Markets, M-19-1715 Research Note

J. Lundy 7 February 2003

The 2003 E-Learning Content Magic Quadrant

In 2003, the e-learning content market will grow, particularly

in the custom content area. Demand is fueled by more
enterprises needing to migrate classroom courses to an e-
learning delivery medium.

Core Topic
Knowledge & Content Mgmt., Collaboration
& E-Learning: Corporate Learning Strategy,
Systems and Technology
Key Issue
Which vendor and service provider
strategies will be successful in corporate
learning support?
The e-learning content market is growing because an increasing
number of enterprises are realizing that quality content is a
critical success factor for e-learning. The six market leaders in
2002 (see "The 2002 E-Learning Content Magic Quadrant")
remain as such in the 2003 edition of the e-learning content
Magic Quadrant, with the addition of Accenture Learning to the
Leaders quadrant (see Figure 1). Several new vendors have
been added to the Visionaries quadrant — CyberU, Knowlagent
and Strategic Management Group. Quisic and OC Inc. have
been removed from the Magic Quadrant, and they no longer
operate under those names.

Gartner
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 Figure 1
The 2003 E-Learning Content Magic Quadrant
Challengers Leaders

Element K
Accenture Learning
Allen Communication NETg SkillSoft
Learning Services KnowledgeNet
Ability IBM
MindLeaders
to DigitalThink
Execute Comet Learning Intellinex
SMG
Geometrix Sun
eMind CyberU
ATG
Fuel CognitiveArts
Ninth House Imparta

Knowlagent

As of February 2003
Niche Players Visionaries
Completeness of Vision
ATG Access Technologies Group
NETg Thomson NETg
SMG Strategic Management Group
Sun Sun Microsystems
Source: Gartner Research

The demand for custom content is growing, and vendors are

positioning to respond to this need. For example, DigitalThink
changed its strategy from being an off-the-shelf content
developer to become a vendor of custom content. Demand is
increasing because business units need content that is focused
on what they do or offer; thus, unique, custom content is
required.

Leaders

E-learning content leaders have the highest combined measures

of ability to execute and completeness of vision. They are doing
well today and are prepared for the future. They must have
strong channel partners, presence in multiple geographies,
consistent financial performance and broad content support.

Accenture Learning, which includes its wholly owned e-learning

subsidiary Indeliq, focuses on custom content development
across broad delivery mediums and simulation on a global basis.
Indeliq focuses on simulation, and offers off-the-shelf content and
the ability to customize content using its authoring tools.
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 Accenture Learning leverages these and other tools, and it has
won several large contracts for custom content development.
The vendor has development centers in the United States,
Europe and Asia.

In 2002, DigitalThink reduced its emphasis on its e-learning off-

the-shelf content to focus more on its growing custom content
business. It provides off-the-shelf IT, soft skills and financial
services courseware. However, in the future, it will focus more on
custom content development services. DigitalThink has a strong
cash position; in 2002, it reduced the amount of cash that it
spends. DigitalThink also added the L5 Learning Delivery System
product in 2002, allowing customers to deliver Sharable Content
Object Reference Model 1.2 content developed by DigitalThink or
its clients.

Element K has started to focus less on its legacy classroom

training environment and more on its growing library of e-learning
off-the-shelf IT content. In December 2002, Element K also
began to offer KnowledgeHub, an authoring tool, to enable
enterprises to develop their own custom content.

KnowledgeNet was one of the pioneers in live e-learning

courseware. Today, it offers much of its IT- and soft-skills-
focused content in multiple delivery formats. It also offers a
learning management system (LMS) and a learning content
management system (LCMS) with its content. KnowledgeNet
recently began to offer simulation courses for a number of
technical areas, including Cisco System certification. We expect
that other vendors will begin to offer these types of courses.

IBM has formed a learning solutions team to bring together its

extensive portfolio of services, software, hardware, research and
alliance initiatives to serve the learning marketplace. This
enterprisewide team has established a significant presence in the
custom content development service area by leveraging its
knowledge base, which spans most leading industries. IBM also
resells other vendors' off-the-shelf content, including Thomson
NETg.

SkillSoft acquired SmartForce in September 2002, which now

operates under the name SkillSoft. SkillSoft offers one of the
largest off-the-shelf content libraries for IT and business skills
content. SkillSoft is focused on integrating the two organizations'
products and operations.

Thomson NETg is expanding its content library. In 2002,

Thomson NETg internally developed hundreds of courses, and
expanded its brand and local business skills content, by
acquiring McGraw-Hill Lifetime Learning assets. Thomson NETg

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 also licensed its content library to IBM and Sun Microsystems,
which now can resell Thomson NETg content. In January 2003,
Thomson NETg signed a deal with Safari Books Online to
supplement its portfolio of corporate learning solutions.

Challengers

E-learning content challengers can execute well, but they have

limited vision. They have strong channel, product and financial
capabilities, but they do not lead the industry in innovation or
strategic insight.

Allen Communication Learning Services, formerly known as

Mentergy, has been in the custom content development business
for more than 20 years, and offers good value. Allen recently
completed a management buyout from Mentergy. It also added
FastFlex RCD, a rapid custom content development service.
Allen also offers authoring tools, including Quest and Designer's
Edge.

Comet Learning, formerly InstructionSet, focuses on custom

content for retailers, manufacturers and consumers. It offers
legacy off-the-shelf IT content.

Intellinex, a subsidiary of Ernst & Young, specializes in custom

content development for a variety of delivery mediums, and
offers an extensive library of off-the-shelf courses in business
skills, PC skills, financial planning, audit and tax, the Health
Information Portability and Accountability Act (HIPAA) for
employers, and regulatory compliance. It also offers an LCMS
and an authoring tool.

MindLeaders focuses on off-the-shelf business skills, IT and

desktop content, and also provides custom content development.
It is one of few vendors, in addition to IBM, to offer OS/390-
focused e-learning content. Recently, it has focused on a variety
of partnerships to enhance its market presence as a one-stop,
integrated e-learning provider.

Visionaries

E-learning content visionaries have strong vision, but they are

limited in their ability to execute. They generally have good
content and related strategies, but they may not have broad
relevance in the market.

CognitiveArts targets soft-skills content development and

focuses on simulation as a key part of its deliverables. In 2002,
CognitiveArts added learning strategy, curriculum design and

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 client enablement consulting services as part of its overall
offering.

CyberU is a relatively new vendor in the e-learning content

market. It is one of the first independent content aggregators; it
offers content from Element K, eMind, Thomson NETg, SkillSoft
and several other vendors. We expect that other content
providers will also follow this approach.

eMind focuses on financial services content and compliance

applications. It has expanded its library to offer fixed-income
content. It also provides custom content solutions to financial
services clients that require them.

Imparta offers off-the-shelf and customized simulation-based e-

learning as part of a blended solution that focuses on
management, sales and marketing skill sets.

Knowlagent, a call center LMS and content provider, announced

on 13 January 2003 that it had acquired Simtrex, which provides
call center simulation training software and custom development
services that are used to create customized simulation training
content. This move strengthens Knowlagent's position in the call
center e-learning space.

Ninth House has moved to the Visionaries quadrant. It focuses

on professional and organizational skills development content. In
2002, Ninth House introduced its Instant Advice product line,
which is composed of short video overviews of a particular
business subject area, such as how to conduct a performance
review.

Strategic Management Group (SMG) provides simulation

products and services that accelerate time to value of corporate
initiatives. SMG focuses on custom simulation content
development and has expertise in sales, product life cycle
management, shareholder value and business skills, including
change management, leadership and project management.

Sun Microsystems offers an extensive array of off-the-shelf

Unix, Java and network computing content and custom content
development, and resells other vendors' off-the-shelf content. In
2002, Sun licensed Thomson NETg's Content library; Sun now
can resell and customize Thomson NETg courses.

Niche Players

Because e-learning content offerings can be varied, the Niche

Players quadrant features vendors that focus on a number of
different areas. E-learning content niche vendors have limited

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 vision and weak ability to execute in the general market. In a
focused market (for example, a geographic, vertical or product
segment), their influence may increase.

Access Technologies Group (ATG) focuses on soft-skills

training, such as consultative selling, using customizable content
via its Simentor series of simulation-based reinforcements.

Fuel focuses on custom content development services. It is

known primarily in Europe.

Geometrix supplies Web-enabled, three-dimensional animation

capabilities. It focuses on medical, IT and regulatory segments.

Advice to Enterprises

The breadth of vendors in the 2003 e-learning content Magic

Quadrant means that enterprises have many options. Gartner
Acronym Key suggests that enterprises evaluate off-the-shelf content for
ATG Access Technologies Group
HIPAA Health Insurance Portability
quality and review examples of custom content before signing
and Accountability Act contracts with vendors.
LCMS Learning content
management system
LMS Learning management
Bottom Line: Good content is the cornerstone of a successful e-
system learning program. Careful selection of e-learning content vendors
RCD Rapid Content Deployment can help to ensure that quality content is deployed. Users will
(product)
SMG Strategic Management take additional e-learning courses if the initial experience is a
Group quality one.

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