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Training Industry Inc. estimates that companies spend approximately 39% of their training budgets on external suppliers while approximately 61% of their budget is spent on internal resources on an average.
However, while the 39% spent on external suppliers may account for the direct costs that training suppliers bill their customers, organizations end up spending much more in hidden or unaccounted costs. At NIIT, we call this the Total Cost of Learning (TCL). If companies need to maximize their learning investments, they need to look at the bigger picture across various areas that may not be accounted for in TCL. Consider the following.
Process Costs – activities and resources both inside and outside the learning organization that are required to select, contract, and manage third-party providers.
Inconsistency – different people in the organization get trained by different vendors, using different content for the same skills. In a way, the same learning needs are met at different cost levels with inconsistent results. This is especially true for decentralized organizations.
Lost Leverage – by not managing vendors across geographies or business units, companies miss out on benefits of scale like volume price reductions, improved SLAs etc.
Lost Value – in a constantly evolving world, companies find it difficult to keep track of changes in the vendor landscape. Frequently, lower quality vendors are selected due to familiarity or convenience.
Lost Organizational Value – vendors frequently work with multiple areas of an organization and yet knowledge and feedback from this work is often neither captured nor shared between geographies and business lines.
NIIT’s Strategic Sourcing service addresses the Total Cost of Learning (TCL) and is focused on delivering value by addressing both direct and indirect costs.