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Current conditions across the globe are forcing everyone to rethink everything, from the simple, like the best way to wash your hands, (saw a great video demonstration for this on LinkedIn) to the complex, like how the world should behave in the midst of a pandemic. This blog lands somewhere in the middle and discusses something a bit closer to home. What happens to education revenue when it is highly dependent on face-to-face training and most of the world is mandating social distancing policies?
If you’re like most education organizations, the bulk of your revenue is derived from instructor-led training. Based on TSIA 2020 Education Services Benchmark Survey data, and as shown in the diagram below, onsite, public classroom and virtual instructor-led training account for 79% of education revenue, at 38%, 26%, and 15%, respectively. Two of the three, onsite and public classroom training, require face-to-face interaction, which translates to 64% of education revenue being at risk, due to current conditions.
Percentage of Education Services Revenue by Modality/Option
Even if your education organization is not revenue generating and you are offering public classroom training at no, or low cost, you are still faced with the same decisions impacting revenue generating organizations. Do you continue with delivery as planned? Do you defer delivery until face-to-face training is again feasible? Do you offer other learning options, such as virtual instructor-led training or online learning, in lieu of public classroom training? These are some of the questions that were addressed in TSIA’s recent Rapid Research Response poll, the Impact of COVID-19 on Classroom Training.
The Rapid Research Response poll consists of five simple questions that can be answered in two to three minutes. This first Education Services poll addressed classroom training and actions that education organizations and students are taking.
The obvious first question is are education organizations cancelling classroom training that is already scheduled? As the data shows, 84% of organizations are indeed cancelling scheduled public classroom training classes, just 11% indicate that they are not cancelling public classroom training and 4% say that it depends, and they are managing cancellation on a case-by-case basis.
Same image caption as above.
Given the uncertainty of how long it will take the current crisis to run its course, it makes it difficult to know how far in advance to cancel classes. Is taking it month by month the best recourse, or is cancelling more than a month out the better approach? Based on the data shown in the diagram below, at 72%, the majority of education organizations are cancelling courses more than one month out. In talking with members, most have cancelled classroom training through May and are in a wait and see mode for June and beyond.
To clarify, when I say “cancelled” it means that the classroom offer was “cancelled” however, the same course is added to the virtual instructor-led training schedule and any students that were already registered are given the option to transfer their registration to the virtual offer.
Cancelling more than one month out helps to reduce the uncertainty that students face and enables them to plan accordingly. Referring to my own experience, I had tickets to three different events:
1) A Warriors basketball game, March 29
2) Opera San Jose’s, The Magic Flute, scheduled April 17
3) A lecture with Neil deGrasse Tyson, May 11
While the basketball game has come and gone, I have not received reimbursement, as the NBA has not officially cancelled the season, and the game that had been scheduled may still be played, at some point. The opera was cancelled, and the money reimbursed. The lecture was moved to May 26. In each case, the outcome is different. For this reason, it is important to communicate early, to communicate often, and to specify what customers’ options are. Don’t leave students in the lurch having to contact you to find out what is going on.
So, what options are education organizations offering to customers that are scheduled in a public classroom training class that is cancelled? The most common option provided is to transfer the registration to a virtual instructor-led training class, for the same course for which the student was originally registered. This of course assumes that the education organization has live virtual instructor-led infrastructure in place and remote delivery capabilities.
The second most common option offered is to complete the same course, online. The graph below shows all the options provided. As the question asked for the participant to “select all that apply” the percentages total more than 100%.
The challenge with offering online learning as an alternative, is that while there might be a lot of online content, that content may not replicate the public classroom course and therefore, is not equivalent to the classroom offer. Data from TSIA’s Video in Online Learning Survey, (member-only access) conducted July, 2018, shows that 78% of survey participants that use video said that they create end-to-end courseware, meaning that individual videos can be strung together to create a course that is equivalent to what is delivered by an instructor. Additionally, the online experience includes access to a hands-on lab environment and thus provides the opportunity for learners to practice in a non-production environment.
At roughly 25% each, it is less common to offer either virtual instructor-led training or online learning for a course, or content, other than for which the student was originally registered.
So, we know what education organizations are doing, but what are students doing? At 68%, virtual instructor-led training is the alternative customers prefer, as illustrated in the graph below. It is interesting to note that the second most selected option, at 24%, is to defer to a later date, instead of opting for online content. In fact, replacing the public classroom course with any type of online learning occurs less than 10% of the time.
This data puts a glaring spotlight on the fact that if you don’t have virtual instructor-led training, there is more at stake than just revenue. More importantly, from a hierarchical perspective it indicates that training with an instructor, even if remote, is still preferred over training without an instructor. Something to think about…
This blog started by presenting data showing that 79% of education services revenue is derived from some type of instructor-led training. The data below shows that 68% of education organizations are experiencing a decline in revenue, due to factors related to COVID-19.
So, what are the implications for education services revenue in a world in which face-to-face contact is restricted? That answer varies, based on a couple of things, one short term and the other long term (depending on global social distancing directives).
From a revenue perspective, the good news for both the short and long-term scenarios is that Education Services Pricing Survey data shows that there is near parity in pricing for public classroom and virtual instructor-led training, with the variance being about $50. Using mock numbers, if the average realized price (price after discount) for a student to attend one day of classroom training, in North America, is $650, the price to attend the same course, via virtual instructor-led training is about $600 per day.
So, in the short-term scenario, preservation of revenue relies on the ability of the education organization to convert as many students as possible from the public training class that was cancelled, to the equivalent virtual instructor-led delivery. In conversations with members, a two-thirds conversion rate seems to be the norm, which is very consistent with our data from the previous question that asked, “What are students doing?” That data showed that about 65% of students are choosing to attend a virtual instructor-led offer.
The long-term scenario is a bit trickier. It requires persuading students who might be inclined to wait for public classroom training to not delay and register now for upcoming virtual instructor-led classes and/or prompting them to consume online content. Therefore, long term revenue is at higher risk. This is evidenced in the fact that most education organizations with whom I have spoken, have said that the pipeline volume in upcoming months is less than the previous quarter and/or less than the same time period the previous year.
So what measures are education organizations taking to buffer decline and bolster the pipeline?
We understand that our member companies, the technology industry, and the world at large have been impacted by COVID-19. Now, more than ever, we need to work together to get through these challenging times. TSIA is committed to providing visibility as quickly as possible into the changing industry trends and practices that come as a result of COVID-19. Visit our Rapid Research Response Initiative resource page for more information.
If you have any questions related to how COVID-19 is impacting your organization, we’re here to help.
Post Date: April 9, 2020
Maria Manning-Chapman, is vice president of research, Education Services, for TSIA. She has more than 25 years of education experience in the high-technology industry. Maria is well versed in the dynamics of running an education services business and has held leadership positions in operations, virtual learning, business development, curriculum development, delivery, and partner management over the course of her career.
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