education and e-learning conference call series · education and e-learning conference call series...

CREDIT SUISSE FIRST BOSTON CORPORATION

Equity Research

Americas U.S./Global Services/Education and E-Learning May 8, 2001

Education and E-LearningConference Call Series

Part 3—Corporate Training: Training a Global Workforce

Gregory W. Cappelli1 312 750 [email protected]

Clayton Kaneshiro1 312 750 [email protected]

Eric Sledgister, CFA1 312 750 [email protected]

• On May 3, 2001, we sponsored an industry conference call withtraining executives from five leading Fortune 100 companies:Cisco, EMC, GE Capital, General Motors, and Motorola. Collec-tively the executives are responsible for training approximately300,000 employees. This report contains the transcript of the con-ference call.

• The discussion was well attended and provided some insightfulthoughts from the demand side of the industry. The issues wecovered included the impact of a softening economy on trainingbudgets, the shift from instructor-led training to e-learning, andthe key factors in buying decisions.

• While we recognize these companies represent the upper echelonof training departments, the sentiment expressed overall towardcorporate training and e-learning was very upbeat. We believeeach of the companies in our coverage universe should benefitfrom the trends occurring in the industry.

• This call represented the third installment of our 2000-01 confer-ence call series, “Education in the New Economy,” in which weaddress current topics in education, training, and e-Learning.

Education and E-Learning Conference Call Series

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Executive Summary

On May 3, the CSFB Education and e-Learning Team hosted a conference callfor investors. The title of the call was “Corporate Training: Training a GlobalWorkforce” and the guest panel consisted of executives from five Fortune 100companies. Joining us on the call were Kevin MacRitchie, Vice President ofTechnical Operations from Cisco Systems, Bill Dacier, Vice President of GlobalTraining and Service from EMC, Michael Markovits, Manager of the Center forLearning and Organizational Excellence from GE Capital, Daniel Ramelli, Presi-dent of GM University from General Motors, and Bill Wiggenhorn, Senior VicePresident of Training and Education from Motorola.

This was the third call in our 2000-01 investor conference call series, “Educationin the New Economy,” which we are hosting to address current topics in educa-tion, training, and e-Learning. We plan to host the next call during the third quar-ter of 2001 and will continue to explore the corporate training market. We expectto release details about this call shortly.

The panelists covered a series of issues on the call, but we believe there werefour key highlights. First, we believe the discussion provided us renewed confi-dence that the corporate e-learning market is still growing despite the weakeconomy and tight corporate budgets. The panelists noted that the cost savingsand ROIs are very clear to their respective organizations, and they are looking tocontinue to spend in this area going forward. We believe the e-learning market isstill in its early stages and will reward management teams that are able to adaptand execute this strategy.

Second, panelists reiterated that their budgets and breadth of responsibility areexpanding to cover more than IT and internal HR training spending. More so thanbefore, companies are seeing the opportunity to use e-learning to drive produc-tivity with sales training, product training, six sigma training, CRM training andsupplier training. We believe the breadth of opportunity for e-learning companiescontinues to expand; however, it was very clear that the large buyers of trainingon this call are looking for training vendors that can provide more of a one-stopshop in their offerings for content, infrastructure, and service.

Third, we were surprised to hear the magnitude of the shift between instructor-ledtraining and e-learning. While we perceived that a meaningful shift is occurringand projected that e-learning could move from 5% of training expenditures to10% of expenditures over the next year or two, these companies relayed expec-tations of driving approximately 40-60% of training via the Internet next year. Wedo recognize that these companies are at the forefront of training and e-learningbut were amazed to hear the aggressive targets they have set for themselves.Clearly this bodes well for our e-learning providers under coverage, DigitalThink(DTHK, $8.39), SkillSoft (SKIL, $28.26), and SmartForce (SMTF, $36.34).

Lastly, we discussed the key factors that decision-makers use to select vendors.Panelists each had their own criteria, but a few factors held true for all panelists.Obviously companies value the product quality (the ability to drive retention ofknowledge), global capability (ability to quickly implement to thousands of usersworldwide) and a complete solution (versus being forced to integrate severalplayers on a common platform). Other important factors noted were a good priceand flexible delivery medium (Internet, Intranet, mobile, downloadable, etc.).

In summary, this call provided a unique perspective and a check on the trends incorporate training and e-Learning, reminding us that the industry is still in its in-fancy and has the opportunity to grow immensely over the next several years.Although other Fortune 100 companies are much further behind our panelistswhen it comes to training and e-learning, many will soon recognize the cost sav-ings and returns associated with effectively training a global workforce.


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Conference Call Transcript

Greg Cappelli, Credit Suisse First Boston—First, I want to thank everybody forjoining us today to participate in our latest conference call, entitled "CorporateTraining: Training a Global Workforce." This is the third installment of our 2000-2001 investor conference call series, "Education and the New Economy," that theCSFB education and e-Learning team is hosting. And we're trying to address dif-ferent and current topics in education training as well e-learning. We're really ex-cited about this one call today, as we have a tremendous panel for you to reviewthe industry.

First, let me just lay out the agenda quickly for the call, which has been arrangedfor our clients in order to get a comprehensive update of the corporate trainingmarket from the end-user's perspective. Various topics will include trends in cor-porate training budgets, the opportunities and challenges of training a globalworkforce, and exploring our panelists' views on training in general, including e-learning. In addition, we’ll get their views on evaluating and selecting outside pro-viders of training services, measuring the return on training, and training's role inattracting and retaining qualified employees.

We also want to discuss the panel’s view on how the economy has perhaps im-pacted the training departments at large corporations in general. Now, in order toefficiently move through the questions that institutional investors have sent to usover the past couple weeks regarding this call, we're going to moderate the callfrom here and therefore won't be opening up the call for outside questions due totime constraints.

Also, there will be a replay number for the next week, which you can access bydialing 888-264-3165. You'll need a PIN number—it's 7123.

Now I'd like to introduce our panelists. We're very fortunate to be joined on thiscall by executives from the training departments of five Fortune 100 companies.We're joined by Kevin MacRitchie, who's with Cisco Systems. He's the VicePresident of Worldwide Channels and System Engineer in Technical Operations;Mike Markovits, Manager of the Center for Learning and Organizational Excel-lence at GE Capital; Donnee Ramelli, he's the President of General Motors Uni-versity. Bill Wiggenhorn is the Senior Vice President of Training and Educationand the President of Motorola University, and Bill Dacier is the VP at GlobalTraining and Services at EMC. Thanks to all of you for joining us today.

I'd like to begin by asking each of the panelists to provide a little more color onyour respective roles within your company and the organization’s mandate to-wards corporate training and e-learning. And then we can get into some of themore specific detailed questions for each panelist.

Bill Wiggenhorn from Motorola, maybe we can start off with you.

Bill Wiggenhorn, President and Senior Vice President of Training and Edu-cation, Motorola University—Thank you, Greg.

Our charter is really to provide technical education, business-related education,and transcultural education to all of our employees, key customers, key suppliers,and members of government regulatory agencies that we interface with. So thatgives us a very large student population.

We teach, literally, in 24 countries around the world, but we have people in 65.And so e-learning and moving on to wireless mobile learning processes is a veryimportant infrastructure piece for us, in order to meet these needs around theworld.

Greg Cappelli —Thanks, Bill. Mike, could we get your view please?


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Mike Markovits, Manager, Center for Learning and Organizational Excel-lence, GE Capital—Yes, thanks Greg, pleasure to be on the call today.

This is Mike Markovits from GE Capital. I run the corporate university for GECapital, so service about 100,000 employees around the world. Our curriculumspans from Six Sigma quality to leadership to sales and marketing and finance.

Like Bill, a lot of the thrust in the most recent period of time is around transitioningmore of the learning to delivery via the Web. So a lot is around purchasing off-the-shelf library products, as well as creating our own custom products for GEand GE Capital.

Greg Cappelli —Thanks Mike, can we go to Donnee?

Donnee Ramelli, President, General Motors University —Yes, Donnee Ra-melli. I joined General Motors about 15 months ago, and senior management atthat point had asked me to come aboard to continue to build the capability ofGMU, which focuses on the 88,000 professional, technical, managerial, and ex-ecutive employees around the world. We do have other joint ventures that focuson the operators and factory floor training and learning.

The three key parts of the mission were to build the professional skills and capa-bilities, and to make sure they were linked to performance and results, not only inour biggest operations but around the world as we grow. To make sure we’re de-veloping the right sort of leadership and executive programs that would build afoundation capable of leading our most challenging business efforts and enter-prises around the world, and to enable a number of corporate change initiatives,where we are changing our business model and our processes to make betteruse of technology.

All of this, in their view, is linked to the bottom line in driving the global processes,so that we not only master them, but we include contemporary best practices.Here, like Bill and Mike, the ability to use e-learning to quickly leverage learningand new approaches is going to be very powerful for us. We made—and we'll talkabout this later—we've looked at a number of different pilots and we believe wehave the strategy that's going to work for us and for our workforce around theworld.

Greg Cappelli—Okay, Kevin, if you could give us your thoughts, and then we’llfollow with Bill Dacier.

Kevin MacRitchie, Vice President, Worldwide Channels and Systems Engi-neer in Technological Operations, Cisco Systems —Sure. This is KevinMacRitchie from Cisco Systems. I actually run the systems engineering and tech-nical organization for all of our worldwide channel and partner organizations. Sointernally we consult with our education department and the field programsaround our own employees, which would net around 5,000 in terms of the field atsystems engineers and about twice that in our sales organization.

But taking that same technical and sales content around our products, servicesand solutions out into our partner base, of which there are 40,000 partners, net-ting out around a little over 300,000 systems engineers—so technical folks, and alittle over 500,000 sales individuals out there. How do we take that content andready-enable our partners, so that they can engage from their standpoint in termsof selling, servicing, and supporting Cisco products.

From my perspective, how do I build content and meet time-to-market demandsfor emerging technology, as well as core skill sets that are required to sell, serv-ice and support Cisco products in our marketplace.

Greg Cappelli—Thanks Kevin, Bill Dacier, would you like to conclude for us?


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Bill Dacier, Vice President of Global Training and Services, EMC—This is BillDacier from EMC. Similar themes. Currently, we're responsible for trying to utilizee-learning for what is our 11 hubs, or centers of excellence, around the world.And we're trying to utilize those hubs to deploy our e-learning technologies withour products.

Right now we're responsible for the technical training of the customer service, thepartners, the end users, software engineers, and professional services. And ouraudience has practically doubled from about 20,000 to 40,000 technical partici-pants. And our goal, similar to the earlier speakers, is to try to get that to them,time-to-market, and utilizing their skill sets to be value added in the workplace.

Greg Cappelli—Thanks, guys. I appreciate the introductions. I guess I’d like tostart off with this question. We keep hearing that training has become much moremission critical for organizations. And I wanted to get your opinion on whetheryou agree or disagree with that. And if so, can you talk about some evidencewithin your own organization and some of the success you’ve seen within yourorganization driven by your training initiatives, perhaps cost savings or productiv-ity or growth.

Bill, let’s start with you.

Bill Wiggenhorn—Yes, Greg, this is Bill Wiggenhorn from Motorola. I think—wehave shifted from a philosophy of providing almost unlimited education to everyemployee around the world, in which we offered almost 7,000 courses over thelast few years, to very focused, targeted education for specific employees.

And those are very much wrapped around two areas. One, initiatives that thebusinesses want to drive, and then, secondly, around areas where we think wecan get tremendous productivity increases. And those would be in areas such assoftware engineering, where we know, with the proper education on tools, tech-niques and software packages, that we can actually improve the productivity by afactor of 3X for a new-hired software engineer. That if we actually use the knowl-edge transfer capability of e-learning—in other words, not just skills, but also whatpeople have done before, how they've solved problems, we can actually improveit by a factor of 8X. So that's one of our big areas, is in the engineering softwaredevelopment area.

Another one where we see it is in major account sales. There are three areas thatwe focus on and we can track productivity. One is product knowledge, two is theapplication of the products in a particular business area, and the third one is inrelationship management.

And so what we've done is really said, "All right, who are the populations that weneed to improve their productivity the greatest?" "What are the tool sets neces-sary to do that?" And even in these very difficult times, even though the trainingbudget has come down, the budget set aside for course material has really re-mained relatively high. Some of the other overhead costs have been reduced.

Greg Cappelli—Thanks. I’d like to get a couple of other panelists to comment onthis as well.

Kevin MacRitchie—Greg, this is Kevin from Cisco. One of the things we look atfrom a Cisco perspective as a philosophy of the company is, how do we leveragethe Internet for our customers and our partners to gain a competitive and produc-tivity advantage? So, as we look at e-learning, certainly that’s one of those killerapplications that helps us to do that.

As we cycled in internally, from an e-learning perspective with a very internal fo-cus three or four years back, we’ve seen in the neighborhood of a 40 to 60 per-cent cost savings, depending on the types of training that we’ve been doing in an


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e-learning format. Now I think we can even improve upon that to a great extentover some of the new offerings in e-learning and what is next-generation e-learning.

We also see a much greater opportunity, in terms of retention rate, and what Imean by that is, are we really using the tools effectively to then not only get thoseskills but to retain the skill sets that we need to have, which is critically importantas we move into meeting time-to-market on new tools, new product offerings, andas our partners begin to specialize in different skill sets so that they can bringadditional value to the market—it's important that they do that. And in terms ofstaying ahead of the pace of change, we have to do that in a very timely fashion.

As we look at e-learning as a tool to reach in a time-to-market fashion, we want tobe ahead of that pace of change and have not only our internal force built up butour partner competency built up at the time of product or new market introduction.

Greg Cappelli—That’s interesting, Kevin. Mike, can you follow on to that?

Mike Markovits—This is Mike Markovits from GE Capital. I’ll make one quickaddition, and really the way that things have evolved at GE Capital, it’s aroundcorporate initiatives. What are the key actions that our senior leadership havesaid in terms of how our company needs to transform, and then the question thatI’m constantly asked is, then, given that initiative, what are the skills and knowl-edge that our employees need in order for us to basically be able to achieve thattransformation?

So in the last couple years the two most dramatic examples of that have beenaround Six Sigma quality and around e-business—both initiatives that we've hadat GE, as well as in many other companies. But the emphasis around the skillsand knowledge necessary to pull those initiatives off has been absolutely critical.So in terms of the question "How has training become mission critical?" —abso-lutely, relative to the biggest transformative initiatives going on at our company,it's recognized that training is a key enabler.

Bill Wiggenhorn—Just to add one more thing. And that is, one of the powers ofthe e-learning format is that if a company doesn’t provide it under its key initia-tives, an employee can look at their own skill set and say, "I need it," and easilyget access to it. And one of the things we’re changing is providing educationagainst initiatives which we pay for, but also providing employees an opportunityto take other courses online, that they can pay for with their Visa, MasterCard, orwhat have you. And that’s the first time that we’ve been able to do this.

Greg Cappelli —Thanks, Bill. Can I ask Bill Dacier from EMC in sort of a relatedquestion how you guys at EMC measure the return on training dollars and its ef-fectiveness, and are you asked yet to quantify this for senior management or theboard?

Bill Dacier —Well, actually, that’s a perfect segue. I was going to tie into the mis-sion critical as well as the return on investment. I think that one piece of evidencein our company of the economy forcing the strategic alliances within the companyis the return on investment, which is not only for my organization now, it’s for thecompany-wide initiative. So once we’ve made the investment, we’ve come to-gether and we’ve eliminated a lot of the ad-hoc training that goes on with a lot ofcompanies due to the size and then urgency to give it to the marketplace.

This has forced a lot of organizations to share and have common interest in thegoals, which has been the lifeline during this economic downturn, has enforcedthe value-add and allowed us to go forward, and maintain our integrity as well asour return on investments.


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Donnee Ramelli—This is Donnee Ramelli with GM. Let me just answer this if Ican, Greg.

Three years ago, General Motors took a decision to move from 26 differentpieces of software around computer-aided design and manufacturing, and go notonly to one piece of software, but to put a job description together where peoplemove from design all the way to engineering in the same process. And eliminateall of the non-value-added work. That was a good return on investment decision,but it focused on classroom training around a certain workstation.

Today, they have a blended solution. In other words, still a good ROI, we stillwant the return. Can we reduce the investment in the classroom course? And togo to a blended solution where you use e-learning, and where you use other dis-tance learning aspects, cuts the investment even further and improves the ROI,allows us to bring out a lot more vehicles—I think we'll introduce one every 28days this year, with a smaller engineering contract.

Greg Cappelli—Donnee, just on that note, is there an initiative that’s sort of beenset out at GM, where you've kind of said. “Hey, we've spent so many—whatever,hundreds of millions of dollars on training and by next year or the year after, wewant to try to have so much of it in an e-learning format?”

Donnee Ramelli—Right. And the reason is, every time we shift that portfolio fromclassroom into a blended solution which has more e-learning in the portfolio, wesee a big savings. So last year in the first quarter we had one percent, this year inthe first quarter we were at six percent. We would be heading to 25 percent inshifting that portfolio in the next 12 months.

Greg Cappelli —Do any of the other panel members have initiatives like this, be-cause I think this is a critical issue for training at this point.

Bill Dacier —Absolutely. This is Bill Dacier from EMC. We started off with an 80-20, lecture-led 80, 20 percent e-learning. And that’s from day one with a CBT CD-ROM. But with the new—and I like the phrase "blended solution"—where we'reheading is that 60-40 has been the initiative given to us this year, 60 percent nowlecture and 40 percent in the e-learning. So we're aggressively flipping thataround to 30 percent lecture and 70 percent e-learning. That is our direction.

Joe Tucci, our new CEO, is absolutely supporting this initiative. And someonealso mentioned the blended solution earlier. The complexity of our environment,that we live in, most of our customers are mission critical. So what we're trying todo is allow the instructor-led to be more hands-on. They go through the flightsimulator of the e-learning, then when they come into the actual hands-on situa-tion, or a proctored center, they're living in a real environment.

Greg Cappelli—Well just as a quick follow-up, Bill from EMC, and then I’d like toget the other panel members' view on this as well—that's a major swing, 30-70 to70-30. Are you able to do that because the technology's become so much better,or the solutions, or—I don't know—the outside vendors you're using? What's en-abled you to think you can actually move this quickly towards an e-Learningstrategy?

Bill Dacier—Well, the time period on that—right now, this year is the 60-40, thenext year is the 30-70. But it's a collection of all the technologies, I think, as wellas the vendors. I think the vendors are becoming more and more best-practices. Imean, they're using those to push themselves. And we've actually pushed quite afew vendors through the knothole to meet our expectations.

So I think it has to do with the technology that's available today, as well as thevendors’ understanding of the need to be at the leading edge for technology.


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Kevin MacRitchie—Greg, this is Kevin from Cisco. I’d like to comment on thatone, if that’s all right, and take it one step farther. I’ve put an initiative from ourteam that all content has to be 100 percent available in an e-learning format. Nowthere’s some aspects to that I’d like to just walk through real briefly, if I may.

Couple things about that from an e-learning perspective. There’s a variety ofofferings in what we call e-learning. And I would contend that two years ago, e-learning was much more of an e-reading format than today, where it’s much moreinteractive and engaging. With the e-learning strategy, moving towards 100 per-cent—and I'll qualify where I think ILT plays in this in just a moment—there's acouple key elements to that. A, we need both instructional and interactive, over-the-Web, if you will. We need offline e-learning capability, and we need mobile e-learning capability.

For instance, the ability to download e-learning content and view it in the sameway on a mobile computing device, whether it's an iPak or a Palm, whatever itmight be, the same way you would interact with it if it was live over the Web. Alsothe ability to move into a virtual and simulated lab environment, of course, for thetype of content that we're working with. But I think that applies across all the or-ganizations that we're talking with today.

So I need A, based on the numbers of people I have to get to and the criticality ofreaching market share very early on, to be able to hit all my partners at the timeof product introduction that are moving into a particular, say, specialization ormarketplace.

Greg Cappelli—Kevin, we get a lot of questions about wireless learning and itsfuture. Is the technology good enough, and are the applications good enough atthis point for it to be effective? You know. . . is it happening right now, are youpushing it right now so that somebody can pick up their handheld and get salestraining or whatever it might be—soft skills, IT—on a mobile device.

Kevin MacRitchie—My answer to that is "yes," and I think we’re in the earlystages of that. In fact, I’m holding my iPak right now, which has a series of mod-ules on it right now in e-learning format, that I actually take and download mod-ules as I fly, to brush my own skill set up. And lately, I’ve been brushing up on theMicrosoft MCSE skill set, as it relates to much of our IP telephony products, justso I have that level of competency as I engage with my engineers.

Now, I think that—we talk about blended solutions, and I think there's still a verystrong place for traditional ILT. However, as I look to get out to 800,000 individu-als in time to market, I can't get them in a classroom fast enough. And even if I'mmoving into a major market area, where I would expect 40 percent of my partnerbase to go to, I can't move them in that classroom fast enough.

We used to say, two to three years ago, the market share you grabbed in the first12 months would basically be the fixed market share you could almost count oncontinuing if you do things right. And every percentage point you took from therewas a monumental effort to gain one percentage point. I think that that has col-lapsed, it's closer to six to eight months, that market share that you grab.

With 88 percent of our business coming in through our partners worldwide, wehave to make sure that we enable them right up front to help us go grab that mar-ket share. My only ability to reach them is in an e-learning mode. I think the ILTportion still has a very strong play, but I view the ILT component of this to be alittle bit different level. Where we're using the e-learning mode is to—all that re-peatable content, that's very important as base-line skill sets, that helps us moveinto a mode where now I need a coaching role, as opposed to a traditional in-structor-type role.


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I see the ILT side of that market space and—at—with my peers within Cisco andmany of the e-learning partners we've been working with and, maybe, ILT part-ners. We're talking about them moving much more into a coaching role as op-posed to traditional, repeatable-type instructional content.

Greg Cappelli—Interesting. Does anybody else on the panel want to talk aboutthe original question of quantifying the return on training?

Mike Markovits —Yes, this is Mike Markovits again from GE Capital. And I actu-ally have maybe a slightly more conservative view. I’m under the same chal-lenges, dealing with more management curriculum as opposed to some of thetechnical curriculum, but our goal is to have 50 percent delivered over the Web—and to reduce our costs by 50 percent as well. And we're supposed to achieve 25percent of that cost reduction over the next two years.

But I don't believe . . . my experience today is that the technology—and evenmore importantly, the supplier base—is not where we need it to be in order toachieve the goals that I have. And especially in terms of the supplier base, thefragmentation of the supplier base makes my job extremely difficult. I'm con-stantly meeting with different suppliers and trying to weave together the types ofe-learning solutions I need by taking a little piece from one supplier and anotherpiece from a second supplier, et cetera, to try and knit together my solutions, be-cause the industry is so fragmented today.

Greg Cappelli—Mike, that’s a very interesting point of view, and we get askedabout that all of the time. I’m also curious as to how much of your training and e-Learning solution you intend to outsource going forward. But in terms of this one-stop-shop mentality, is that what you would like to see? Are you looking forsomebody who has a learner management system as well as content, maybe inmultiple different areas such as IT, business skills, soft skills, as well as high-quality service offerings?

Mike Markovits—Yes. That’s even more ideal than what I wish for most of thetime, given the current state of things. I would like someone to have curriculum inone particular topic area—as an example, let's take leadership curriculum, thathas both basic skills delivered in more simple, instructional design methodolo-gies, as well as having that same, more advanced curriculum with more sophisti-cated learning methodologies.

What I tend to see fragmented a lot is the instructional design capabilities that thedifferent suppliers have. Also the content capabilities, and then to your point,Greg, then there's that whole third group that then has the learning system infra-structure capabilities.

Donnee Ramelli—This is Donnee. I’d like to echo a little bit of what Mike has justlaid out, but also I agree with where Kevin is headed. Because I think there’s anintersection that’s important here. When we try to think about what it’ll be like inthe future, remember most of my professional technical and executive folks areoperating on a computer system somehow, either getting inputs, or analyzing, orproviding internal product. We think it’s all got to be digitized at some point, be-cause that’s the space they actually work on, that ought to be the space theylearn on.

The problem, I think, as Mike has underscored, is when you go to the market-place and you look for available content, there are a few that are providing pre-mium content. There are a few that understand the best learning approaches thatreally allow people to apply and learn and get ready to do. But I don’t think thewhole marketplace is there yet.

So generally, after we deal with what is available, we look at the vendors who canhelp us convert the specialized content we think we have to blend with that. So I


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think for us it's a road of picking the right partners with existing premium contentand leading edge approaches, and then trying to blend it for the specialized, orproprietary, learning that's focused on the business result or the business needthat's in our way.

But the minute you can get all digitized, whether it's on a Web site, or in an e-learning approach, I think the better off we are in helping the people who will runthe business in the future.

Kevin MacRitchie—This is Kevin from Cisco. I’d agree with that wholeheartedly.Some of the key elements we looked for when we were first going out trying tofind some partners to help us at least get launched into this space, beyond justvideo-on-demand and beyond just—what I'll call e-reading for a moment, wasfinding some of those partners that have really put either 70, 80 percent or 100percent of their business in the e-learning space. So that they were having tobuild uniqueness and an engaging model for the learner in this e-learning space,as opposed to having an ILT business that would support it as they either choseto dabble in or out.

So they were . . . their whole survivability was around having a functional e-learning business that had a sustainable business model behind it. So that wasone of our first elements. And then many of the other items that were alreadyshared, how does the learning management system tie into what we use as alearning management system? How does that course development get done?Can we share content in XML format so we can share content with our own sys-tems? And, can we seamlessly portal back and forth so maybe they’re hostingcontent for it or we're hosting content for it?

I think also in that space, many of the learning partners, whether they're ILT part-ners or e-learning partners, will begin to specialize in their skill sets. If it's tech-nology, for example, they might begin to specialize in the types of things theytrain in, or other partners—or other training organizations may begin to specializein many of the soft skills that we've talked about today. But I think as the marketitself continues to grow and grow, the umbrella of trying to do all for all peoplebecomes very, very difficult. And we'll find the training partners begin to special-ize even more so than they have in the past.

Bill Dacier—Yes, this is Bill Dacier. I just wanted to add on that in our environ-ment, because of our technology—and a lot of it's proprietary—that we're dealingwith customization. We're taking our content, and we have e-technologists thatlive inside EMC. And I agree with one-stop shopping, and we have to segmentour business and our offerings to the partners that can meet that, or are on theleading edge to meet that experience that we're trying to give to the learner. Sothat's how we've been successful in trying to get the sense of urgency and thebest practices inside EMC.

Greg Cappelli—Bill, one quick follow-up, and then I’d actually like to ask BillWiggenhorn to follow up on the same point. What is the optimal level of trainingfor EMC to try and do internally, and what percentage should be ILT versus e-Learning?

Bill Dacier —For the e-learning experience, I would guess that we’re probably inabout the 60 to 70 percent (outsource), and the things that we’re bringing in-house are pretty much off-the-shelf leading edge that we can utilize on a verysmall scale that are not that complicated. For the customization of blending boththe EMC environment and maybe the customer’s environment, we are pushingthat through partners that can customize and create a very reusable platform onall of those 11 sites around the world.


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Bill Wiggenhorn—Greg, this is Bill Wiggenhorn. Five years ago, we probably did80 percent of the design inside and 20 percent was purchased. Today as we shiftto the e-learning, where we do have a target to be 50 percent of all material on-line by 2003, we’ll purchase or actually are purchasing 80 percent from outsideand leaving it as-is. Another 10 to 12 percent is being purchased and customized,and then the remaining 10 to eight, or eight to 10 percent we’re designing in-house at two of our design shops, one in Florida and one in Malaysia, that reallyspecialize in designing online learning that’s proprietary to the organization.

The other thing I’d like to comment on, or add, regarding a supplier or a partner isthat when you’re really in the global business, you need a partner who can helpyou put it in the language of the receiver rather than simply the sender. And a lotof the suppliers today define a global market as those who speak English. And sowe really need to deal with that.

I think another issue is being able to deal with intellectual property issues aroundthe world and figuring out who’s going to protect it—is it the buyer or will the ven-dor participate in that? . . . other issues such as moving information across bor-ders and some of the tax issues, et cetera. So I look at the criteria for a partner,besides the general competency in their area, we also are looking for their flexi-bility and willingness to price things that fit in the different markets around theworld rather than having one model and living or dying with that.

Greg Cappelli—Bill, and I also want to ask this to each of the other panelists, butthis is an important question from the investor’s standpoint and one that we’vegotten a lot. Given that you are outsourcing so much of this, can you just clarifywhat the most important decisions levers are—whether it's an e-learning providerof soft skills, business skills or IT, or an ILT provider—can you clarify for us thetop things you'd look for, whether it's price or quality or location, when you're se-lecting a provider of training or e-learning services.

Bill Wiggenhorn—Yes, Greg, Bill Wiggenhorn. The first thing we’d look at is theircompetency in whatever it is. Learning management systems or content or whathave you. And in looking at competency, look at their bench strength. Many of thesuppliers we’ve looked at have very talented people but it’s a very thin line. And ifone or two were to leave, it will really collapse. So we’re looking at bench strengthin the competency area we’re interested in.

Two is their flexibility to be able to work with us on a global basis and to be ableto price in local currencies. And to assist us in figuring out what the right pricepoints are, realizing they need to make a profit, but at the same time, those whoare inflexible, we just can’t afford to deal with.

And then the third one is their track record of working with clients, and what wefind is many of the suppliers coming through all claim the same clients. When wego back to the client group we find that they’ve all worked with divisions but veryfew have helped implement something on a worldwide basis.

Now there are some exceptions such as at GE, which I’m sure Michael can talkabout from the Six Sigma point of view and the e-learning point of view, but it’sone we really press hard on. Last thing I would say is that as a buyer we’ve hadto develop a new set of competencies ourselves. In setting up a department thatactually monitors these e-learning vendors, developing a competency on how tobuy, changing our contract process, and also our evaluation process.

Greg Cappelli —Thanks a lot. And maybe I could get Donnee Ramelli to go next.

Donnee Ramelli —Yes, it probably sounds very similar to Bill. I’d use a few dif-ferent words. I think there’s two top things we look at, one that I’ll say is quality.And if we’re going after content, is this a premium kind of quality and is it applica-tion oriented? In other words, can somebody do something after they went


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through this, or did they just read a bunch of concepts and principles and theyreally are not any more effective at the end of that?

If you're going after somebody who's going to convert for you—convert your ex-isting learning into something, do they have a high-quality process that ends upwith a good product that allows for application and engagement, and is it effec-tive? Also, is the process overly expensive? Because if so, then you'll never doyour plans. So you have to get somebody who is effective both in a quality sensebut also in a cost sense.

I think the second area that we underestimate every time is what I'll call accessi-bility and technical issues, and can they go global? And I think that there needs tobe a lot of discussion front-end to make sure that actually works. We just ran apilot with somebody and they cannot play in our infrastructure. And while theyprobably have a good value proposition, it is something I can't turn on and use.

Greg Cappelli—That means they don’t have the technology that’s compatiblewith yours?

Donnee Ramelli —Or maybe that my infrastructure isn’t the way they thought theworld would be when they made the product.

Greg Cappelli —And you’re speaking in the sense that GM has thousands ofdealerships around the country and you need to be able to have all of them onlineor trained in a certain way?

Donnee Ramelli —In our first core, we would look at what I would call "everythingbut the dealership" circuit. The dealership circuit is the hardest core to guaranteelittle variation. We do use a Hughes satellite system to connect with our dealers,that’s been a very productive broadcast approach for us and we’ve made it inter-active with some devices. I think the second phase for them will be to provide thatin a digital format, online, over the Internet—and we'll encounter some accessibil-ity issues, but we understand that's part of that phase.

But now we're just talking about trying to get this into the rest of the company ona global basis, not dealerships in the first instance. We got people who are in fi-nance or in purchasing or in engineering around the world who still do not play ininfrastructure.

And I think lastly, and it's already been touched on, the sustainability issue—dothe companies have enough people to sustain the effort, are they going to be asustainable business? Is their business model not only going to work for you, butis it going to continue to live in the future? Because you want to have long-termpartners here.

Greg Cappelli—Do any of the other panelists have views that are different at allfrom this, in terms of selecting a vendor?

Bill Dacier —Well, this is Bill Dacier. I’d like to add two things. One is, how is thecontent? How fast you can take content and turn it into e-learning. That’s high onour list. And also, we want to make sure that the technology and the engagementof the learner, there’s actually tangible measurement that there’s been knowledgetransfer. Whatever tools associate with that. So those are two additional ones thatwe look for, to make sure that down the road it is scaleable. And the learner’sactually going in and taking the time to experience this education.

Greg Cappelli —All right, so you’re not just buying a lot of this stuff and then noone ends up using it, I’m assuming.

Bill Dacier —Yes. The ROI investment model.

Mike Markovits —This is Mike Markovits and I’ll just add one more that reallybuilds on that one. And that’s the whole issue of learner engagement via the in-


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structional design. There's a lot of content out there that's reasonably good con-tent, but the presentation and the interactivity renders it dull and boring. And soone of the critical factors that we always evaluate is, how engaging is the instruc-tional design? Will people who begin the learning stick through it and want tocomplete it?

Greg Cappelli—And then Kevin, if you could just finish up on this topic, and thenI also want to ask you to comment on the importance to you guys in terms of,whether you want live on the Web, asynchronous, what’s working, what’s not, ifyou can get into that secondly.

Kevin MacRitchie —Okay, sure. Thanks, Greg. So, I think the quality feature isincredibly important for us and that’s what was just mentioned. The student en-gagement, will they finish the course? And thus we look at the uniqueness of theoffering that engages them and the retention that comes from that.

So, when they get done, they go pass the test that certifies them or gives themsome level of “badging” as opposed to going through it and yawning or not stay-ing engaged. Two is the return on investment. And a key element for return oninvestment for me is the time to market that I can get and how fast can I get thecontent created. And that comes from the competency of the content creationprocess. So as I go grab market share in a new market that we choose to movein or move products into a market, that's where I get my return on the investmenton the back end.

And then, last on the flexibility issue, it's important for us to have a couple keyareas of flexibility, and that's the ability to use our subject matter experts to dropin, if you will, to the e-learning provider or e-learning creator. We don't expect ane-learning company necessarily to have all the content and subject matter ex-perts that we would have and vice versa. I don't want to have a large-scalestructural design organization within Cisco either. I think that's something thatgets outsourced very well.

Also, the diversity then, the second half of flexibility, is the diversity of access,which I think leads into your next question, Greg. Can I get multi-language sup-port, which of course is as important as well. But, from an access standpoint, canI get live over the Web? Can I get asynchronous, can I get downloadable con-tent?

And I think the important element is, does the partner offer a diverse enoughportfolio in that space for the type of content that they deliver? So, I think it wouldbe far more difficult for me to dictate the types of learning for the individuals thatwant to take this coursework content and say if you want to take a soft skill, youhave to do it live over the Web. Or if you want to take a technical course, youhave to do that off-line.

I'd prefer to have a diversity there related to the type of content that they're goingto get trained and so my answer then is yes, I need live. I need mobility as well. Ineed interactive where maybe it's not a live course. I need a well-rounded offer-ing because it should really be up to the student to determine what works best forthem in the mode they are in.

Many people that we all work with are doing their job during the day and arelooking at that wonderful window between midnight and two in the morning to goget that educational content, to get their skills up to speed. Others have an op-portunity somewhere in the middle of the day to take an instructional course overthe Web that blocks out in nice two-hour or three-hour segments maybe once aweek or twice a week for a period of time that they can get that live course work.

And then, I think if you're going to do that, you have to have a mentoring capabil-ity on the back end of that that allows this pursuit when they're not in an instruc-


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tional course. Where can I go to get some mentoring, and do I have access tointeractive-type coursework as an add-on to the live coursework so I can go outand practice and be ready for the next section.

Greg Cappelli—Kevin, what’s the future in this space? It sounds like it is reallynot just e-learning, I know you still do a lot of instructor-led training, so it seemslike it has to be a combination of asynchronous, live on the Net, and maybe ILT?

Kevin MacRitchie —It’s a blended offering that we would take a look at; I’m notgoing to take away an ILT offering. But, I want to make sure that all the content—and I'll restate it—100 percent of the content does need to be available over theWeb, and I want to let the learner choose what works best for them. Again, I thinkthe ILT mode will move more and more to a coaching role.

But, certain individuals prefer that because they . . . as we begin to move into ane-learning mode, some people still need to learn how to e-learn.

When we go off to an ILT course, the first thing the instructor says today is turnoff your cell phones, your pagers, your whatever, your Palm Pilots and they walkdown a list. I see it on every one of the opening pages. And you're there for twodays, three days, five days. When we think, and the way much of the e-learning isgeared, it's much more modularized—two-hour segments maybe, maybe four-hour segments. We don't do that. And so, we don't wall off our office and shut offthe phones for a moment and really get focused in. So, there's a transition proc-ess of learning how to e-learn. I think that's an important aspect to that as well.

Greg Cappelli—I understand. Bill, I think you had a comment.

Bill Wiggenhorn —I just wanted to add one thing and that’s really as the . . . andinvestors look at this, as you listen to all of us speak, we’re really talking aboutdifferent market segments within the corporation. So, there are training budgets,or education budgets, for the development of our own employees, and that’s oneset and we’ve talked a little bit about the type of coursework, the criteria we usefor selecting it.

The other thing you’ve heard us talk about is using e-learning as part of our mar-keting strategy to reach our channel partners, our end customers and consumers,which tends to come out of another budget area. And so, I think when you look atthis particular market segment, it is a total learning market segment separatefrom the industrial commercial component.

And so, as one goes down, the other one actually can be going up and the mar-ket can remain very healthy for the use of technology and the learning process.

Greg Cappelli —And so, Bill, I just want to follow on to that. So, of the two buck-ets for you guys, I would assume that training your employees is one thing. Iwould assume the even bigger piece is training your customers, particularly withMotorola when you come out with new products. Is that considered more impor-tant to the corporation or are they both considered equal? And which one getsmore attention?

Bill Wiggenhorn —In our case, they’d both be considered very important. But, tome, what I see is the willingness and time to invest even more heavily in thoseareas which reach the consumer and customer—and to hold back a little bit onthe employee education, and do just do that, which is absolutely necessary todrive a particular initiative. In better times, both are relatively high.

Internal training budgets maybe are frozen or decreasing because I think theother education budget, which tends to come out of marketing, engineering, etcetera, is probably on the increase.


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Bill Dacier—This is Bill Dacier and I just wanted to comment on that a little bitfrom our environment. As I mentioned earlier, due to the environment of theeconomy, our budgets have sort of been blended together now. We cut some ofthe offering to our partners and our vendors so that now when we do a minorcustomization, we do a more module approach, and then we customize it ac-cording to the audience. So, that's why I thought—earlier I mentioned that ourbudget had been pooled and it has the same urgency both internal and external.

Greg Cappelli—Hey Bill, from EMC, just to follow on to that, and this is a ques-tion that is very, very important to everybody who’s invested in companies in thisarea, I’d like you to start, and then if anybody else wants to comment on it. Let’stalk just a little bit about how susceptible your budget is to the economy softening,has it impacted your budget?

Secondly, think about this from the same context, is this one of the reasons whye-learning purchases remain strong? Is e-learning simply a lot cheaper and moreefficient and you’re trying to keep people off of airplanes and hotels? Can youavoid spending more money on outside travel, and expenditures, and perhaps isit even speeding up the movement there?

Bill Dacier —Well, again, I think because the pools of economy that we have,actually it hasn’t impacted the technical education. Actually, it’s increased it be-cause we’re collectively working at the same mission, so we’re collectively elimi-nating the duplication that might have happened in the underground activities inthe company, which happens a lot of times due to the urgency at the time of themarket.

Also, the biggest benefit from the economy is now we have a consistent messageon the technology offering and we’re leveraging each other’s technical resourcesfrom the contents to deliver the best possible model that goes to the environment.

So, from the budget, from me personally… Joe Tucci has made two statementsvery clear in our company, that during these economic concerns, the two thingswe should invest in is the people, because there's a lot players out there (compe-tition). The second is in education, value-adds, and getting them to the value as-set of the company at a much faster or more rapid deployment to the workplace.But, it has not affected my particular budget at this point.

Greg Cappelli—Anyone else? Donnee?

Donnee Ramelli —You know, we have taken costs out of this budget for the lastseveral years. But, I think the idea is you can take costs out, but what you need todo is increase the effectiveness and the volume to the right places, the placeswhere it counts for the business and for the customers, where it counts the out-comes of what you’re doing.

And the key is the two technologies we could have used to overcome that reduc-tion—one, the satellite system that I described earlier, and two, moving more ofthe blend into e-learning. You can have people take a course or two in e-learningand be much better prepared for a two or three-day classroom stint than the oldfive-day or 10-day classroom stint. So, there's a way to blend this that immedi-ately helps the volume, reduces the cost, keeps people focused and invested in,because at the end of the day, they'll make the difference in the outcome for thebusiness and for the customer.

So, I think that we have to get hooked on this blend. We think we know the placeswhere it can save us a lot of money, and we will spend money with the right kindof vendors in the e-learning industry.

Bill Dacier—And can I just add? This is Bill Dacier again. And with our goal, oneof the things that I want to follow-up on is that by taking our brick-and-mortar


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standard approach, by using e-learning, we can almost double or triple our ca-pacity because of that example—by eliminating the standard lecture and elimi-nating the rhetoric that they get on . . . not the rhetoric, but the repeatableprocess. When you come into the facility, it's all hands-on now. So, just usingthose current facilities allows us almost triple in capacity without affecting morebrick–and-mortar.

Greg Cappelli,—Mike can you comment on your budget at GE?

Mike Markovits —Yes. One of the things that we measure here on a quarterlybasis is dollars spent per training hour. And we have been able to drive thatmeasurement down, which is the right direction, spending less money per traininghour via e-learning. And we’re both spending less money and delivering morehours of learning to our population.

And I think one of the important things to take into consideration in terms of that istelling me one of the things I have to do is a lot of educating of my senior man-agement on what was total training dollars. There’s a budget I have for the designand delivery of training. One of the things that is outside of my budget is all thetravel expenses of students.

And we have to get our arms around that total budget in order to demonstrate tothe organization the cost savings associated with e-learning, and we’ve donethat. And so, we’re seeing, you know, the right kind of metrics in terms of reducedcosts, while at the same time delivering more hours of training to more people.

Greg Cappelli —Hey Mike, when you’re going and selecting training, is price in-credibly important when you're looking at different areas of training—is pricingcoming down?

Mike Markovits—Okay, so, there’s two parts to that. Yes, price is very importantand no, I would say in the marketplace that there’s some intransigence amongstour suppliers around price. I don’t believe that they’ve figured out how to changethe dynamics of their business in order to reduce prices to the degree that theyshould be able to.

Bill Wiggenhorn —Hey Greg, this is Bill Wiggenhorn. I would say that quality ismore important than price. But, of course, price is something of a consideration.What I do see now is those suppliers that really want to be a long-term partnerare willing to be much more flexible on their pricing then they have in the past.And that the price per unit or per packet of information on the technical side, thee-learning side, is coming down.

I agree on the in-classroom situation. Maybe we ought to figure out a good modelto do that. But, we’ve always used our own contract instructors where we simplypay for the value of the material developed. And now, today we can have an in-structor teaching on a worldwide basis using a video screening or satellite tech-nology rather than just reaching 30 students in one classroom. So, our actual costper hour, even instructor-led training, is coming down dramatically. But, I don’tfind the outside suppliers, at least right now, moving in that direction.

Greg Cappelli —And Bill, just on your budget, do you feel like there’s been pres-sure to cut back on it? Has it been more important in terms of doing the sameamount of training with less dollars?

Bill Dacier —Well, there’s no pressure to cut back on the internal budget. Theexternal budget has actually increased, in other words, for customer and con-sumer education. But, when it really comes down to it, if management or theleadership wants people that have a certain skill set, it does not matter what thefinancial conditions are, they’ll fund it. So whether it be a Six Sigma, or an engi-neering design process or something like that, no matter what the budget is, they


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always come up with the money and we move ahead with it. I would bet, by theend of the year, our budget will be right back where it was the previous year.

Donnee Ramelli—This is Donnee. The hidden benefit to us is that the means ofdelivery, if you can either go to satellite or to Internet or to Intranet, eliminates allof the costs associated with the classroom ILT design. So if you can just shiftyour money, whether it’s decreasing or staying flat, into the means that wouldallow you to take advantage of this sort of free delivery process, you can providea lot more content that’s a lot more value focused on the global audience.

Greg Cappelli —I want to get Kevin’s point of view on this as well, especiallygiven John Chambers’ quote that we've all seen over and over again on e-learning and the size of the market. But I also want you guys, or maybe Kevin youcan follow on with this. One of the things that I'd like people to discuss is, youknow, there's a big difference between business skills, soft skills and IT training.Is IT more difficult to do online? I'd like to get your thoughts on that, first of all.

And then secondly, is it going to get easier, do you think, to put IT designs onlineover time? Because we certainly see more information technology done in theclassroom than we do business skills and soft skills from our vantage point.Kevin, can you take a shot at that?

Kevin MacRitchie—Yes, let me try and tackle both of those here. From thebudget perspective, last year we doubled the size of our education budget for ourexternal partners and customer focus. What we’ve done is very similar to whatBill at EMC has been doing over the last year, and that is pooling the resourcesfrom our training and education department, our internal organization, as well asour external training focus, and building content singularly, so we don’t walk downthe rat holes Bill discussed of multiple sets of content being created on the samespecific piece of material.

So we want to make sure we’re not doing any of that duplicate effort. And ascontent gets created, we’re working through a process now where we’ve priori-tized that content from a company standpoint.

And so Bill, I applaud the efforts there that you guys have been working on. Itactually helped us reduce our overall cost of delivery dramatically from the yearprior. So we’ve actually been able to give money back to the company in that en-vironment because we’re able to reach a much broader audience.

The back end to that, we focused on how has that helped us from our return oninvestment from our customer satisfaction standpoint. And the key area we fo-cused on was improving skill sets of our own force, internal and external, andhow does that affect our customers—and the dramatic improvements we're see-ing in customer satisfaction by focusing on our sales and technical skill set bothour internal organization as well as external for our partners and our customers.So we see some great proof points on that in terms of the investment, and thefact that we're dramatically reducing the cost of delivery.

As far as soft skills versus IT skills, I think I would tend to go almost the otherway. For what we're finding from an IT skills standpoint, I'm actually finding itmuch easier on the IT skills because, as someone stated earlier, they're used tositting in front of their laptop. Or they're used to walking around with their mobilecomputing device. It's the environment they engage in regularly for creation proc-ess and learning process anyway.

So it seems to be very easy, although you do—any time you're doing technicalstimulation—you run into live lab-type scenarios in the technology component ofthat. But I think we've gotten through that hurdle pretty well, both from the re-sponse from our internal and external. And the certifications that we go through toensure those individuals are meeting those IT skills, we're seeing a much more


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dramatically improved rate of those individuals going and taking those IT certifi-cation tests. Passing them on their first or second attempt as opposed to multipleattempts.

On the soft skills side, you know I think . . . so I would turn it the other way goingon the soft skills side. We spend a fair amount of time watching video-on-demandsimulating, whether it's HR type environment or HR training or soft skills trainingor presentation skills training, whatever it might be. And I think we need to look atadditional ways to be creative in that area beyond the ability to serve up a VHStape over video-on-demand over the Internet.

So we need to find ways to be more engaging in those soft skills to better simu-late the types of environments we would do in a presentation skills coachingclass, where we actually have to get up in front of a room of people. In this envi-ronment, now where you're getting up in front of a room of people is in front ofyour laptop. I think we need better simulation environment in that side.

Greg Cappelli—I guess, Kevin, what you’re saying is that you know now itsounds like there’s ways to simulate Cisco complex routing systems on the Web,whereas maybe even a year-and-a-half ago that was pretty tough to do. And Ithink we're seeing that in, whether it's NT or—Bill can comment more specificallyon what they're seeing over at EMC. But I think we're seeing much better ways tostimulate the technology side now. We're using technology to simulate technol-ogy. I think it's actually harder to do that in a soft skills environment. And that's,again, my perspective.

Bill Dacier—I absolutely agree with you. This is Bill Dacier.

Mike Markovits —This is Mike Markovits. One additional comment I’d makeabout the simulation in the soft skills environment to the degree that some suppli-ers have not been able to develop that kind of instructional methodology andthere are some that have. They tend to be case-based in terms of the learning,which requires the learner to sit for a long period of time to engage in the storyand get the learning out of going through the situation. And what I find from manyof our learners is they want what we call bite-sized pieces of knowledge, wherethey can go in, learn something in 10 minutes and leave again. And so there’s adilemma there in terms of how to do the soft-skill learning successfully.

Greg Cappelli —I guess, you know we’re going to go ahead and wrap up here inthe next couple of minutes. And I very much appreciate everybody’s time. One ofthe final questions that I’d like to ask because we get it a lot, in this environment,are you finding that deals—as we progress towards a mix of ILT and Internetbased solutions—where are the buying solutions getting signed off? At the HRlevel? Is it moving up the chain? Is it required now to get senior managementsign-off in terms of getting certain types of deals closed as you purchase traininggoing forward?

Bill Wiggenhorn, could you take a shot at that, and anyone else who is inter-ested?

Bill Wiggenhorn—Yeah. I would say, at least in our case, it hasn’t changed. Be-cause as senior officer, I still have enough signing authority that I can sign off oncontracts at almost any size. I would say, one thing we have built into our systemis I have a board of trustees for the university, in which I have the leaders of all ofthe businesses as well as the office of the CEO sit on it. So when we actually,we’d make a decision, for instance, on a learning management system for ourexternal customer, something like that, we would actually take that recommenda-tion to the board of trustees and have them give them final approval. But as far assigning authority, et cetera, it rests with me. I do not have to take it to HR or to themarketing arena.


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Now I'm sitting today in a financial service company talking to you where I advisethem. The case here is yes, it does move from HR actually to the CEO becausethe purchase level and requirements are just much higher than they're accus-tomed to.

Bill Dacier—Hi, this is Bill Dacier. We have a similar process. We have an edu-cational steering committee where the senior executives sit on the committee.And at that point, once it’s identified, ROI is discussed and the benefits, and it’sapproved, it just goes through the process.

Greg Cappelli—Well, is it taking any longer today than it might have a year agoor half-a-year ago to get things signed off on?

Mike Markovits —This is Mike Markovits. No it’s not. I’d say the one differencethat I’m experiencing is the degree to which I have to build the business case. I’mbeing asked more questions. And I’ve had to do more homework to justify theinvestment than I did in the past. But the process is essentially the same.

Bill Dacier —That’s a good point. That’s a true statement here. This is Bill Dacier.The business—adding more value to the business plan.

Donnee Ramelli—This is Donnee Ramelli. Recently we implemented one of themajor steps in the strategy. I actually wanted to take it up to the leadership tomake sure there was engagement and buy-in. At the end of the day, they wouldhave let me sign this without bringing it up to them. That wasn’t the issue. But forus it’s a step forward, and a step I want them to advocate and be around. So Ithink that’s why we do that more often. It doesn’t really take much more time. Itjust solidifies the leadership buy-in on an important effort to get the business re-sults.

Greg Cappelli —Any other final thoughts or comments from the panelists?.

Bill Wiggenhorn —Greg, this is Bill Wiggenhorn and I would like to add onething. I mean you’re literally talking to companies that have a history of investingin their people and are trying to stay in tune with where the technology is goingand the options for their people. I’m not quite sure the mass market is there yet.And what I do notice is that many of those firms that we work with that historicallyhave not invested in the classroom training are now willing to invest, or let theirown people invest in the online course elsewhere. Whether it be at the universitylevel or just in a particular suite of IT programs of soft programs.

So I think this market will continue to spread quickly. And the pie will increase insize rather than just being a shift of the methodology employed.

Greg Cappelli—Bill, does that imply that you are as aggressive in other marketsoutside the U.S. you know, at the same level you are in the U.S. throughout thecompany? Because I know the providers, as you mentioned earlier, are extremelydifferent outside the U.S. And some of the U.S. providers are not set up to handlethe rest of the world yet. So what implications does that have?

Bill Wiggenhorn —Yeah, actually we’re very aggressive outside of the UnitedStates because we see the use of technology as a way to reach people wehaven’t been able to reach on a timely basis before. One of our frustrations ishaving a supplier base that can actually go with us truly on a global basis. Sothat’s one reason we set up our own design center in Malaysia, because therewe’re not only trying to do our own design, we’re trying to help create an industrythat can support us in those countries. We’re going to do the same thing in China.And we’ll probably do the same thing in Egypt to support us in Africa and theMiddle East.

Greg Cappelli —Anybody have any comments on that final thought?


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Mike Markovits—Yes, this is Mike Markovits. So two things. One, just on Bill’scomment, what we’re finding is we’re sourcing content locally. So we have 15,000employees in Japan. We’re looking for what we can’t find in the United States,English language providers who have rich content in Japanese, as an example.And so, around the world, we’re looking to locally source local language trainingso that we don’t depend on our U.S. suppliers to do the translation.

Greg Cappelli —I think it sounds like you’re waiting for the U.S. base of suppliers,as it sounds like with Bill as well, to actually catch up to what you need to do.

Mike Markovits —Right. So our strategy has been not to wait. And just a secondcomment, just as the closing comment that really didn’t get touched and I thinkmight be relevant to this group because, I assume, many folks sit on board onsome of these e-learning start-up companies. One other comment I have aboutthat group of suppliers, as a group, is that they tend to try to sell solutions as op-posed to understanding needs. And it goes back to one of the questions Gregasked about what my preferred delivery channel is. Do I prefer synchronous orasynchronous, or one type of technology over the other? And what many of thesuppliers want to do is sell their particular technology or their particular deliverychannel without understanding what my needs are, and whether that is actuallythe solution that would best fit it.

Greg Cappelli —Thanks, Mike. Kevin, Donnee, or Bill Dacier? Any final com-ments on the global issue?

Kevin MacRitchie —So this is Kevin. On the global front, we, too, are trying towrestle with how do we deal with multi-language and in-country support. I thinkwe’re making some good progress with some of our partners wrapped aroundwhat does that look like, and how do we multi-language supports? We’re movingfrom five-language support to nine and, hopefully, to 13-language support veryshortly. And we want to distribute that on a worldwide level so we can have rea-sonably ubiquitous access, understanding that the access to the end user or theend learner and their last mile capabilities might be different. But how do wesource that content as locally as possible as well? So, different strategies areoccurring there.

I think also—one thing from an overall perspective to keep in mind—e-learning isjust in its, from my perspective, in its infancy moving into its second-generation ornext-generation capability. And for a long time, while we moved to—you know, Ilike to jokingly call it e-reading—for a period of time and we were satisfied withthat.

There's a whole new set of technologies and a whole new set of unique offeringsthat so many of the e-learning providers are now coming forth with. And it's im-perative that we go back. And the companies that were mentioned earlier that arejust starting to look into this, that may have had a perception of the past, thathaven't seen what's new, we need to engage them to take a look at it. Becausethe cost savings and the productivity gains are huge in his area. And the farrange and reachability is huge. But we're just on the cusp of the next wave, whichis monumentally bigger than what it started from.

Bill Dacier—This is Bill Dacier. In a global sense, I mean that’s our largest returnon investment by keeping them in-country or keeping them within the time zone.So going forward, the benefits of e-learning are even easier to justify in EMEA orin Asia-Pac. So aggressively what we do—I use the phrase, the e-reading was agood enough tool to keep them in-country. And we use the mentor program byputting people on the street to help them in their local language. But we're ag-gressively working with partners to convert that to e-learning with a localization.

Greg Cappelli—Donnee, do you want to just finish up for us?


– 21 –

Donnee Ramelli—Yes. And I don’t underestimate the difficulty in making this aperfect global solution. But for us, there’s a big advantage in now being able toput on a finance course or a purchasing course or an engineering course. Thatsomebody was not going to be allowed to fly in to one of the global regions, butnow they have . . . they can at least now get to the fundamental data, the funda-mental information. Because otherwise they were not going to be satisfied withthe old classroom system simply due to cost.

So we will have a lot of wonderful things happen, although it won’t be a perfectglobal system simply because we are digital in these kinds of solutions. They canget access to a blended solution by using some collaboration where it’s about tobe put up. So we have some ways to make inroads on this without being perfect,and to help the sort of professional, technical, managerial, and executive folks getaccess to what they need or would never have had access to it at all.

Greg Cappelli —I want to thank everybody on the panel. Kevin MacRitchie fromCisco, Mike Markovits from GE Capital, Donnee Ramelli from GM, Bill Wiggen-horn from Motorola, and Bill Dacier from EMC. Thank you guys so much for tak-ing time out of your busy schedule. This has been incredibly helpful for us, and Iknow our clients as well who are on this call. And thanks again. We will have atranscript available of this call.

Again, the replay number is 888-264-3165 with a PIN of 7123. Thanks, everyone,and have a great day.

N.B.. CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manageror co-manager of a public offering of securities for or makes a primary market in issues of any or all of the companiesmentioned.

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