a number of universities and most of the Fortune 100.
Competition
SmartForce, Digital Think, KnowledgeNet, Learning Tree International, Teach.com, CyberStateU.com
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Corporate e-Learning
PROSOFTTRAINING.COM (POSO) v VENDOR-NEUTRAL CERTS WWW.PROSOFTTRAINING.COM
3001 Bee Caves Road, Suite 100 Revenues: ~$13 MM (CY 99 est.)
Austin, TX 78746 Employees: ~85
T: (512) 328-6140 Founded: December 1995
CEO: Jerrell M. Baird
Highlights
鈥? ProsoftTraining.com pioneered vendor-neutral IT certifications and is a market leader in its segment.
The Company currently focuses on converting its instructor-led training courses to computer-based
and Web-based training.
鈥? In 1999, the Company鈥檚 Certified Internet Webmaster (CIW) program received accreditation from the
American Council on Education as part of their college credit recommendation service, allowing
Prosoft to tap a potentially lucrative academic client base of universities, community colleges, and
vocational-technical schools.
鈥? Prosoft has a very strong distribution network that is comprised of 5,200 Sylvan testing affiliates
worldwide, 2000 Virtual University Enterprise testing affiliates, 925 authorized training centers of
various training companies, e-learning portals, and international training providers and corporations
in Japan, Australia, New Zealand, Singapore, China, India, Kuwait, and Saudi Arabia.
鈥? The Company鈥檚 success in the certification business depends on whether Prosoft鈥檚 certifications
become industry standard. Being a first mover and having a large global distribution network
leveraging Prosoft鈥檚 brand can make the difference in the battle for market leadership.
Company Profile
ProsoftTraining.com derives its revenues from three different business lines in the area of IT training:
courseware, teaching services, and certification. The Company offers more than 50 vendor-neutral
Internet/IT training courses and eight Internet certification tracks on a wholesale basis targeting training
companies, corporations, academic institutions, and individuals. ProsoftTraining develops 98% of the
courseware internally and delivers it via instructor-led training, textbooks, CD-ROM, and the Internet.
Course topics include fundamental and intermediate skills in Internetworking, Web site design, Internet
scripting, Internet application development, Java, Internet server administration, Internet security,
ecommerce, Linux and UNIX administration, and CompTIA鈥檚 Network+ operating environments.
Courseware is sold in the form of textbooks, reproduction licenses, OEM licenses, and custom-developed
courses. Two thirds of Prosoft鈥檚 revenues comes from teaching services, which include training of client
instructors, conducting classes, developing custom and Prosoft courseware, and client consulting. A part
of the Company鈥檚 IT classes is conducted via Prosoft鈥檚 ProFlex distance-learning program.
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In the area of IT certification, a rapidly growing part of the Company鈥檚 business, ProsoftTraining offers
its vendor-neutral Certified Internet Webmaster (CIW) program, which is comprised of an entry-level
credential (CIW Foundations) and seven specialized job-role certifications: site design skills, interactive
Web site development, Web sites connected to database applications, Web server administration, TCP/IP
networking skills, server and network protection skills, and ecommerce transaction skills. Tests are
administered through leading testing vendors such as Sylvan Prometric and Virtual University Enterprise
(VUE). Course delivery is also achieved through Web-based training via e-learning portals, such as
Learn2.com and its Tutorials.com, and Learning University Web sites reaching millions of consumers. In
addition, Prosoft markets its certifications through Prosoft Certified Training Center (PCTC) resellers and
licensees, which agree to use only official courseware provided by Prosoft, teach courses using only
certified instructors, and advertise courses using the official trademark and logo. The Company has
agreements with over 800 authorized training centers. Certification revenues are comprised of fees from
students taking the CIW certification examination ($100 鈥? 150) and sign-up fees to become an authorized
Prosoft training partner ($3,000 鈥? 9,000).
Prosoft recently expanded its product offerings by introducing one of the first Linux certification
programs in the market. The Linux Certified Administrator exam comprises Linux Fundamentals and
Linux System and Network Administration courses. In line with its channel development strategy, Prosoft
recently announced an agreement with the Japan Technology Transfer Association (JTTAS), under which
JTTAS companies would offer certification classes to their employees and clients. Members who have
signed up include Fujitsu Learning Media, NEC, Compaq, Cisco, Oracle, and Microsoft. The Company
has facilities in Austin and Dallas, Texas; Jacksonville, Florida; Santa Ana, California; Vienna, Virginia;
Chapel Hill, North Carolina; and Oak Brook, Illinois.
Major Clients
IBM, CompUSA, Samsung, ExecuTrain, New Horizons Worldwide, Productivity Point International,
ARIS Corporation, Knowledge Alliance, Catapult, ComputerPREP, TECHConnect (UK), BIC Systems
(UK), DiTEC (Germany), Technology Training (Ireland), Semcon (Sweden), Institute Eris (France),
Fringes (Spain), Drake International (Singapore)
Competition
HyCurve, CompTIA, Global Knowledge Network, Novell
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Corporate e-Learning
RWD TECHNOLOGIES, INC. (RWDT) v ERP SPACE E-LEARNING WWW.RWD.COM
1040 Little Patuxent Parkway Revenues: $124.4 MM (FY 99)
Columbia, MD 21044 Employees: ~1100
T: (410) 730-4377 Founded: 1988
CEO: Robert W. Deutsch
Highlights
鈥? RWD Technologies is a diversified IT and ERP services, technology performance support, and
consulting firm with increasing exposure to the world of corporate e-learning. In 1999, RWD
launched its Enterprise Learning Solutions division and acquired Merrimac Interactive Media
Corporation, which specializes in customized, Web-integrated learning systems and certification
programs for high-tech companies.
鈥? In late 1999, RWD announced a new Internet-based training offering, RWD ERPspace e-Learning.
With the option of synchronous or asynchronous content delivery, employees can register, perform
interactive simulations, track their performance, and measure their progress with online testing.
鈥? RWD has long experience and expertise in Internet technology as a platform for communications and
information transfer in a variety of industries. The Company has also developed strong partnerships
and skill sets in distance learning, knowledge management, and complementary services, which
should contribute significantly to future revenue growth in this line of business.
Company Profile
RWD Technologies鈥? four principal service areas include information technology services, enterprise
resource planning (ERP) services, lean manufacturing consulting, and technology performance support.
These services are targeted towards large corporations and academic institutions in the U.S. and abroad.
The Company鈥檚 IT products and services include a full spectrum of strategic consulting, custom software
development, ecommerce and e-training products (including RWD WILS, RWD Multimedia, and
TM
WebPlayer ), knowledge management systems and services, electronic performance support systems
(EPSS), electronic document management systems (EDMS), enterprise relationship management (ERM)
systems, enhanced user interface systems, remote worker and sales force automation, packaged software
integration and implementation, and operations and maintenance services. RWD鈥檚 ERP services comprise
implementation planning, project management, data conversion, system configuration, change
management, end user training and services, and consulting. Lean manufacturing consulting services
include the development and deployment of entire production systems, plant and manufacturing line
start-up, and troubleshooting services. The Company鈥檚 technology performance support services
encompass the design, development, and delivery of information to end users of technology, including
classroom, online, and plant floor training, hard copy training materials, customized job aids, online help,
and plant floor consulting.
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Corporate e-Learning
In addition to its general IT and ERP services, RWD has a long history of deploying Internet technologies
for corporate learning. RWD develops, integrates, and deploys a wide variety of Web-based performance
improvement solutions, including authoring, publication, comprehensive skills assessment, management
of courses and content, and tracking of user progress. First launched in early 1998, the RWD WILS
product is a learning environment that incorporates the essential components of effective performance-
TM
based training. WILS utilizes the presentation capabilities of the RWD Multimedia Web Player to
deliver conceptual presentations. It also incorporates links to a virtual lab where users can view
demonstrations of tasks and then practice the tasks independently. Interactive exercises, links to
instructors via e-mail, and other online resources are also available. RWD WILS is currently being used by
TM TM
the World Bank to support their SAP R/3 implementation.
RWD ERPspace e-Learning is the Company鈥檚 latest training product. Directed primarily at ERP
implementations in the post go-live stage, it delivers both synchronous and asynchronous distance
learning. It can be delivered as either a turnkey solution or be fully hosted by RWD. In cooperation with
WBT Systems, RWD also develops complete turnkey solutions for training employees in topics unique to
their organizations. The Company鈥檚 consultants create content for RWD and WBT clients to be delivered
via WBT Systems鈥? learning management system 鈥淭opClass.鈥? RWD鈥檚 recent alliance with Dataware
TM
Technologies has resulted in RWD InfoHarvest , a comprehensive knowledge warehouse intranet
solution that allows information to be captured from disparate sources during company mergers,
acquisitions, globalization, and reengineering. In addition to e-learning, RWD offers full services in
several e-commerce applications, including e-tailing, e-purchasing, e-services, and e-business. In 1998,
RWD provided services to 131 companies in more than 20 industries. The Company maintains facilities
in ten U.S. states and the U.K.
Major Clients
Mobil Oil Corporation, DaimlerChrysler, Ford, General Motors, NationsBank, MediaOne, IBM, Merck,
SAP America, Bell Atlantic, Lucent Technologies, Microsoft, Fujitsu, Pioneer Hi-Bred, BC Telecom,
Genentech, Polaroid, Port Authority of NY & NJ, BellSouth, Goodyear, Bethlehem Steel, Harvard
University, Stanford University, Houston Industries, Boston Edison, John Deere, Bristol-Myers Squibb,
Kodak, Chevron, CIGNA Healthcare, Continental Airlines, Warner-Lambert, The Weather Channel,
Disney, Dow Chemical, NASD
Competition
Professional services groups of large technology and management consulting companies, consulting
practices of large accounting firms, software companies
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Corporate e-Learning
SKILLSOFT CORP. (SKIL) v ENTERING NEW MARKETS WWW.SKILLSOFT.COM
20 Industrial Park Dr. Revenues: ~$3.8 MM (CY 99 est.)
Nashua, NH 03062 Employees: ~120
T: (603) 324-3000 Founded: January 1998
CEO: Charles E. Moran
Highlights
鈥? In collaboration with The Wharton School of the University of Pennsylvania, SkillSoft plans to
develop financial courseware targeted at Global 2000 organizations.
鈥? SkillSoft鈥檚 new partnership with Delmar reflects a move to enter the post-secondary and K-12
education markets. The Company鈥檚 Web-based courseware will be delivered to over 3200 community
colleges, career schools, junior colleges, vocational-technical schools, and high schools, giving
SkillSoft access to a huge market.
鈥? Through learner accreditation programs with the University of Phoenix and George Mason
University, SkillSoft is tapping the continuing education market. The Company鈥檚 courses have
received approvals from a number of educational institutions and certification organizations for
college degree credit, continuing education requirements, or professional certification.
鈥? SkillSoft鈥檚 strategy to diversify into virtually all segments of the education market will likely lead to
an exponentially growing revenue stream, as the Company can leverage its content in different
markets.
Company Profile
SkillSoft offers a comprehensive library of more than 215 highly interactive, off-the-shelf, Web-based soft
skills courses in the areas of project management, team building, communication, marketing, strategic
planning, finance, personal development, customer service, sales, knowledge management, and human
resources. Content is developed in cooperation with outside organizations, such as DDI and TACK
Training International, that provide course content or assemble courses according to the Company鈥檚
design models. SkillSoft products are targeted at Global 2000 companies, governmental organizations,
and educational institutions and can be accessed through corporate intranets and the Internet.
SkillSoft鈥檚 courses are media rich and use instructional models such as simulations, behavioral modeling,
role-playing, practice exercises, and integrated assessments. Utilizing an 鈥淎ccelerated Path鈥? feature,
learners are able to 鈥渢est out鈥? of topics in which they are proficient, and then be guided to specific areas
that cover the skills they do not already possess. RolePlay鈩? is an interactive feature with realistic audio-
visual simulations of everyday workplace scenarios. Additional RolePlay鈩? features include an 鈥楨xplore鈥?
mode, allowing the learner to explore all possible outcomes by moving backwards and forwards through
the simulation, as well as an 鈥楨valuate鈥? mode, which evaluates user responses and provides summary
feedback at the end of the simulation. The Company also offers different performance support tools,
including searchable course-related queries, real-time, online one-to-one mentoring with experts in 14
curriculum areas, and customizable firm-specific 鈥淥nline Job Aids,鈥? such as a database of 600 topical
refreshers and worksheets, in order to provide a direct connection between skills learned and the job.
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Other services include assessment of success criteria, implementation, program administration, program
communications, and marketing and coordination of all customer support efforts. SkillSoft鈥檚 new
ecommerce Web site, powered by Headlight.com, opens a new distribution channel for small and
medium-sized businesses and professionals to access its products, allowing SkillSoft to reach another
previously untapped market. SkillSoft was recently awarded the Global-Charter Registered Education
Provider (R.E.P.) status by the Project Management Institute giving over 50,000 PMI members access to
the Company鈥檚 Web-based, self-directed learning tools. SkillSoft has offices in Nashua, New Hampshire,
Dallas, Texas, and the UK.
Major Clients
GTE, IBM, Citibank, Dayton-Hudson Corporation, Ernst & Young, EMC Corporation, Adobe, Fujitsu,
BEA Systems, National Car Rental, Highmark, General American Life, American Red Cross, Fluor
Daniel, Finova
VC/Affiliation Partners
Warburg Pincus Ventures
Competition
SMGnet, Teach.com, UNext.com, Pensare, Ninth House, SmartForce, Provant
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SMARTFORCE PLC (SMTF) v LEADING UNIFIER WWW.SMARTFORCE.COM
900 Chesapeake Drive Revenues: $198 MM (FY 99)
Redwood City, CA 94063 Employees: ~1400
T: (650) 817-5900 Founded: 1984
CEO: Gregory M. Priest
Highlights
鈥? With about 4.5% share of the U.S. market, over 2000 corporate customers, and a large global
presence, SmartForce is by far the largest e-training company in the market. The Company is a player
in all three major market segments: content, technology, and services.
鈥? In late 1999, SmartForce launched 鈥淪martForce e-Learning,鈥? a fully integrated, Internet-based
learning solution, representing a fundamental strategy shift that transforms the formerly CBT-focused
company into a Web-centric player.
鈥? While originally an IT training provider, SmartForce has moved aggressively into the high-demand,
fast-growing content areas of business and interpersonal skills and is in the midst of creating an
online learning business degree program.
鈥? The Company鈥檚 timely move into the online training market should be well received by customers and
investors. Armed with a strong management team, established brand recognition, and the capability
to serve different segments of the education market in one-stop-shopping fashion, SmartForce should
be able to leverage its first-mover advantage to grow rapidly.
Company Profile
SmartForce (formerly CBT Systems) develops and markets off-the-shelf and customized e-learning
solutions targeting Fortune 3000 companies, government agencies, universities, the continuing education
market, and other major U.S. and international organizations in a wide variety of industries. The
Company鈥檚 e-training courseware covers areas, such as client/server concepts, operating systems,
networking, graphical user interfaces, Web publishing, and database design, as well as business skills and
performance improvement, and can be deployed over the Internet and intranets. Vendor-specific products
include Microsoft Windows NT and Windows 2000, IBM/Lotus Notes, Cisco Router Configuration
curricula, Novell NetWare, Sybase/Powersoft PowerBuilder, Oracle Database Administrator and
Developer 2000, Javascipt and LiveWire, Informix Online Dynamic Server, and SAP鈥檚 R/3. In addition,
SmartForce has developed generic titles for COBOL, Internet Security, C, C++, UNIX, IT Core concepts,
Project Management, and Internetworking. The Company maintains a content library of over 1,200 titles.
Most of them have been authored in or converted into Java or DHTML, removing the need for customers
to install software or plug-ins on desktops and enhancing content usability across multiple operating
platforms.
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Other services include SmartSeminars (SmartForce-hosted e-learning events on IT and business topics
comprising expert-led online seminars that bring together streamed audio and video, graphics and
animation, and interactive and collaborative learning features to create a rich learning environment),
SmartMentoring programs, supplemental technical documentation, and certification preparation tools. In
addition, the Company provides customized solutions. Corporate customers receive an end-to-end e-
learning environment, with a fully customized user interface, expert-led virtual seminars, peer-to-peer
collaboration, 24x7 access to expert mentors through e-mail, chats, or newsgroups, and a host of learning
options 鈥? often including in-house courseware. For several large clients, the Company creates SmartForce-
hosted corporate e-learning universities, with a strong emphasis on building online learning communities.
This is reflected in agreements with Dell to create and host EducateU.com, a global online learning
community for Dell customers and non-customers, and with Microsoft, to create an online community for
its more than 600,000 Microsoft Certified Professionals worldwide. As one of the first content
companies, SmartForce 鈥? through a new partnership with Macromedia 鈥? offers authoring and self-
publishing tools on corporate e-learning sites.
SmartForce was recently selected by the academic consortium of the 鈥淏ig Ten鈥? universities and the
University of Chicago to provide SmartCourses to faculty, staff, and students via campus intranets,
representing a step into the post-secondary education market. Through the creation of SmartForce.com, a
destination site for professional advancement, SmartForce expanded its presence into the consumer
market segment, leveraging its B2B offerings in the B2C world. The Company鈥檚 extensive network of
content partners includes Cisco, Microsoft, Intel, Novell, Lotus Development, SAP, Oracle, and Informix.
SmartForce, headquartered in Redwood City, California, maintains offices in 26 countries.
Major Clients
Alcatel, AT&T, Bear Stearns, Bell Atlantic, Blue Cross Blue Shield of Ohio, British Airways, Cambridge
Technology Partners, Compaq Computer, Computer Sciences Corporation, CTG, Dell Computer, GTE
Data Services, Manpower, MCI, Modis Professional Services, PriceWaterhouseCoopers, Reuters, Sprint
Corp., Tandem, Unisys, The University of California System, U.S. Air Force, U.S. Army, Wells Fargo
Competition
NETg, DigitalThink, KnowledgeNet, Learning Tree International, ExecuTrain
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SMARTPLANET (ZD) v SMART ONLINE COMMUNITY WWW.SMARTPLANET.COM
368 Lakeside Drive Revenues: ~$3 MM (CY 99)
Foster City, CA 94404 Employees: 50
T: (650) 350-6500 Founded: September 1999
CEO: Chris Dobbrow
Highlights
鈥? SmartPlanet is one of the largest paid membership sites and online communities on the Web and the
largest in the e-learning category, with 30,000 of the 160,000 current registered members paying for
access to more than 575 courses. SmartPlanet members are projected to reach 1 million by the end of
2000, each generating an estimated $100 in revenue.
鈥? The Company鈥檚 leverages Ziff-Davis鈥? long history and expertise in the online learning market.
SmartPlanet鈥檚 vision is to provide a rich and diverse Web destination for people seeking continuous
personal and professional growth on virtually any topic or interest by combining the three key
elements of a successful ecommerce site: content, commerce, and community.
鈥? SmartPlanet is capitalizing on people鈥檚 desire for a fulfilling learning experience within a learning
community. The Company is ahead of the market with a huge active community, years of
management experience in this category, and rapidly growing brand awareness among customers.
Company Profile
SmartPlanet, a business unit of Ziff-Davis, is a content aggregator and host of personal learning
communities targeting the consumer and continuing education markets. SmartPlanet links individuals
with common interests in personal and professional areas such as Career & Business, Computing &
Internet, Finance & Investing, Science & Technology, Arts & Society, Body & Mind, Hobbies &
Recreation, and Home & Family. The site offers several specific areas in which to pursue an interest:
Learn, Teach, Discuss, Shop, and a customizable section called 鈥淢y SmartPlanet.鈥? Through these
integrated areas, people can directly exchange information and advice with like-minded individuals,
access a wide variety of content, and review and buy services or products such as books and software.
Ziff-Davis University (ZDU), which has grown into a market leader in the IT training segment from its
launch in 1995, has been fully integrated in SmartPlanet as the base for the Computers & Internet
Learning Zone. It offers a number of programming, networking, Linux and Unix, desktop applications,
databases, hardware, Web design, and other IT courses.
Courses are offered using a variety of formats. Online instructor-led courses are taught by experts who
present engaging lessons, hands-on projects, and answer students鈥? questions. These courses also include
online discussion areas and mailing lists. Self-paced courses are available as well and use a variety of
knowledge builders, quizzes, streaming audio, and simulations for instruction. SmartPlanet members have
the option of creating and teaching self-paced courses, further building a sense of community among
members. SmartPlanet鈥檚 鈥淪martPartners鈥? provide a combination of diverse learning content, commerce,
and community for SmartPlanet.com. These partners include ZDnet, WetFeet.com, ClearStation,
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Youachieve.com, Cook鈥檚 Illustrated, RunZebra.com, netSyndicate, Livinglanguage.com, Beyond.com,
Smartmoney.com, Barnesandnoble.com, and the Appraisal Institute. SmartPlanet plans to reach millions
of additional potential members through distribution and partnership agreements.
SmartPlanet offers different ways to participate in e-learning. A free membership provides access to a
portion of SmartPlanet鈥檚 course offerings, while a subscription-based tuition model involves a one-year
membership that gives unlimited access to all standard courses. This membership is available for
approximately $70 鈥? $90 per year. Members can also take any standard course on an ad hoc basis
without paying an annual fee. Premier courses are purchased separately, and members receive discounts
on premier courses developed by content partners and can purchase them through the ecommerce portion
of the Web site. While a number of courses are free, course fees in general range between $9.95 and
$29.95.
Major Clients
NA
VC/Affiliation Partners
None
Competition
Learn2.com, Click2learn.com, Headlight.com, TrainingNet, Hungry Minds, and various ecommerce and
community sites
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PRIVATE COMPANY PROFILES
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COGNITIVE ARTS CORP. v GOAL-BASED SCENARIOS WWW.COGNITIVEARTS.COM
th th
115 East 57 Street, 10 Floor Revenues: $11 MM (CY 99)
New York, NY 10022 Employees: ~150
T: (212) 319-3556 Founded: December 1994
CEO: Joe Bianco
Highlights
鈥? Cognitive Arts is one of the strongest players in the custom-built, interactive simulations space.
鈥? The Company鈥檚 dramatic move from instructor-led to technology-delivered training within the last
two years, combined with its new strategy of creating a virtual university, has transformed its original
business model into a highly scaleable solution.
鈥? Through its long-standing affiliation with The Institute for the Learning Sciences at Northwestern
University, the Company鈥檚 team of content developers, instructional designers, graphic artists,
programmers, and video producers has significant expertise in cognitive psychology, education,
artificial intelligence, and computer science. This solid experience creates a significant barrier to entry
in the Company鈥檚 market niche.
鈥? With three product lines serving different target markets and a strong, established customer base
among Fortune 100 corporations, Cognitive Arts is positioned to be a major player in the e-learning
industry.
Company Profile
Cognitive Arts鈥? core business is the design and development of large-scale custom-built and off-the-shelf
multimedia learning programs in business areas such as management, leadership, mentoring/coaching,
sales, customer services, financial decision making, and negotiation. The Company serves mainly Fortune
500 companies and major international corporations. The largest part of the Company鈥檚 business is the
creation of customized, interactive simulations, called 鈥済oal-based scenarios,鈥? using a variety of teaching
methods based on a 鈥渓earning by doing鈥? approach, developed from the research and theory of Dr. Roger
Schank. Goal-based scenarios encompass case studies, animations, movie clips, and story-telling designed
to simulate real-life situations. Training can be delivered via Internet, intranet, video, CD-ROM, and/or
instructor-led sessions, depending on the customer鈥檚 organizational infrastructure and culture. Changes in
the Company鈥檚 revenue stream should make Cognitive Arts an 80% online player in 2000.
Custom solutions price between $300K-500K per training program. The Company also provides services
such as needs assessment, strategic curriculum consulting, program development, implementation,
deployment services, and performance measurement. In 1999, Cognitive Arts has begun to produce a
library of off-the-shelf training titles for the corporate market. It is teaming up with partners that have
already branded content or distribution, including Harvard Business School and Germany鈥檚 Klett Verlag.
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In addition, the Company plans to develop a virtual university in concert with new partners, offering
courses to the post-secondary and continuing education markets.
Cognitive Arts emphasizes goal-oriented training based on studies and theories developed at
Northwestern University鈥檚 Institute for the Learning Sciences (ILS), from which it originally emerged.
Cognitive Arts鈥? founder and CTO, Roger Schank, was a founding director of the ILS and, prior to that,
the Director of the Artificial Intelligence Institute at Yale University. Schank, who holds academic chairs
in computer science, education, and psychology, is widely published and considered a pioneer in the field
of learning sciences. Northwestern University still holds a 10% stake in Cognitive Arts. The Company has
offices in Chicago, Boston, New York, and San Francisco.
Major Clients
Aeroquip Corporation, Ameritech, Andersen Consulting, Deloitte Consulting, Eaton Corporation, First
Union Corporation, Franklin Covey Leadership Center, GE Capital, Harvard Business School Publishing,
Hewlett-Packard, IBM, Johnson & Johnson, Lucent Technologies, Target Stores, Ulysses Training, U.S.
Department of Veterans Affairs, W.W. Grainger
VC/Affiliation Partners
ING Barings, Northwestern University, Harvard Business School Publishing
Competition
Internal/External Communication (IEC), Ninth House Network, SMGnet, Teach.com, Pensare,
UNext.com, Omnitech, Provant, SkillSoft
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Corporate e-Learning
CYBERSTATEU.COM, INC. v CERTIFICATION ONLINE WWW.CYBERSTATEU.COM
3746 Mt. Diablo Blvd., Suite 100 Revenues: $3 MM (CY 99)
Lafayette, CA 94549 Employees: ~30
T: (925) 299-2000 Founded: March 1994
CEO: Ronald A. Abelmann
Highlights
鈥? As one of the pioneers in the rapidly growing online Internet infrastructure certification and testing
market, CyberStateU.com is well positioned to become one of the market leaders. With nearly 92%
of its students passing a certification exam on the first attempt, CyberState鈥檚 courses yield an
unusually high pass rate, resulting from the Company鈥檚 3-year research on effective, interactive
teaching methods.
鈥? After meeting extensive requirements and standards set forth by ITCAP, a national college
accreditation program, CyberState became one of the first Authorized ITCAP Centers (AIC) enabling
students to obtain college credit for Microsoft technical classes. In addition, the Company is a
certified technology education center for Microsoft and Novell.
鈥? The Company鈥檚 recent move into the B2B market opens up a previously untapped and more stable
revenue stream.
鈥? CyberState鈥檚 ample catalog of media-rich, high-quality certification programs and its large network of
content, technology, and distribution partners should allow the Company to reach critical mass.
Company Profile
CyberStateU.com is a Learning Service Provider (LSP) offering online IT certification training to
individuals, corporations, and government agencies. The Company focuses on Internet infrastructure and
Internet telephony certifications and offers an extensive curriculum of off-the-shelf Microsoft, Novell,
Cisco, Linux, Oracle, A+, and Computer Telephony certification programs. Together, CyberState
University鈥檚 course offerings cover about 90% of the Internet infrastructure technologies in the market. In
addition, the Company provides custom computer telephony training for its largest customers. All of the
Company鈥檚 courses are custom-developed for CyberState by the Company鈥檚 exclusive content partners,
including best-selling authors David James Clarke IV (Novell Press), James Chellis (Sybex Network Press),
and Todd Lammle (Sybex Network Press), and partners such as Novell, Microsoft, MindQ, MeasureUp,
and Global Training Solutions. The Company鈥檚 current enrollments include students from all continents.
To reduce total study time and improve content retention and skills transfer rates, CyberStateU.com has
developed its interactive Synergy Learning System (SLS), an engine that combines multiple teaching media
into a structured learning environment. These media incorporate auditory, visual, and kinesthetic sensory
inputs to address different learning styles. Teaching methods utilized include a combination of multimedia
skills assessment and testing, online lectures and assignments, streamed videos, hands-on labs, case
studies, online review sessions, CD-ROM, books, mentoring, chat forums, and e-mail. Other key features
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Corporate e-Learning
of the Synergy Learning System include guaranteed performance support resources, adjustable program
length, and easy plug-in of third-party developed courses. CyberState employs a large number of certified
instructors who can handle chats and mentoring for tens of thousands of students per day, making the
Company鈥檚 solution very scaleable. Each certification consists of one to seven courses, all of which must
be purchased at once.
CyberStateU.com is actively partnering with learning portals, systems integrators, value-added resellers,
software/hardware vendors, academic institutions, c-learning companies, and other content providers. A
number of these partnerships are exclusive. Partners include Click2learn.com, Hungry Minds,
DigitalGuru.com, TrainingNet.com, BrainBuzz.com, iContact.com, Virtual University Enterprise (VUE),
MeasureUp, Microsoft, Novell, SGI, Dialogic (an Intel company), Cygcom, Natural Microsystems,
StarVox, Applied Digital Solutions, CT Institute, KnowledgePlanet (formerly KnowledgeSoft), and
Augusta State University. In addition, CyberState has developed relationships with distributors in the UK,
Asia, and Australia. The Company has offices in Lafayette, California, San Jose, Salt Lake City, and
Atlanta.
Major Clients
AT&T, Nortel, Lucent Technologies, INS, Natural Microsystems
VC/Affiliation Partners
Novus Ventures, Sigma Partners, Compass Technology Partners, iMinds, Stanford University, Acuity
Ventures
Competition
MeasureUp, TrainingNet, NETg, SmartForce, KnowledgeNet, DigitalThink
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Corporate e-Learning
DOCENT, INC. v FIRST PLACE WINNER WWW.DOCENT.COM
2444 Charleston Road Revenues: NA
Mountain View, CA 94043 Employees: ~100
T: (650) 934-9500 Founded: 1997
CEO: David Ellen
Highlights
鈥? Docent鈥檚 strategy is to stay focused on its core competencies in the technology segment and partner
with major content, technology, and service companies to deliver integrated end-to-end online
learning solutions.
鈥? In a recent independent evaluation of seven leading learning management systems organized by PC
Week, Docent鈥檚 Enterprise 4.0 was the only system to receive grade A for its strong capabilities to
create online course catalogs, track student progress, schedule courses, establish learning paths, match
students correctly with the courses they need, align training with job performance, offer flexible
payment options, and support multiple languages.
鈥? Docent was one of the pioneers to offer a delivery architecture that is flexible enough to allow users
to download content to handheld devices, such as palmtops, supporting just-in-time training and
information delivery to mobile employees or field workers.
鈥? Docent鈥檚 branding strategy, superior product, and established corporate client base make Docent a
strong candidate for market leadership in the e-learning technology market.
Company Profile
Docent develops a suite of learning management systems, course assembly tools, and other enterprise-level
software for creating, deploying, and managing training over the Internet, intranets, or extranets. The
Company鈥檚 strategy is to offer a complete solution for enhancing customer education and customer
interaction through sales, service, and support organizations targeting Global 2000 corporations,
primarily in the technology, financial services, and healthcare industries. With its Docent Enterprise 4.0,
the Company provides a framework for companies to design and deliver seamlessly integrated courseware
along with results measurement and integration into other enterprise applications. Enterprise 4.0 allows
students to register, manage their personal learning plans, and track their progress without third-party
intervention while allowing managers to administer courses, track and assess student needs, and monitor
performance. The product is based on a highly scaleable open architecture, supports all Web standards,
and does not require client-side plug-ins.
Enterprise 4.0 consists of five integrated modules: 1) Docent鈩? Learning Management Server (LMS)
manages all aspects of learning administration such as manager and employee self-service for enrollment,
competency management, profiling, curriculum management, notification, and results tracking. The
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Corporate e-Learning
Docent LMS manages both online and traditional instructor-led training events; 2) Docent鈩? Content
Delivery Server hosts the client鈥檚 library of online content and assessments, and includes detailed tracking
of course statistics, assessments, and student activity through standard browsers; 3) Docent鈩? Desktop for
Developers assembles and publishes customized, Web-based courseware that can integrate existing
company materials, e.g., CBT courses, Word documents, and PowerPoint presentations. It includes two
components, Docent Outliner and Docent Publisher; 4) Docent鈩? Mobile aims at providing remote and
mobile users with the same learning experience as networked users via offline or disconnected course
delivery and CD-ROM course distribution. Student data is captured locally offline and synchronized with
a Docent Server when a student reconnects with the network; 5) Docent Reserve provides optional
integrated resource management, scheduling, conflict resolution, and optimization. Enterprise 4.0 is
priced on a seat basis. Cost per user for 1000 users is $90 plus an annual maintenance fee of 20% of the
purchase price.
To create customized learning solutions, Docent also offers consulting services, integrated resource
management, PDA integration, customized ecommerce and assessments, user interface modifications,
standard and customized client education, and technical support. In addition, Docent recently introduced
a complete application-hosting service, adding an LSP function to the Company鈥檚 product mix. For a
monthly service fee, the Company鈥檚 Application Service Program provides companies with a complete
turnkey hosted online learning solution, including Docent applications, technology infrastructure, and
day-to-day management of the hosted environment. Docent鈥檚 partners include Hewlett Packard, Ariba,
3
Portera, Miller Heiman, IBT Financials, C i, and The Richardson Company. The Company maintains offices in
Mountain View, California, Plano, Texas, Burlington, Massachusetts, and Amsterdam, The Netherlands.
Major Clients
Microsoft, Schering-Plough, Pitney Bowes, Merrill Lynch, Lucent Technologies, Sun Microsystems,
Boeing, McKesson HBOC, MicroAge, LSI Logic, Beckman Coulter, TIAA-CREF, Informatica, Royal Dutch
Shell, AXA
VC/Affiliation Partners
Norwest Venture Capital, Advanced Technology Ventures, BancBoston Ventures, Credit Suisse First
Boston, Invesco, Gilde Ventures, Arcadia Partners, Comdisco Ventures
Competition
Saba Software, Click2Learn.com, WBT Systems, Lotus Development Corp., Teamscape, Pinnacle
Multimedia, KnowledgePlanet (formerly KnowledgeSoft)
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Corporate e-Learning
LLC v MANDATORY CONTINUING EDUCATION
E MIND.COM, WWW.EMIND.COM
4077 Redwood Avenue Revenues: NA
Los Angeles, CA 90066 Employees: 100
T: (310) 823-6692 Founded: February 1998
CEO: Howard Marks
Highlights
鈥? eMind.com is a leading online provider of education to the financial services and healthcare
industries. The Company鈥檚 strategy is to partner with clients in order create virtual corporate
universities by offering a complete e-learning solution that includes an optimized mix of content,
learning management, and services.
鈥? Exclusive partnerships with professional associations, academic institutions, and other publishers of
content enable the Company to offer online testing & certification, licensing, and credit.
鈥? By targeting the mandatory continuing education market, the Company captures a source of recurring
revenue that is more stable than one-time course sales.
鈥? eMind.com pursues an aggressive growth strategy that includes international expansion and
acquisitions. Along with its branding strategy and its differentiated product, this makes eMind a key
player in its market niche.
Company Profile
eMind.com (formerly Yipinet) develops highly interactive, Web-based training courses in collaboration
with academic institutions and associations. Course topics include accounting and taxation, insurance,
banking, securities licensing, and professional development. eMind also acts as a learning portal,
aggregating and distributing content from third-party developers in the areas of IT, marketing, and
personal development. The Company currently offers a total of over 1000 courses, with a strong vertical
focus. In early 2000, eMind will add a healthcare offering and an OSHA offering to its library of course
titles. Virtually all of the Company鈥檚 offerings consist of off-the-shelf content; however, custom-built
courses are available to the Company鈥檚 largest clients. eMind鈥檚 target markets are Fortune 2000
companies and the consumer segment. Currently, about 65% of revenues stem from enterprise products,
with the remaining 35% of revenues coming from individual customers.
The Company creates and manages 鈥淜nowledge Hubs,鈥? which are industry-specific Web destinations for
the learning and information needs of working adults. They are targeted to professionals seeking
mandatory continuing education. The purpose of these Knowledge Hubs is not only to offer courses but
also to provide professionals with industry information and enable chats with experts in various fields
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Corporate e-Learning
through 鈥淎sk the Experts鈥? and 鈥淟eaders鈥? features. Knowledge Hubs also include research tools, news,
and job banks. The Company鈥檚 goal is to be more than an e-learning portal by taking a broader approach
to learning and offering more value-added services. Through its Knowledge Hubs, eMind is also pursuing
ecommerce, advertising, and sponsorship revenue opportunities. In addition, the Company offers
consulting, hosting, implementation, and content conversion services, as well as an in-house developed
learning management system and authoring tool, which are free to eMind鈥檚 corporate clients.
Individual users buy courses on a per-course basis or through an unlimited annual license. Course fees
range from $40 to $120, depending on the number of units offered. Prices for enterprise products are
negotiated on a case-by-case basis, varying between $20,000 and $1MM per contract, depending on
course usage. eMind has established several relationships with professional associations, such as state
CPA associations, and is certified by the National Association of State Boards of Accountancy (NASBA)
to offer continuing education credits. The Company鈥檚 content partners include SkillSoft, NETg, Edward
Fleur Financial Education Company, University of Massachusetts Medical School, AICPCU, Grant
Thornton, and Dearborn. eMind maintains offices in Los Angeles, CA, Princeton, NJ, and Toronto,
Canada.
Major Clients
Arthur Andersen
VC/Affiliation Partners
Rader Reinfrank & Co., Knowledge Universe
Competition
Click2learn.com, TrainingNet, Headlight.com, HungryMinds.com, Learn2.com, University.com
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HEADLIGHT.COM v TARGETING SMB MARKET WWW.HEADLIGHT.COM
th nd
540 9 Street, 2 Floor Revenues: NA
San Francisco, CA 94103 Employees: 50
T: (415) 306-0222 Founded: June 1998
CEO: Peter Mellen
Highlights
鈥? With nearly 3000 online courses in 19 learning channels in the areas of IT training, IT certification,
and business skills, Headlight.com has aggregated one of the largest collections of training courses
available on the Internet.
鈥? Headlight鈥檚 Web-based learning management system allows managers and individuals to personalize
training curriculum from multiple publishers and track course progress of their employees and/or
themselves. The Company鈥檚 goal is to create a one-stop-shop that simplifies the purchase and
management process by eliminating a manager鈥檚 need to use multiple sites for training.
鈥? Through new partnerships, Headlight.com is expanding into Europe and Asia and expects to offer
content to businesses in those regions within twelve months.
鈥? Headlight.com has the potential to secure a first-mover advantage in the content consolidation
business. By targeting small- and medium-sized businesses, which employ approximately 60% of the
U.S. workforce and tend to adopt e-learning more quickly than large corporations, Headlight.com is
attacking a huge, under-served market. Given the Company鈥檚 large number of course offerings and
strong branding strategy, Headlight.com is a candidate for market leadership in its segment.
Company Profile
Headlight.com is a leading e-learning portal targeting small-to medium-sized corporations (SMB) and the
consumer/continuing education market. The Company has aggregated nearly 3000 off-the-shelf training
courses on a variety of business-related topics, including IT certification, programming, operating
systems, network administration, database management, Internet literacy, desktop training, sales, finance,
strategic planning, general management, and personal development. Headlight.com also provides tools
that enable companies and individuals to effectively manage and track the learning process.
Headlight.com courses do not require any downloads or installations and are delivered from the
Company鈥檚 servers to the user鈥檚 Internet browser, requiring a 28.8kbps modem. Headlight.com鈥檚 database
is searchable by price, bandwidth, learning approach, and publisher. This, combined with the creation of
a unique user profile, enables Headlight.com to offer its 鈥渃ustom learning paths,鈥? which allow for courses
to be tagged and tailored to individual users. Free skills assessment offered on the site generate specific
course recommendations tailored to each user鈥檚 unique learning needs, so that content is provided only in
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areas with which users are unfamiliar. The Company鈥檚 free 鈥淢y Profile鈥? allows a student to keep track of
recommended courses, courses in progress, completed courses, and assessment results. The user can start
and stop courses as often as needed, and then return to review them as desired. In addition,
Headlight.com offers registration, enrollment services, and free learning management services, enabling
customers to track the progress of their employees and assess the effectiveness of the training programs.
These tools, along with 鈥淢y Team,鈥? are offered to managers to facilitate purchasing, assigning, and
tracking training efforts.
Course fees range from $12 to $149, which includes tracking tools. Additional revenues are generated
through sponsorships, advertising, and ecommerce. To gain access to content, the Company enters
distribution agreements with leading content providers serving small- and medium-sized businesses, with
whom it shares resulting revenues. Headlight.com has partnerships with leading publishers of content,
including Ninth House Network, NETg, Ziff-Davis Education, and SkillSoft. Moreover, Headlight.com
teams up with portals and LSPs, such as Learn2.com and Brainbench, to give its customers access to
additional training content and IT certifications. Some of the Company鈥檚 distribution partners driving
traffic to Headlight.com through links and marketing promotions include Compaq, NBCi, Alta Vista,
Office.com, and Concentric Networks.
Major Clients
Hundreds of small and medium-sized businesses
VC/Affiliation Partners
Draper Fisher Jurveston, Silicon Valley Band of Angels
Competition
Click2learn.com, TrainingNet
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INTERWISE v VIRTUAL CLASSROOMS WWW.INTERWISE.COM
2334 Walsh Avenue Revenues: NA
Santa Clara, CA 95051 Employees: 150
T: (408) 748-7800 Founded: 1994
CEO: Hillel Kobrinsky
Highlights
鈥? InterWise鈥檚 strategy is to develop an Internet-based architecture that focuses on optimal use of
bandwidth to deliver course content, two-way full duplex audio, and live applications sharing in a
real-time online classroom to students over any connection speed.
鈥? The Company pioneered the use of studio-type production and recording capabilities that allow
companies to capture, edit, and re-purpose recordings of live online classes delivered through
InterWise. This allows businesses to produce and distribute reusable instructional segments and self-
paced lessons with 鈥渋nstant鈥? turn-around time and low development costs.
鈥? InterWise recently won a Crossroads 2000 A-List Award for its instructor-led online learning product
Millennium 2.0.
鈥? The Company鈥檚 highly interactive, flexible, and scaleable delivery platform and its aggressive
international expansion should allow InterWise to reach critical mass of market share quickly.
Company Profile
InterWise develops virtual classroom technology targeting mostly multinational corporations and
academic institutions. The Company鈥檚 flagship product is Millennium 3.0, a suite of software products
and services enabling live, synchronous instructor-led training over the Internet. It consists of four
integrated software components: InterWise Instructor, InterWise Student, InterWise Campus, and the
Millennium Server. InterWise Instructor enables instructors to take advantage of the same broad range of
instructional techniques and interactivity they would use in a physical classroom. Content materials can
be developed in formats, such as PowerPoint, Microsoft Office, Web sites, video/audio clips, CBT, PDF
files, or any other desktop application. The materials are presented to student desktops via a whiteboard
with live drawing tools. Instructors interact with students via public or private two-way audio, written
notes and online polling, questions, and tests. InterWise鈥檚 Class-at-a-Glance user interface allows the
instructor (and students) to see and monitor each student as they would in a traditional class. In addition,
the system supports breakout sessions during a class, multiple instructors, remote application sharing, and
peer-to-peer interaction through threaded messaging.
The InterWise Student interface comprises five buttons allowing students to raise their hands, write a note
to the instructor or a co-student, anonymously flag the instructor to speed up or slow down, and take
control of the whiteboard pointer when given the floor to speak. Students can view materials presented on
their whiteboard with an optional streaming video of the instructor and be given multiple opportunities to
respond to formal and on-the-fly polls, questions, and tests. Other technical features include: 1) push
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capability (course materials are automatically and invisibly downloaded to student desktops in advance of
class, keeping live streaming at class time to a minimum and allowing students with 28.8 modem
connections to have the same experience as students on T1 lines); 2) multi-stream unified time code
(enabling complete synchronization among audio, video, and data so individual student experiences will
not vary with connection speed); 3) proxy tree architecture (allowing the system to scale to an unlimited
number of concurrent students around the world); 4) InterWise Servers (automatically use the appropriate
protocol combinations to support students connecting through dial-up connections and students behind
firewalls with various configurations), and 5) e-business integration (embeds live or prerecorded e-
learning sessions into clients鈥? Web sites to reach customers, partners, and employees).
In addition to its Millennium platform, the Company offers LiveCycle Services, a suite of services that
include needs assessment, project planning, implementation management, product training, instructional
design for live e-learning, event preparation, just-in-time support, and on-air event monitoring. InterWise
also provides a customized, fully-hosted solution of its Millennium product suite. Millennium 3.0 is
priced based on named users or usage, with quarterly, annual, or perpetual licenses starting at $15,000,
depending on scale. In 1999, the Company moved its headquarters from Tel Aviv, Israel, to Santa Clara,
California. In addition, InterWise has offices in New York, Switzerland, Germany, France, Greece, Israel,
Singapore, Japan, and South Africa.
Major Clients
Applied Materials, SAP, Bank Leumi, Bristol-Myers Squibb, DDS, Ford, Institute for Law and Justice,
PelelPhone Communications (Motorola), The Tefen Group
VC/Affiliation Partners
NA
Competition
Centra Software, LearnLinc Corporation, Lotus Development, PlaceWare, WebEx
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KNOWLEDGEPLANET.COM v ELEARNING MARKETPLACE WWW.KNOWLEDGEPLANET.COM
11490 Commerce Park Dr., Suite 400 Revenues: $6 MM (CY 99)
Reston, VA 20191 Employees: ~130
T: (717) 790-0400 Founded: December 1999
CEO: Alan Todd
Highlights
鈥? KnowledgePlanet.com is the first company to offer a technology platform 鈥? the KP2000 Workforce
Performance Management System 鈥? integrated with a B2B eLearning Marketplace where training and
HR professionals can evaluate and purchase training products and services provided by a variety of
training vendors. The key feature of the Company鈥檚 eLearning Marketplace is that it provides quality
ratings for courseware from different content providers.
鈥? The Company鈥檚 goal is to bring together suppliers and buyers of e-learning content, remove
inefficiencies in the training purchasing and deployment process of large corporations, and provide a
total solution for workforce development and performance improvement under a single contract.
鈥? KnowledgePlanet.com is positioned to become a key player in the e-learning industry through its
ability to provide a complete e-learning solution comprised of a scaleable enterprise management
platform, custom content, and professional services.
Company Profile
KnowledgePlanet.com, a company recently formed through a merger of four companies: KnowledgeSoft,
Kobbix, MindQ, and Interactive Studios, aggregates and custom-designs content, develops learning
management systems, and provides application hosting and other services to Fortune 1000 companies.
The Company鈥檚 main products, KP 2000, a Workforce Performance Management (WPM) system, and
eLearning Marketplace are sold together on a subscription basis. eLearning Marketplace is a portal site
where organizations find thousands of Web-based training courses, mainly in the areas of IT training, that
have been adapted to run on the Company鈥檚 KP 2000. eLearning Marketplace is designed to streamline
the evaluation, purchasing, implementation, and tracking processes associated with implementing third-
party content. The site organizes content and communities by business channels, such as IT or Leadership
and Management, and by vertical industry channels such as Financial Services. On the Marketplace Web
site, subscribers can locate, try, and evaluate courseware from various vendors and read ratings assigned
by KnowledgePlanet鈥檚 analysts and other Marketplace members. While KnowledgePlanet鈥檚 offerings are
targeted towards large corporations, any individual can make course comparisons and evaluations on the
Web site. Members can also learn about trends in workforce training and collaborate with other
professionals responsible for workforce performance issues.
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The key difference between KnowledgePlanet and e-learning portals is the underlying KP2000 WPM
system that focuses all workforce development activity on attaining skills and desired performance levels
required by an organization鈥檚 business strategy. Each member鈥檚 secure WPM system is customized to
integrate the organization鈥檚 business rules, workflow, management approval, and internal human resource
management system. KP2000 consists of three modules: Performance Management, Assessment
Management, and Learning Management. Performance management delivers a personalized competency
profile to every employee based on his/her current and required skills and the proficiency level at which a
person should be performing on the job. Assessment management coordinates 360-degree evaluations and
objective assessments to monitor subject knowledge as well as observations of performance improvements
on the job. Learning management coordinates online learning and other training activities to help people
close performance gaps. The Company offers its Web-based KP2000 WPM system in combination with
the eLearning Marketplace course content primarily as an application hosted solution. If preferred,
organizations can also license content and hardware and install the system on their own infrastructure.
The Company鈥檚 services package includes implementation and project management, competency and skill
modeling, process reengineering, systems integration, content development services, and internal
marketing. KnowledgePlanet鈥檚 solution is offered through a membership subscription that ranges in price
from $5 per user per month to less than a dollar per user per month, based on the number of people
enrolled. Customers get billed only for the courses their employees have actually used, broken down by
vendor. The Company鈥檚 content partners include SmartForce, NETg, DigitalThink, CyberStateU.com,
DPEC, SkillSoft, eMind.com, Dearborn, and FST. KnowledgePlanet also has strategic alliances with
Productivity Point International (PPI) and PeopleSoft. The Company maintains offices in Reston, Virginia,
Chicago, New York, San Francisco, Dallas, Minneapolis, Atlanta, and Mechanicsburg, Pennsylvania.
Major Clients
Goldman Sachs, Morgan Stanley Dean Witter, Prudential, Fidelity Investments, Wachovia, Zurich
Financial Services, Chevron, Saudi Aramco, Acxiom, Hershey Foods, Marsh Mercer, Glaxo Wellcome,
Rite Aid, PeopleSoft, AMS, Convergys, Highmark, Silicon Graphics
VC/Affiliation Partners
HarbourVest Partners, Knowledge Universe
Competition
TrainingNet, Click2Learn, SmartForce, DigitalThink, NETg, KnowledgeNet, Saba, Docent, Syscom
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NINTH HOUSE NETWORK v BROADBAND COURSEWORK WWW.NINTHHOUSE.COM
550 Fifteenth Street Revenues: NA
San Francisco, CA 94103 Employees: 150
T: (415) 575-0950 Founded: December 1996
CEO: Jeff Snipes
Highlights
鈥? Ninth House Network is the first e-learning company to provide corporate learning via a broadband
media network, which may give it a significant first-mover advantage.
鈥? The Company offers a highly interactive, movie-style e-training solution designed to create a
鈥渓earning experience鈥? within a long-term learning community.
鈥? Ninth House Network鈥檚 strategy is to build a strong brand name in the business skills arena and to
integrate content, technology, a portal, and communities into a value-added, one-stop-shopping
business model.
鈥? With a high-quality product, strong management team, and a highly scaleable business model, Ninth
House is uniquely positioned to become a leader in the emerging e-learning market.
Company Profile
Ninth House Network is a broadband multimedia learning network providing online business skills
learning programs to Fortune 500 companies and government agencies. The Company currently offers six
online learning channels accessible from the corporate desktop: leadership, management, team
effectiveness, communication, project management, and business essentials, each of which include various
courses on the topic. Ninth House creates personalized, highly interactive, and cinematic learning
experiences using teaching techniques such as story-telling, role-playing, simulations, complex behavioral
modeling, streamed videos, personalized mentor reinforcement, and case studies. All of the Company鈥檚
learning programs are developed internally.
The goal of the network is to create collaborative intra-company learning communities and transform
coursework into a continuing learning process. The learning channels are constantly updated with new
interactive movies to encourage learners to come back regularly to play or take more courses. To provide
instant learner support and develop relevant programming, Ninth House partners with leading thinkers in
the business field, such as Tom Peters and Ken Blanchard, and offers Q&A features as well as
personalized digital mentors, which customize the program according to each employee鈥檚 learning style. In
addition, the Company offers a number of value-added services, such as skills gap assessment, custom
curriculum design, performance tracking and evaluation, ongoing reinforcement and mentoring,
knowledge base management, systems integration, hosting, and consulting services.
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Ninth House uses a scaleable deployment system and sells its complete service package on a per-seat basis
for approximately $500 per annual subscription. A subscription gives the client access to the broadband
environments (simulations, role-playing, interactive videos, personalized mentor reinforcement), learning
programs (courses, exercises, animated case studies, and games), performance support (Web casts, instant
advice feature, author talks, communities), and editorial content (articles, tips, tools). Ninth House
recently formed a content partnership with best-selling author Larraine Segil to create a learning program
on internal and external corporate alliances.
Major Clients
Hewlett Packard, Intel Corporation, TechData, First Union National Bank, Texaco, Black & Decker,
Empire Blue Cross/Blue Shield, MediaOne, U.S. Navy, the State of New Mexico, Software Spectrum,
Excite@Home, ConEdison, Insight Direct, U.S. Department of Justice
VC/Affiliation Partners
Chase Capital Partners, Merrill Lynch, Hambrecht & Quist, Arena Capital, WR Hambrecht + Co, Meta
Group, Ken Blanchard Co.
Competition
Teach.com, SMGnet, Cognitive Arts, SkillSoft, Pensare, UNext.com, Provant, SmartForce
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PENSARE, INC. v KNOWLEDGE COMMUNITIES WWW.PENSARE.COM
5150 El Camino Real, Suite C32 Revenues: NA
Los Altos, CA 94022 Employees: ~70
T: (650) 967-5000 Founded: Summer 1996
CEO: Douglas E. Donzelli
Highlights
鈥? Pensare is a pioneer of the e-learning business model based on long-term partnerships with top-tier
academic institutions, such as Harvard Business School, Duke University, and The Wharton School of
Business. These partnerships allow Pensare to leverage this quality brand content into new channels.
鈥? The Company鈥檚 strategy includes integrating content, technology, and services to offer an interactive,
complete e-learning solution and create knowledge communities tailored to specific organizations.
鈥? The international brand recognition of Pensare鈥檚 content partners positions Pensare to capture
significant foreign market share.
鈥? Pensare鈥檚 branding strategy and strong partnerships, combined with short time-to-market capabilities
and a highly scaleable distribution model, should enable Pensare to leverage its first-mover advantage
and be aggressive in capturing the corporate market.
Company Profile
Pensare offers online business skills training in the areas of management and leadership, innovation,
marketing, sales, business essentials, e-business, and finance to major corporations via the Internet. The
five defining elements of Pensare鈥檚 strategy are branded content, performance and applied learning tools,
human interaction, cultural adaptation, and learning community platform technology. The Company uses
an innovative Internet delivery technology that incorporates knowledge capture and sharing, multi-user
simulations, online discussion groups, interactive exercises, courseware, and knowledge libraries. The goal
is to enhance employee performance by forming intra-company 鈥淜nowledge Community鈩⑩?? teams,
where learners share information, collaborate in study and project groups, and learn from each other.
Pensare鈥檚 Knowledge Community Platform is the foundation of its solution. As an Internet-native
solution, it uses open standards, facilitates multi-user simulations and role-playing technology, and allows
integrated customization of communities, corporate knowledge mining, and distributed action planning.
In collaboration with over 45 major brandholders among academic institutions, such as Harvard Business
School (HBS) Publishing, Fuqua School of Management (Duke University), Wharton School of Business
(University of Pennsylvania), University of Southern California, corporate universities, and leading
authors, such as Anthony Parinello, the Company is developing a wide range of courses, including the
first complete online MBA curriculum from a top-ten business school. As part of many of these
agreements, Pensare will be able to resale the curricula it develops with its business school partners into
other academic institutions, corporations, and corporate training and university programs, thereby
increasing the scalability of the business model.
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The Company鈥檚 prices range from $300-$600 per seat, with discounts based on volume. Pensare also
custom-designs training courses on a turnkey basis and provides hosting services, Web collaboration
tools, performance support and tracking tools, mentoring, 鈥淢y Learning Community鈥? personalization,
virtual events organization, and other value-added services. The Company is currently building a large
online library of courses, from which corporate universities can choose and create their own customized
certificate and degree-granting programs. Universities that want to start selling their own courses online
will also be able to turn to Pensare to provide the needed technology.
Major Clients
Unisys, Fujitsu, Hallmark, Equistar
VC/Affiliation Partners
GE Capital (Equity Services), MediaTech Venture, AVI Management Partners, Battery Ventures, Imperial
Ventures, WR Hambrecht + Co., Duke University
Competition
UNext.com, University Access, Cognitive Arts, Teach.com, eCollege, SkillSoft, SMGnet, Ninth House
Network, KnowledgePlanet.com, Apollo Group (University of Phoenix)
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SABA SOFTWARE, INC. v LAUNCHING E-COMMERCE PLATFORM WWW.SABA.COM
2400 Bridge Parkway Revenues: $6.7 MM (CY 99)
Redwood Shores, CA 94065 Employees: ~300
T: (650) 696-3840 Founded: April 1997
CEO: Bobby Yazdani
Highlights
鈥? With more than 2 million people licensed to learn on Saba鈥檚 learning management systems and over
20,000 learning offerings, Saba is one of the early leaders in the technology segment of the e-learning
market.
鈥? The Company鈥檚 Saba Learning Enterprise鈩? system recently won a Crossroads 2000 A-List Award in
the Strategic Software Platforms category as the best, newly proven technology for 鈥淭echnology
Infrastructure.鈥?
鈥? Saba鈥檚 platforms are highly scaleable, standards-based, and content-neutral. They support the
procurement, deployment, and management of learning in many languages.
鈥? Saba provides a well-rounded combination of branded e-learning infrastructure and value-added
services. Coupled with its aggressive international growth strategy, Saba is well positioned to expand
on its market leadership.
Company Profile
Saba Software offers an integrated range of Internet-based learning network products and services to
Global 5000 companies, government agencies, and learning providers. The Company鈥檚 three product
groups include Saba Learning Enterprise鈩?, Saba Learning Provider鈩?, and Saba Learning Exchange鈩?.
Saba Learning Enterprise is an open, Internet-based learning management system that allows corporate
customers to establish knowledge and competency goals, assess the learning needs of individuals and
organizations, select and purchase online and off-line learning materials and programs, measure and track
individual learners鈥? progress, and manage enterprise-wide learning initiatives and processes. Saba鈥檚 goal is
to enable clients to cost-efficiently procure and deliver learning and to close knowledge and competency
gaps throughout client companies鈥? extended enterprises, including customers, suppliers, partners, and
employees. Saba Learning Enterprise is also available as a completely outsourced, Saba-hosted solution,
called Saba Learning e-Enterprise.
Saba Learning Provider is an Internet-based learning network that enables internal and external learning
providers to develop, sell, and distribute online and off-line learning content and programs to
organizations worldwide. Using Saba鈥檚 software, providers can access demand, market their content to
organizations, transact with ecommerce capability, deliver online learning, manage classrooms and
supplies for off-line learning, and take advantage of multiple reporting capabilities to better manage their
businesses. The system also manages and allocates learning resources such as registration, classroom and
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instructor availability, instructional material fulfillment, and online learning delivery. Moreover, Saba
recently launched Saba Learning Exchange, a global, Internet-based B2B learning marketplace, designed
to enable businesses, governments, and learning providers to buy and sell learning offerings and
collaborate within learning communities. Product features include comprehensive search capabilities,
access to private learning networks and offerings via secure pass codes, chat rooms and discussion groups,
and ecommerce capabilities. Saba also offers a full range of management consulting, business process
reengineering, technical implementation consulting, education, and support services.
To achieve a high content compatibility with its learning management system, Saba has built a large network
of content partners, including SmartForce, SMGnet, NETg, DigitalThink, Cognitive Arts, SkillSoft, Provant,
Headlight.com, TrainingNet, Catapult, and IEC. The Company鈥檚 facilities are located in 13 major U.S. cities
and in Australia, Canada, Germany, India, and the UK.
Major Clients
Cisco Systems, Lucent Technologies, DaimlerChrysler, Ford, GE, Hyundai, 3Com, Procter & Gamble,
Qwest Communications, BMC Software, Adobe, Paine Webber, Wells Fargo, PriceWaterhouseCoopers,
Continental Airlines, US West, Anheuser-Busch, U.S. Dept. of Veterans Affairs
VC/Affiliation Partners
Sequoia Capital, Crosslink Capital, Internal Investors, Comdisco Ventures, BancBoston Robertson
Stephens, Berkeley International Capital Corp.
Competition
Docent, Click2Learn.com, KnowledgePlanet (formerly KnowledgeSoft), Lotus Development Corp., WBT
Systems, Pinnacle Multimedia, Teamscape
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SMGNET, INC. v SYNCHRONOUS LEARNING WWW.SMGINC.COM/SMGNET
3624 Market Street Revenues: $4MM (CY 99)
Philadelphia, PA 19104 Employees: ~60
T: (215) 387-4000 Founded: November 1996
CEO: Robert Brodo
Highlights
鈥? SMGnet鈥檚 strategy is to create long-term strategic performance development systems by integrating
competency design & measurement, learning experiences featuring highly interactive multimedia
business simulations, learning communities, career development, and performance management.
鈥? The Company has built a strong network of partnerships and alliances in the areas of content
development, technology, and online distribution.
鈥? SMGnet focuses on its market niche and does not plan to be everything to everybody. Through its
parent company, however, SMGnet has access to a large, international customer base and
complementary products, such as instructor-led training and consulting services.
鈥? By delivering branded, value-added training programs, SMGnet has the foundation to emerge as one
of the key players in the content segment.
Company Profile
SMGnet is an online training company that focuses on performance improvement. The Company is the e-
training arm of Strategic Management Group (SMG), a global training and consulting firm that has been
in business since 1981. SMGnet targets Fortune 500 companies and small and medium-sized businesses.
The Company focuses on client functions that drive business performance, such as R&D, Sales, and
Marketing. Its product mix consists of seven different product groups: 1) Finance Iqnet; 2) Project
Management Iqnet; 3) PEAT (Project Environment Assessment Tool), measuring organizational climate
for successful project management practices; 4) Performance 21, providing performance management
courses; 5) CLEO (Continuous Learning and Education Online); 6) CareerPoint Internet, providing career
and personal development planning; and 7) Business Side of e-Commerce, a business simulation and
online workshop that teaches how to implement an ecommerce strategy.
SMGnet鈥檚 learning modules also entail skills assessment and mastery tests. Training is delivered in small,
20-minute modules, mainly via Internet. In addition to asynchronous learning, Centra鈥檚 Symposium鈩?
platform enables the Company to offer synchronous course delivery in the form of virtual classrooms and
Web-based, follow-up seminars. Although all of the Company鈥檚 learning modules are off-the-shelf,
SMGnet provides customization of content, needs identification, and measurement, as desired by clients.
In addition, SMGnet is currently creating a 鈥淟eadership Development System,鈥? which is a combination of
learning experience, learning community, and 24x7 mentoring/coaching online and includes performance
development tools as well. The Company hosts all of its training services.
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The Company鈥檚 strategy is to provide the learner with an engaging and entertaining learning experience
through multimedia simulations, streamed audio and video clips, animations, expert advice, and case
studies. The goal is to make learning a part of employees鈥? everyday life and form intra-company learning
communities. The Company鈥檚 performance management system is integrated into employees鈥? e-mail and
calendar system and provides both guidance and learner support on an ongoing basis. Courses are sold
for $25 鈥? $200 per user, based on volume per organization and type of course. The Company maintains
offices in Philadelphia, San Francisco, Chicago, Atlanta, Washington, the UK, and Germany.
Major Clients
Boeing, IBM, Motorola, Intel Corporation, Cisco Systems, Hewlett Packard, Sun Microsystems,
Federated Department Stores, U.S. Postal Service, Dow Chemical, Sprint, Exxon, GTE, Net Life,
Rockwell
VC/Affiliation Partners
NA
Competition
Ninth House Network, Teach.com, Cognitive Arts, SkillSoft, Pensare, UNext.com, Provant
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TEACH.COM v ONE-STOP-S HOPPING WWW.TEACH.COM
25 Northwest Point Rd, Suite 1025 Revenues: NA
Elk Grove Village, IL 60007 Employees: 150
T: (847) 545-0100 Founded: October 1998
CEO: Elisabeth Tomaszewicz
Highlights
鈥? Teach.com offers a full suite of off-the-shelf and custom-built e-training courses in the areas of
desktop training and business skills, integrating content, technology, and services into a one-stop-
shopping business model.
鈥? Teach.com鈥檚 key differentiator is its state-of-the-art courseware development infrastructure and
delivery technology offering a high degree of adaptability and flexible adjustment of bandwidth
without losing media quality. Its strategic relationship with Dell allows the Company to offer servers
pre-configured with its SmartTrainer庐 architecture and training solutions.
鈥? Teach.com is one of the strongest and most diversified players in the corporate e-learning space. Its
solid client base, long experience in content development, and innovative technology and services
make it a leader in the market.
Company Profile
Teach.com provides technology-delivered performance improvement training targeting Global 2000
companies, governments, and universities. The Company develops both off-the-shelf courseware,
accounting for 60% of revenues, and custom-designed solutions, making up 40% of revenues, in the areas
of business skills and desktop application training. Its large library includes multimedia courses in
customer service, finance and business management, leadership, interpersonal skills, sales, sales
management, performance management, general management, telemarketing, MS Office, MS Operating
Systems, Internet browsers, and Lotus, which are deliverable through the Internet, intranets, and CD-
ROM. Customized instructor-led training is available on request, but accounts for a very small part of the
Company鈥檚 business.
In addition, Teach.com provides skills and needs assessment, performance tracking and support tools,
training effectiveness measurement, hosting, consulting, and other value-added services and tools to
clients. Through a combination of instructional methods and technology, including streamed videos,
multimedia simulations, role plays, scenarios, client-specific case studies, live application practice,
mentoring, and guided instruction, the Company鈥檚 products provide a high level of interactivity and can
also be customized to employees鈥? learning styles and situational needs. Teach.com鈥檚 SmartTrainer庐
engine is a comprehensive self-study learning environment that incorporates a behavioral modeling
approach in a Show Me-Try It format, providing pre-and post-training skills assessments and continuing
performance support in the form of a Help Desk function, even after the course is completed. Learners
have the option to access only those course lessons for which they did not demonstrate mastery during the
pre-test.
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Teach.com provides training at different bandwidths depending on the needs and capabilities of its clients.
On the Internet, video streams from a separate server than the rest of the course. Content is linked to
streaming video at a learner鈥檚 desktop. Prices for Teach.com products range from perpetual licenses for
large corporations of $1 per course per user, depending upon the number of individuals to be trained, to
$150 for off-the-shelf products sold to individuals. Teach.com is the result of the 1998 merger of
Anderson Soft-Teach and International Learning Systems, two companies with a 15-year history in the
education and training business. The Company has offices in Elk Grove Village, Illinois, Los Gatos,
California, and Golden, Colorado.
Major Clients
AT&T, IBM, Bell Atlantic, Dell, Oppenheimer Funds, New York Life, the Guardian, Enterprise Rent-A-
Car, Smurfit Stone, ServiceMaster, State Farm, Bristol-Meyers Squibb, Excite@Home, Johnson &
Johnson
VC/Affiliation Partners
Arch Venture, Ohio Partners, TIA CREF, Tribune Ventures, State Farm Insurance, Allstate
Competition
Ninth House Network, SMGnet, Pensare, Cognitive Arts, Digital Think, SmartForce, SkillSoft, NETg
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TRAININGNET, INC. v REVERSE AUCTIONS WWW.TRAININGNET.COM
296 Concord Road, Suite 180 Revenues: NA
Billerica, MA 01821 Employees: ~115
T: (978) 671-7500 Founded: February 1999
CEO: Hemang Dave
Highlights
鈥? TrainingNet is most likely the largest aggregator of training content in the market, offering more than
100,000 training course events annually in more than 25 soft skill and IT training categories.
鈥? The Company鈥檚 strategy is to leverage Web and intranet technology to accelerate and streamline the
training selection, approval, and purchase process for corporations and professionals through its B2B
ecommerce marketplace.
鈥? In an effort to bring buyers and sellers together and make the purchasing process for corporate
SM
training more efficient, TrainingNet recently launched RFP Exchange , a reverse auction where
buyers can specify what custom training they need, when and where they need it, and what price they
are willing to pay.
鈥? Through a combination of an unmatched selection of training courses, various value-added services,
aggressive expansion and acquisition strategy, and an experienced management team, TrainingNet is
well positioned to be one of the dominant B2B learning portals on the Web.
Company Profile
TrainingNet aggregates and distributes soft skills and IT training from over 1,200 content providers. The
Company offers all forms of training delivery, including classroom training (ILT), synchronous and self-
paced online courses, computer-based training delivered via CD-ROM or network connection, books and
training manuals, and self-study video and audio tapes. Approximately 2,500 of the Company鈥檚 training
courses are Web-based. Courses are organized in eight major channels: management and professional
development skills, general business skills, desktop applications, Internet skills, IT training and
certification, engineering, law, and industry-specific training for 16 vertical industries. TrainingNet offers
its products via its Marketplace 3.0, targeting mainly the corporate segment but also the continuing
professional education market. Key features of TrainingNet鈥檚 marketplace include: 1) search by keyword,
category, subject, delivery medium, industry, time, location, and provider; 2) RFP (Request for Proposal)
Exchange for finding custom and high-volume on-site training; 3) course evaluations by past participants;
4) course filtering capabilities; and 5) personalization through 鈥淢y TrainingNet.鈥?
For corporate clients, the Company offers customized slices of its online marketplace on their corporate
intranets. Customized features include integration of internal and external offerings, company-specific
messaging and branding, course filtering, employee personalization, electronic course approval process
management, training activity analysis, reporting on spending and course evaluation, turnkey employee
communication programs, and RFP Exchange, a proposal exchange designed to find the best training
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resources for on-site and customized classroom training, training software and consultants, seminar and
conference facilities, and volume purchasing. With its recently launched RFP Exchange, TrainingNet
provides a new service that allows buyers to specify all their custom training requirements (including
price, preferred providers, and how many proposals they want to receive back and by when). TrainingNet
also lets buyers reach a wide range of training providers whose proposal features and prices they can
compare side-by-side.
In addition to selling courseware to corporations and individuals, TrainingNet distributes its content
through other leading B2B training portals, content sites, and technology companies with extensive
reseller channels. These strategic partners provide co-branded TrainingNet marketplaces on their sites
and/or integrate them into their products and services. Strategic partners include Dow Jones, Business
Week, IDG.net, SuccessFactors.com, HeadHunter.net, Hoovers, and Kaplan Education Centers. Among
TrainingNet鈥檚 content providers are SmartForce, DigitalThink, CyberStateU.com, New Horizons
International, ExecuTrain, ARIS Education, Learn2.com, PPI, Provant, Global Knowledge Network, IBM
Learning Services, Cornell University ILR, Berlitz, and Oracle. The Company maintains offices in
Billerica, Massachusetts and Vancouver, Canada.
Major Clients
Allaire, Bull Information Systems, Carolina Power & Light, CMGi, Diebold, Harley-Davidson, Harvard
University, Hill-Rom, Genzyme, Levi Strauss & Co., Lockheed Martin, Lotus, Mercedes Benz, NewsEdge,
Sybase, Volvo
VC/Affiliation Partners
Charles River Ventures, Bessemer Venture Partners, Blue Rock Capital
Competition
KnowledgePlanet.com, Click2learn.com, Headlight.com, University.com
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UNEXT.COM v ONLINE MBAS WWW.UNEXT.COM
500 Lake Cook Road, Suite 150 Revenues: NA
Deerfield, IL 60015 Employees: 100
T: (847) 405-5000 Founded: November 1997
CEO: Andrew M. Rosenfield
Highlights
鈥? UNext.com鈥檚 strategy is to incorporate academic content from premier universities, such as Columbia
University and Stanford University, to create executive training and a complete MBA program for
multinational corporations seeking to develop and enhance human capital.
鈥? The Company鈥檚 proprietary technology allows students to form collaborative learning communities
utilizing synchronous and asynchronous communication.
鈥? UNext鈥檚 global strategy, branded content, and scaleable business concept should allow the Company
to garner market share quickly, once it has ramped up its operations.
Company Profile
UNext.com was created to provide online business education in the areas of accounting, finance,
marketing, international business, and other parts of a standard business curriculum to large
corporations. It plans to offer complete MBA programs through its Cardean online university as well as
single classes to learners who want to improve specific skills. UNext applies a 鈥渓earning-by-doing鈥?
approach, using highly interactive and media-rich teaching methods, such as multimedia simulations,
video clips, collaborative exercises, case studies, real-time online mentoring, and labs, with the goal of
creating virtual learning communities. In addition, students work with textbooks, write essays, submit
problem-solving assignments, and take exams. The Cardean platform provides tools that allow constant
revision and updating of course material, continuous skills assessment, and tailoring of learning
interactions to match students鈥? capabilities and learning style.
UNext develops its academic course content in conjunction with leading institutional partners, such as
Stanford University, Columbia University, University of Chicago, Carnegie Mellon University, and the
London School of Economics. Cardean University is accredited by the Commission of the Distance
Education Training Council (DETC), which is listed by the U.S. Department of Education as a nationally
recognized accrediting agency. UNext courses have undergone a comprehensive testing process and are
constantly reevaluated for quality content and efficacy.
UNext will sell its classes at a certain discount to top instructor-led academic business programs. While
the Company currently targets the B2B market, it plans to sell classes to the consumer markets in the
future and to expand its course offerings beyond business education. UNext鈥檚 technology partners include
USI, Oracle, and IBM-Lotus. UNext.com was originally funded by Knowledge Universe, which still has a
20% non-voting interest in UNext. The Company maintains offices in Deerfield, Illinois, and
Bloomington, Indiana.
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Major Clients
IBM, A.T. Kearny
VC/Affiliation Partners
Knowledge Universe, Pritzker Organization, Gleacher & Company
Competition
Pensare, University Access, Cognitive Arts, eCollege, Teach.com, Apollo Group, SMGnet, SkillSoft,
KnowledgePlanet.com
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WBT SYSTEMS v TOP CLASS WWW.WBTSYSTEMS.COM
Reservoir Place, 1601 Trapelo Road Revenues: <$10 MM (CY 99)
Waltham, MA 02154 Employees: ~75
T: (781) 839-2800 Founded: 1995
CEO: Peter Zotto
Highlights
鈥? WBT Systems is a leading learning management software provider selling its products in over 20
countries worldwide. With 40-50% of its revenue stemming from international markets in Europe,
Asia, and Australia, the Company has already a great deal of international visibility, giving it an edge
over most domestic e-learning technology providers.
鈥? With its TopClass Server, WBT Systems owns a viable brand product that is one of the most popular
training management systems designed for the Internet. It is currently installed on over 600 sites of
both large corporations and academic institutions. Around 2 million users have taken courses based
on the TopClass infrastructure.
鈥? The Company has built a flexible, open Web-native system based on its 鈥渓earning objects鈥?
architecture that can easily be adjusted to any industry standard that emerges.
鈥? WBT Systems has an experienced management team that is aggressively pushing forward the
Company鈥檚 national and international expansion. In combination with a brand product and a solid
client base, this gives WBT Systems a strong foundation to be a market leader in the technology
segment of the training industry.
Company Profile
WBT Systems develops the Web-based learning infrastructure platforms and authoring tools that enable
organizations to deliver training content to large numbers of learners over the Internet or intranets, and to
manage the entire training process, from registration through testing and certification. The Company is
targeting Global 2000 corporations, government agencies, and higher education institutions, both in the
United States and abroad. WBT Systems鈥? lead brand is the TopClass family of products that include a
training management system, authoring tools, certification technology, and support services designed
specifically for the Web. The TopClass Server provides course and content delivery and management,
administration, progress tracking, and certification and auto testing capabilities to evaluate students and
customize their course material based on performance. In addition, WBT offers personalization and
collaboration capabilities based on its 鈥渓earning objects鈥? architecture. TopClass can also be used to assist
instructor-led classes.
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The Company鈥檚 new product group, TopClass Publisher Studio, provides a bundle of development and
publishing tools to aid the creation of content for delivery using the TopClass Server system. It allows
organizations to set up complete environments for creating and testing new courses. TopClass Publisher is
an authoring tool that allows the development of courseware created from any Web-compatible content
without programming or knowledge of HTML. TopClass Publisher can also use any existing creation
tools, such as PowerPoint, Dreamweaver, or FrontPage, to create and edit pages within a course.
TopClass Assistants convert Microsoft Word and PowerPoint documents into TopClass courses.
TopClass Player allows for offline testing of courses. Through TopClass Training, TopClass Support, and
TopClass Consulting, the Company offers a number of professional services to assist and guide clients
throughout the implementation process. Services include customization and large scale deployment as
well. WBT leases its software on a per employee per annum basis, generally for 3 year contracts. Prices
range from $40 per user down to $10 per user per year. A 10 course developer TopClass Publisher Studio
license would often be included with the price of the system. Above 10 users, the price is $1000/user.
WBT Systems鈥? strategy is to focus on providing e-learning infrastructure and to leverage its main area of
expertise. However, to complement its products and services and provide clients with complete e-learning
solutions, WBT Systems has built a large network of partnerships with custom content developers such as
NETg and Pinneast.com, publishers such as McGraw Hill and Macmillan; technology vendors, such as
Centra Software and Sun Microsystems; and value added resellers, such as RWD Technologies, Edutec
(Germany/Switzerland), Hyper (Korea), and New Africa Technology Holdings (South Africa). In the past
quarter, WBT has signed agreements with Oracle, Nokia, Deakin Global, and PriceWaterhouseCoopers,
which gives the Company access to another 1 million plus users. Originally founded in Dublin, Ireland,
the Company recently moved its headquarters to Waltham, Massachusetts. WBT also maintains offices in
San Francisco and Dublin, Ireland.
Major Clients
Dow Chemical, Nokia, Oracle, Price WaterhouseCoopers, Deakin Global, The Money Store, McGraw
Hill, First Union Bank, Bayer AG, University of Kentucky, State University of New York (SUNY),
University College Dublin, University of Technology Sydney
VC/Affiliation Partners
3i Group, Delta Partners
Competition
Lotus Development, Docent, KnowledgePlanet (formerly KnowledgeSoft), Saba, Teamscape,
Click2Learn.com
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GLOSSARY
An application service provider is a specialized form of an
Application Service Provider (ASP)
Internet service provider (ISP) that allows a company to have a
software application hosted via a rental fee. An ASP sells access
to a 鈥減ackaged application鈥? that it typically will license from an
applications vendor. The software license is paid for up front
and/or on a fee basis. ASPs provide IT operations expertise
(offering the necessary application functionality, hardware,
database and networking services, etc.) and frequently also
business operation expertise in a particular market niche or in a
particular functional area (such as human resources or logistics
management). Sophisticated ASPs bundle value-added content,
such as benchmarking data and patent information, and/or
service trading communities and other groupings of companies,
such as industry consortiums, that want to share information
and the cost of technology.
A learning event in which people are not online at the same time
Asynchronous learning
and cannot communicate without time delay. Examples are self-
paced courses taken via Internet or CD-ROM, Web
presentations, videotaped classes, streamed audio/video
presentations, Q&A mentoring, online chats and discussion
groups, and e-mail.
Software applications for creating course interactive material.
Authoring tools / authoring systems
Authoring tools are designed to help the user create online
modules that bring together all components of a course: text
presentations, graphics, links, questions, and tracking of student
performance. They also let the user add materials created in
other software, such as video and audio clips, specialized
graphics, and animations. Types of authoring tools include
instructionally focused authoring tools, Web authoring and
programming tools, template-focused authoring tools,
knowledge capture systems, text and file creation/linkage
systems, etc.
See Instructor-led training.
C-learning
Professional certification is a screening tool and a measurement
Certification
of skills and knowledge. Certification credentials give employees
and clients proof of an individual鈥檚 level of specialization in his
or her field of work.
See Online community.
Community
Course or educational material presented on a computer,
Computer-based training (CBT)
primarily via CD-ROM or floppy disk. Unlike Web-based
training, computer-based training does not require a computer
connected to a network and does typically not provide links to
learning resources outside of the course.
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The intellectual property and knowledge to be imparted. It
Content
consists of the course outline, text-based knowledge modules
for learning, and multimedia. Content is the most important
investment and asset of e-learning. Different types of e-learning
content include text, audio, video, animation, and simulation
content.
Educational situation in which the instructor and students are
Distance learning
separated by time, location, or both. Education or training
courses are delivered to remote locations via synchronous or
asynchronous means of instruction, including written
correspondence, text, graphics, audio and videotape, CD-ROM,
online learning, audio and video-conferencing, interactive TV,
and facsimile. Distance learning does not preclude the use of the
traditional classroom. The definition of distance learning is
broader than and entails the definition of e-learning.
Covers a wide set of applications and processes such as Web-
E-learning
based learning, computer-based learning, virtual classrooms,
= Technology-based learning and digital collaboration. It includes the delivery of content via
Internet, intranet/extranet (LAN/WAN), audio/video tape,
satellite broadcast, interactive TV, and CD-ROM. In this
report, the term e-learning is used synonymously with
technology-based learning.
ERP stands for enterprise resource planning. ERP applications
ERP application training
training is an area of IT training which combines training on
accounting software, project management software,
maintenance management software, and human resource
management and payroll software.
See Technology-based training.
E-training
A local area network (LAN) or wide area network (WAN) using
Extranet
TCP/IP, HTML, SMTP, and other open Internet-based
standards to transport information. An extranet is only
available to people inside and certain people outside an
organization, as determined by the organization.
Outsourcing of the technology and commerce parts of a
Hosting
company鈥檚 Internet-based learning system to an outside
=Web hosting organization.
Standard face-to-face training in a classroom or lab. The term
Instructor-led training (ILT)
instructor-led training is used synonymously with on-site
= C-learning training and classroom training (c-learning).
Worldwide network of networks that are connected using
Internet
special communication protocols such as TCP/IP and
SMTP/MIME. It provides e-mail, file transfer, remote log-in,
news, and other multimedia hypertext services. The Internet is
also the TCP/IP-based interconnection of servers worldwide that
provides communications and application services to an
international base of businesses, consumers, educational
institutions, governments, and research organizations.
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Delivery of educational content via a Web browser over the
Internet-based training
public Internet, a private intranet, or an extranet (LAN/WAN).
= Web-based training (WBT) Internet-based training provides links to learning resources
outside of the course, such as references, e-mail, bulletin boards,
= Online training
and discussion groups. It provides the advantages of computer-
based training (CBT) while retaining advantages of instructor-
led training. The term Internet-based training is used
synonymously with Web-based training and online training.
A local area network (LAN) or wide area network (WAN) using
Intranet
TCP/IP, HTML, SMTP, and other open Internet-based
standards to transport information. An Intranet is owned by the
corporation and only accessible to people working internally in
an organization. It is protected from outside intrusion by a
combination of firewalls and other security measures.
Refers to a combination of desktop training and information
IT training
systems/technical training. It includes training in areas such as:
1) system infrastructure software (network management,
security software, system-level software, system management
software, middleware, serverware, etc.); 2) application software
(word processing, ERP application training, sales force
automation, e-mail, groupware, conferencing software, desktop
publishing, industry-specific applications, etc.); and 3)
application development tools (information access tools and
programmer development tools).
Refers to capturing, organizing, and storing knowledge and
Knowledge management
experiences of individual workers and groups within an
organization and making it available to others in the
organization. This includes formal corporate information
(policies, procedures, and product information), informal
information (documents, reports, presentations, and proposals),
and expertise (recorded in documents like lessons learned,
stories, and case histories). The information is stored in a special
database called a knowledge base.
Any Web site that offers learners or organizations consolidated
Learning portal
access to learning and training resources from multiple sources.
Learning portals can be grouped into content consolidation
portals, embedded technology portals, internal portals,
community & collaboration portals, and affiliation portals.
Operators of learning portals are also called content
aggregators, distributors, or hosts.
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An LSP is a specialized type of ASP offering learning
Learning Service Provider (LSP)
management and training delivery software on a hosted/rental
basis via diverse business models. There are four different types
of LSPs: 1) full service LSPs (customizing, implementing, and
hosting a complete software solution via a private network); 2)
content specific LSPs (licensing content to an organization and
providing a level of learning management services to the buyer);
3) tool specific LSPs (licensing and hosting their specific system
to an organization); and 4) portal LSPs (hosting a portal site and
bundle the learning system in the background). LSPs also
include value-added resellers (VAR) and companies providing
certification and testing services, online collaboration services,
media production and delivery services, and online tutoring.
Encompasses interactive text, images (animated, still, graphics,
Multimedia
photographic, streaming), sound, and color. Multimedia can be
anything between a PowerPoint slide show and a complex
interactive simulation.
Online communities are meeting places for learners on the
Online community
Internet designed to facilitate interaction and collaboration
among people who share common interests and needs. Most are
drawn by the opportunity to share a sense of community with
like-minded strangers, regardless of where they live. Intra-
company communities can be distinguished by goal: there are
communities of practice (employees within the same practice or
department sharing information), communities of learning
(study groups), and communities of purpose (project groups,
product development groups, etc.).
See Internet-based training.
Online learning / training
See Learning portal.
Portal site
Highly interactive applications that allow the learner to model
Simulations
or role-play in an actual scenario or business situation.
Simulations enable the learner to practice skills or behaviors in a
risk-free, simulated environment.
Encompasses education on specific business areas, such as
Soft skills training
communications and presentation skills, leadership and general
management skills, human resources, sales and marketing,
professional development, project and time management,
customer service, team building, administrative skills,
accounting and finance, purchasing, and personal development,
with the goal of improving the knowledge and performance of
employees. For the purpose of this report, it comprises all kinds
of training that are not related to IT or PC applications training.
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A real-time, instructor-led online learning event in which all
Synchronous learning
participants are logged on at the same time and communicate
directly with each other. Synchronous learning is led by an
instructor who maintains integrated classroom control, with the
ability to 鈥渃all on鈥? participants who raise their electronic hands
from a distant location. Students and teachers use a 鈥渨hite
board鈥? to see work in progress and share knowledge. Content
can be delivered using live online courses (virtual classrooms),
audio/video conferencing, Internet telephony, and two-way live
broadcasts of lectures to students in a classroom.
Includes the delivery of content via Internet, intranet/extranet
Technology-based training (TBT)
(LAN/WAN), satellite broadcast, audio/video tape, interactive
= E-training
TV, and CD-ROM. Technology-based training includes
computer-based training (CBT) and Web-based training (WBT).
For the purpose of this report, the term technology-based
training is used synonymously with e-training.
Includes the delivery of content through books and manuals.
Text-based training
The act of teaching or learning new information, behavior, skills,
Training
or actions that can be used to perform job-specific tasks or
improve performance.
Internet-based software that deploys, manages, tracks, and
Training management systems
reports on interaction between a) the learner and the content,
and b) the learner and the instructor. In particular, training
management systems perform student registration, track learner
progress, record test scores, and indicate course completions, and
finally allow instructors/trainers to assess the performance of
their students.
Value-added services in the context of the e-training industry
Value-added services
include custom training needs assessment and skill gap analysis,
curriculum design and development, pre- and post-training
mentoring and support, training effectiveness analysis, reporting
and tracking tools, advisory services and implementation
consulting, hosting and management of Internet/intranet-based
learning systems, integration of enterprise training delivery
system, etc. Deployment and ranking of value-added services
vary between the IT training and soft skills training market
segments considerably.
See Internet-based training.
Web-based training (WBT)
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IMPORTANT NOTE
WR Hambrecht + Co makes a market in the securities of DigitalThink, Inc. (DTHK). WR Hambrecht +
Co was an underwriter of a public offering of securities of DigitalThink, Inc. within the last three years.
WR Hambrecht + Co has private equity investments in Ninth House Network and Pensare, Inc.
The information contained herein is based on sources believed to be reliable but is neither all-inclusive nor
guaranteed by WR Hambrecht + Co, LLC (鈥淲RH+Co鈥?). Opinions, if any, reflect our judgment at this
time and are subject to change. WRH+Co does not undertake to advise you of changes in its opinion or
information. In the course of our firm鈥檚 regular business, we may be long or short in the securities
mentioned and may make purchases and/or sales of them or options to purchase or sell them from time to
time in the open market, as a market maker or otherwise, including purchases from or sales to customers
on a principal basis. In addition, WRH+Co may perform or seek to perform investment banking services
for the issuers of these securities. Most of the companies WRH+Co follows are emerging growth
companies whose securities typically involve a higher degree of risk and more volatility than the securities
of more established companies. The securities discussed in the reports included in WRH+Co Research
may be unsuitable for investors depending on their specific investment objectives and financial situation
and needs. No report included in WRH+Co Research is a recommendation that any particular investor
should purchase or sell any particular security in any amount or at all, and is not a solicitation of any
offer to purchase or sell from or to any particular investor. For additional information that may be
available on the securities mentioned, please contact WRH+Co.
Copyright 2000, WR Hambrecht + Co. All rights reserved. Member NASD/SIPC.
1
U.S. Department of Education, National Center of Education Statistics, 鈥淓ducation and the Economy: An Indicators Report,鈥? 1997.
2
U.S. Department of Education, National Center of Education Statistics, 1997Arthur Levine, Columbia University, 1999.
3
Ken Dychtwald, Age Wave LLC, 1999TechLearn 鈥?99.
4
The Research Institute of America found that 33 minutes after a lecture is completed, students usually retain only 58%. By the second day, one third of the information is retained, and three weeks after the
course is completed, only 15% of knowledge is retained. Jack E. Bowsher, Revolutionizing Workforce Performance: A Systems Approach to Mastery, 1998; D. Peoples, Presentations Plus, 1992; Training
Magazine, 1998.
5
Greg Kearsley, A Guide to Online Education, 1997; Dennis A. Trinkle, 鈥淒istance Education: a Means to an End, No More, No Less,鈥? The Chronicle of Higher Education, 1999; Colin McCormack and David
Jones, 鈥淏uilding a Web-based Education System,鈥? 1997.
6
Jerald G. Schutte, 鈥淰irtual Teaching in Higher Education: The New Intellectual Superhighway or Just Another Traffic Jam?鈥? California State University, 1996.
7
Corporate University Xchange, 鈥淎nnual Survey of Corporate University Future Directions,鈥? 1999.
8
Training Magazine, 鈥淚ndustry Report 1999 鈥? An Overview of Employer-sponsored Training in the United States,鈥? 1999International Data Corporation, 鈥淲orldwide and U.S. IT Education and Training
Markets, 1998 鈥? 2003,鈥? 1999.
9
The MASIE Center, 1999.
10
Bill Communications, Online Learning News, 1999.
11
International Data Corporation, 1999.
12
The MASIE Center, 1999.
13
The MASIE Center, 1999.
14
Includes text-based training.
15
Communications International, 1999.
16
International Data Corporation, 鈥淧urchase Requirements for Interactive Business/Soft Skills Training,鈥? 1999.
17
Risks and opportunities in distance learning are discussed in The Education Economy, January 1999.
18
Ben Watson, SmartForce, 1999.
19
International Data Corporation, 鈥淭he Global Market Forecast for Internet Usage and Commerce,鈥? 1999.
20
Six billion dollars have been invested between 1990 and 1999. An additional $4 billion is estimated to have been invested in 2000. 鈥淭he Education Quarterly Investment Report: A Decade of Private Investment
in Education,鈥? Eduventures.com, 1999.
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