Welcome to Sam Adkins

Next up in the interview que is Mr. Sam Adkins. Thanks a bunch Sam.

For those of you who don't know him, Sam has spent almost 20 years in the training industry. The last company he worked for was a small U.S. Northwest company known as Microsoft. While at Microsoft, Sam, in his role as Group Learning Program Manager, helped create the online learning university known as the Microsoft Online Institute or MOLI.

SAMADICO, Sam's own product research company was started in 2000 and Sam's work there on issues such as Workflow-based eLearning, has helped solidify his place as one of the leading e-learning researchers in the field today.

We are lucky and happy to have Sam here with us...and now on with the interview!

Comments

[mark oehlert]

Sam,

Thanks again for doing this. We'll go with the court reporter start...

Could you please state your name, job title and company for the record?

[Sam Adkins]

Hi Mark. My name is Sam Adkins and I’ll start by giving you a little more information than just my name, rank and serial number. I am an independent learning technology researcher and run a small, one-person consulting firm called Samadico. I focus exclusively on tracking technologies that are used in learning products.

My most recent work is the four-part series called "Simulation in the Enterprise: The Convergence of eLearning, Simulation and Enterprise Application Suites" published by Jay Cross' Internet Time Group.

Aside from my commercially available reports, I also do proprietary technology studies for companies in which I sign the NDA, look under the hood, and provide a detailed SWOT (strengths, weaknesses, opportunities, threats) analysis on the company’s technology.

Most of my commercial work entails tracking nascent technology trends. Once a technology trend emerges in a tangible product, I begin to track it. I plot product migration trends out 3-5 years but I always ground my research in real, commercially available products that are on the market NOW.

Vendors use my data to plan second-generation product migrations. Customers use the data to identify technology that is sustainable and interoperable. Customers also use my data to leapfrog first-generation products that are being eclipsed by enhanced products.

[mark oehlert]

Sam,

Great start! Just some lesson learned from my interview with Murry. People, other than myself, may or may not 'jump in' during this process. That can be disorienting but I find that interaction one of the great powers of blogging so I hope that its OK. We of course are free to either respond or ignore as we wish.

Also, since we both have day jobs, don't feel compelled to conduct this in real-time - no clock ticking here!

That being said - let's get to it -

Technology is one aspect - and we will be discussing it in detail - but what economic models for e-learning companies do you think will be viable 10 years from now? What will their product offerings look like? Will evolving/emerging technologies kill some companies and create others?

[Sam Adkins]

Understood on the vagaries of the medium. I read your flow with Murry and think I can handle the process.

Your three questions:

What economic models for e-learning companies do you think will be viable 10 years from now?

It is rapidly evolving to a transactional “service” model. Due to the rapid adoption of Web Services, the “fee per-CPU” and the “fee per-user” models are both threatened. It may take only 3-4 years now but the business model will certainly be a transactional “pay as you go” or "pay for only what you use" model and based on the amount of real transactions with various product features. You already see vendors experimenting with the “pay as you go” model. It is scary for them because it provides very little visibility into future revenues. Yet, it is more sustainable than single high dollar contracts that anchor the company's future to precarious contract renewals. The Microsoft MapPoint service based on Web Services is a successful prototype of this new business model.

What will their product offerings look like?

You can get an early glimpse by looking at Element K, Blackboard, eCollege and VCampus (among others). They have adopted Web Services and are far into the process of deconstructing their feature sets into small granular “services". IBM built their new LMS product as a modular J2EE component. This allows these vendors to provide a “buffet table” for customers and gives them a lot of flexibility to assemble a variety of services and offer a range of pricing. The customer really wins in this situation. What this also does is open the market to small and medium business (the next big wave of learning technology uptake).

Will evolving/emerging technologies kill some companies and create others?

Inevitably. There is a natural ebb and flow in business, in technology and in product lifecycles. Those companies (new and old) that can thrive in downturns, adopt next-generation technology and get new products into the pipeline tend to survive. Those companies that falter in downturns (blame their woes on the economy), become emotionally attached to legacy products and place all their eggs in one basket will get eaten alive by the more nimble companies. Market share and market capital will not save a company that is unwilling to change. I think Darwin actually said, "It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change."

There are at least five form-factors of learning technology in the enterprise today: courseware, reference, simulation, collaboration and workflow-based elearning. Courseware is severely challenged now in the enterprise and the other four form-factors are evolving rapidly. It is a product design issue now. The products that can literally integrate with real-time workflows will flourish. Unless courseware vendors can rapidly mutate (innovate) new types of courseware techniques and technologies, courseware as a form-factor will only survive in isolated areas of regulated compliance (in which companies are mandated by law to show that employees took formal training).

I already see a variety of nimble vendors taking market share from established learning vendors. Many of these new vendors do not call their products learning technology and consequently fly in under the radar of the established companies. For example, the enterprise content management vendors are aggressively assimilating the LCMS market. A new breed of Business Process Management vendor is displacing classroom training and courseware in the enterprise. These vendors embed learning, simulation and decision trees in the live real-time workflow. Yet, these companies, (like Lombardi, Nobilis, Ultimus and Teamplate) all cite customer feedback that indicates these products “reduce the need for formal training”. So these new vendors do understand whose lunch they are eating. It is the equivalent of small fast little mammals stealing the dinosaur eggs. As I have said elsewhere, just in time is now too late.

[mark oehlert]

That is a great stage-setter. One follow on: Will the ''pay as you go'' model create higher barriers of entry to smaller companies who don't have the capital to make the initial investment in the face of uncertain returns?

Next question: In your opinion, what are some of the global issues confronting e-learning today? Are you aware of any cultural or legal issues that could serve as roadblocks to organizations trying to implement e-learning globally? Have you noticed that different issues get different levels of attention in verying parts of the world?

[Sam Adkins]

OK. I see the trend. We start with basic questions and then move directly to the quantum level.

Your questions:

Will the ''pay as you go'' model create higher barriers of entry to smaller companies who don't have the capital to make the initial investment in the face of uncertain returns?

Not necessarily. The transaction model is used in all service industries (hotels, groceries, utilities). They get financing the old fashioned way, with solid business models. It has been different for legacy software but all roads are leading to the new model. Visibility is not guaranteed with the legacy business model.

Multi-million dollar and multi-year contracts are now rare. Visibility is eroding anyway and not only start-ups, but established vendors will have to show investors other types of sustainability. Even the 18-20% maintenance fees will go away as Web Services take hold.

Short-term subscriptions will probably be the transitional stage to the pure pay as you go model. This is the lucrative model that is used by the professional STM (Science, Technology, Medical) research content vendors (Reed-Elsevier dominates the market). Market research now shows that even consumers are being “migrated” successfully to fee-based content. Instead of contract renewal rates, companies will have to deal with “churn” rates.

The push toward grid computing is pure “pay as you go”. As the industry changes, barriers to entry change. Web Services changes the barrier to entry equation completely.

It is now possible for companies to get up and running with very little up-front costs. Look at Amazon’s Web Services business model. They allow “associates”, small Mom and Pop shops, to integrate the entire range of Amazon functionality into their little specialty shop. Not a dime in infrastructure beyond having a web site capable of “consuming” granular Web Services. In the Amazon model, the little shops carry no inventory, has no distribution costs, and requires no IT support (a little SOAP expertise is needed to get up and running). Amazon does the real work once a customer buys. In this model, Amazon (so far) gives the Web Services away for free and gives the “associate” a small percentage of the sales, a higher percentage for higher sales. The point is that a small company can make money with very little up-front investment.

Those vendors that are XML-ready have the advantage in this new model. IBM, VCampus and Element K are XML-ready. IBM’s new “Workplace” line of products embeds the J2EE LMS into the WebSphere portal. VCampus sells granular services only to corporate customers so far but Element K is rapidly retooling itself as a wholesaler that sells technology and services to major learning companies (Novell, IBM, PPI, Microsoft) that re-brand and resell the products as their own.

Once learning technology features are widely available as commercially available Web Services, a new start-up could get up and running in days. The key differentiator for them will be their service niche such as the vertical or the subject matter area. Expertise and experience become the barriers to entry, not cash or equipment.

What are some of the global issues confronting e-learning today?

From a cultural perspective, elearning is the only way to establish educational parity quickly in developing nations. The United Nations wants “universal” education by 2012 or so. I think it will take much longer but elearning allows the planet to leapfrog 30-50 years of sequential technology phases. Wireless technology will be the delivery method of choice (if not necessity). There is simply no time (or point) to laying landlines or fiber in developing nations or trying to sell desktops to billions of people without landlines.

A good site to get a view of the complexities and challenges of this issue is the Development Gateway (www.developmentgateway.org/). This site has a huge amount of data on global elearning.

The problems can be summed up by this quote from the Development Gateway. “Targeted education and development programs are working toward positive measurable outcomes in several developing countries in a number of areas and sectors, such as universal primary education, gender equality, improving maternal health, building knowledge in agricultural production, and reducing infant mortality.”

From a tactical perspective, we have to broaden our concept of elearning beyond courseware. Particularly in the academic community, the term elearning is synonymous with courseware design models. This artificially confines the potential of the medium and we may indeed have to jettison the word if we can’t broaden it. As I said in my last post, there are five form-factors of elearning (reference, courseware, simulation, collaboration, and workflow). We have to bring all of these to bear on the global challenges.

For example, providing a course on a small handheld to a farmer in India (as the SimPuter company does) may not be as effective as providing GPS data, agricultural reference and weather simulations to that farmer. This is exactly how farming is evolving in the West. The average Caterpillar tractor now has five IP addresses.

Are you aware of any cultural or legal issues that could serve as roadblocks to organizations trying to implement e-learning globally?

The cultural issues in elearning tend to be conflated with local market issues. I am guilty of this as well. We used to ponder why first-generation elearning products did not sell (at all) in Japan. And we made up silly things like the culture prefers face-to-face education. We now know that it is a simple product design issue. If you put a product on a shelf anywhere on the planet and it does not sell, it is a product design issue, not a cultural issue. If you put a car with a steering wheel on the left on the market in a country that prefers steering wheels on the right, I guess you could say that was a cultural problem. I think it is a product design issue.

Now collaboration products are ticking up in Japan and Asia and vendors such as Docent are allowing local firms to OEM their technology (deeply buried in the local product). I think we finally understand that products need to adapt to markets, not the other way around. This is way beyond localization of text.

The biggest legal issue facing learning technology vendors is patent lawsuits. This is not just isolated to learning companies, but now a thorn in every vendor’s side. There is a whole new breed of patent holder now that sells no product, does no research, develops no technology, has no staff. They write up patents, or buy patents from individuals, and go after major technology vendors one at a time. Lawyers work on commission. These patent litigations all revolve around developing and tracking conventional courseware products (tools and platforms), so far.

There is even a patent pending for the systematic instructional design process right now. Imagine if you had to pay a license fee to a third-party for every course (classroom or elearning) developed internally or sold externally?

If that patent is granted, every classroom and elearning course created or sold that includes objectives, assessment, etc. and was developed systematically, will owe the patent holder a fee. Since courseware based elearning is on the decline in the corporate market, I can see vendors migrating rapidly to the other form-factors. Until then, the existing patent litigators are concentrating on platforms and tools.

The recent boom in elearning in the academic markets will attract these technology-based litigators like moths to a flame. Since courseware is fundamental to academic organizations, it is hard to see how they will side-step this problem. Open Source tools and platforms are not immune from litigation. It could blindside the HE market once the corporate world deflects the blow.

I often do patent searches for companies when I analyze their products, so I run into this a lot now. The isolated cases that make the news are just the tip of the iceberg. Vendors pay off these litigators quietly simply because it is cheaper than litigation. Let me say that again. Even if a vendor could prove they had first art or prior usage, it is cheaper to pay them off and then migrate products elsewhere.

The patent issue is one of three main issues facing our industry today. The other two that worry me are outsourcing and the new affective domain personality tests that are used to screen job candidates. These are primarily US problems (even though offshore outsourcing goes to other countries) so not part of your “global” question just yet.

Have you noticed that different issues get different levels of attention in varying parts of the world?

Absolutely. Each market is unique, particularly in their technology adoption patterns. I had this drilled into me when I worked for Microsoft. I would go to Europe and use the word “Europe” like it actually applied to a unified entity. I was often reminded by local colleagues that there is no such thing as Europe, but rather 19-20 different countries. Even the establishment of the EU has not changed this much.

For a variety of technical reasons (infrastructure, dial-up fees, telecommunications, desktop technology), courseware-based elearning as we know it is still localized to a few English language markets (US, Canada, UK, Australia and IT-based content sold around the world in English). It is very expensive in places like Italy where Internet connections are charged like toll calls (you pay for the time you are online).

Again, each market is different and each sector within the market is unique. For example, there is very little corporate elearning in France but it is a robust market for academic elearning products. Industry analysts are often confounded as to why first-generation elearning has not taken off in Germany or Japan (the second and third largest economies).

Yet there are other types of elearning that are enjoying brisk sales in other countries. Mobile technology is already used for elearning in Japan, South Korea and Northern Europe. It is not courseware but performance support, gaming, simulation and collaboration. Japan has been called a “nation of thumb-typers” referring to the crowds of people on trains and in subway stations bending over handhelds using both thumbs to pound out messages. English as Second Language (ESL) is a very lucrative elearning category in this mobile market.

Smartphones are now flying off the shelves in Europe and Asia (phone vendors call the last few months of sales “astronomical”). Trying to sell desktop products in markets overwhelmingly dominated by handhelds is a symptom of poor business strategy, not a cultural issue. To be fair, 2.5G and 3G technology has been slow to reach the US, but it is here now and vendors have yet to focus on it.

This desktop “myopia” is giving new vendors a head start in the market. Check out the “augmented reality” performance products from Oxford Technologies or Wireless Peripherals here in the US. Honda just bought 4,500 head-mounted systems from Microvision allowing auto mechanics to get reference, mentoring and schematics using hands-free wearable computers while they work on cars. These and new products from Business Activity Monitoring (BAM) and Field Force Automation (FFA) vendors are already establishing toeholds in a new “mobile performance” market that will sell very well in 3G-enabled countries (and eventually in the US).

[mark oehlert]

First, my apologies for dropping off the map like that! I hate it when work gets in the way!
Second, wow Sam - amazing response. Let me hit the ones that really jumped out at me:

a. "The average Caterpillar tractor now has five IP addresses." I'd say unbelievable but I believe it!

b. Concerning the issue of locality in elearning, do you see companies like welocalize playing a larger role in the development/deployment of e-content? Or are their product offerings too limited in relation to the needs of the global market?

c. Do you see patent litigation and copyright extensions as the Scylla and Charybdis of the legal world which most threaten our industry?

c1. How can we fight back here? Off-shore patents? Creative Commons' licenses?

c2. "There is even a patent pending for the systematic instructional design process right now." Stunning. Sad.

[Sam Adkins]

Welcome back, Mark.

a. "The average Caterpillar tractor now has five IP addresses." I'd say unbelievable but I believe it!

Farming in the "West" (now a pretty global concept) is becoming very high tech. These tractors are also used in mining, heavy industry and construction.

The military and heavy industry are innovating extraordinary workflow-based elearning that they are embedding in the consoles of complex machines. There is a small cottage industry now for “Situational Awareness” products to help humans navigate complexity. The prime innovation here is that these products weave together all three of Bloom’s taxonomy: skills, learning and the affective domain. An operator’s belief system is now recognized as crucial in the mix of things.

One of the biggest booms in IT training is in specialized technology in the construction business. Simulation-based elearning is hot right now in the heavy industry sector. The concept of blue-collar is pretty outdated.

b. Concerning the issue of locality in elearning, do you see companies like welocalize playing a larger role in the development/deployment of e-content? Or are their product offerings too limited in relation to the needs of the global market?

Welocalize is doing very well right now. If you look at their business, it would seem that the market for localizing elearning technology is pretty healthy. They intend to double their revenues in FY04 through acquisitions. They will scale to global reach at that kind of growth rate. I was not aware they were doing much content localization though.

When I interviewed IBM at the time they rolled out their new J2EE-based LMS module, they said they were not encountering many US-based firms across the planet but rather a slew of local firms, competing in local markets. So it appears there is a demand for learning technology in some countries, but I have no data that breaks it down by country. But it leads me to believe that content development is a local affair as well.

c. Do you see patent litigation and copyright extensions as the Scylla and Charybdis of the legal world which most threaten our industry?

Yes, I am worried about it, but the industry will adapt. Litigation is one way businesses compete now. It does stifle innovation since it now takes a lot of money to throw up legal shields around your product. The so-called “barriers to entry” for new start-ups now includes significant legal fees and patent research.

I saw a quote from Greg Priest in the Irish press where he said it was “quite common” in the elearning industry. Some companies are paying off the more aggressive litigators. Some companies are fighting back. Just scan the SEC reports of 5-6 of the top elearning vendors and you’ll quickly see who is fighting and who is settling.

What I think will happen is the “target” will keep moving and vendors with R&D and product lines will innovate themselves out of litigation. That doesn’t protect them completely, but it is one good way “out”. I do expect the more aggressive litigators to start targeting the higher education institutions. That is where the “new money” is in elearning.

It is bad in the software industry but it is very bad in biotech. It is endemic to society now and we’ll figure it out.

c1. How can we fight back here? Off-shore patents? Creative Commons' licenses?

There’s the rub. There is no safe haven. Off-shore patents just complicate the matter. From a commerce perspective, the US patents are the ones to get. A large amount of new patents in the US are filed by foreign firms.

The suits are based on invention. It is irrelevant what technology you use or what license you have. Solutions built with Open Source are fair game.

The EU is embroiled now in debate over patent laws. One camp wants to pass patent laws similar to the US, and the other camp wants to stop it for the very reasons I have been talking about.

It appears the main problem is the type of patent known here as Class 705 patents. They are now very hard to get as the Patent Office is getting so much flack over them. It is the Class 705 patents that allow someone to patent a business process as long as the process is “useful, concrete and tangible”. Well, that is pretty darn broad.

c2. "There is even a patent pending for the systematic instructional design process right now." Stunning. Sad.

Kinda sad, yeah. It is in application stage and I will check on that one every once in awhile. I tend to see all this as “just business” and that business and the free market will shake it off eventually.

Many folks that do get patents approved just sit on them and never do much with them. There are now literally thousands of patents on every type of learning technology, content and service you can think of. Only certain companies litigate on them.

It is very expensive to litigate, so the phenomenon only follows big money. And it is based on rule of law. I can’t really begrudge companies that make a living solely off of litigation. As the debate in the EU rages, it may become a model for the US to overturn some of the more silly patents and perhaps jettison Class 705 categories altogether.

I think Winston Churchill said something to the tune of “Don't worry. You can always count on the Americans to do the right thing after exhausting all other alternatives”.