A New Profit Center

One of the benefits of external training programs is the generation of additional revenue. Several companies have taken that model one step further by generating more revenue than the program costs to staff and operate. "We develop a learning strategy, then develop a business plan around that strategy," says Lynne Herrmann, vice president of education for Hyperion Solutions, a software company in Sunnyvale, Calif. "And we work toward our plan, just like any other business unit in the company. We are a profit center because we treat it like a business."

Kelly Gray, director of educational services at NewMarket International, a software company in Portsmouth, N.H., says external training also is profitable. "It's also usually the second or third most profitable area in the company behind software sales and, at times, technical support," she adds. Gray oversees 50 external trainers in addition to the consulting and educational development groups (which are more focused on internal training, but assist with content development for all engagements) located within educational services at NewMarket. She estimates that 60 percent of the external training group's revenue comes from training that customers buy when they purchase NewMarket software.

Although that implementation training is a required purchase, it is not bundled into the price of the software from an accounting perspective. Instead, the training components of the deal are listed as separate line items. The remaining 40 percent of external training revenue is generated through additional training that customers request following the implementation.

OutlookSoft Corp., a budgeting software and Web analytics company in Stamford, Conn., takes a similar but leaner approach to external training. OutlookSoft's three full-time trainers do not provide traditional classroom training. "We only offer live, Web-based training and hands-on multimedia training, which enables us to train worldwide with a department of three," says Leslie Kirshaw, OutlookSoft's director of training. The department also boasts the highest profit margins of any revenue area within the company. OutlookSoft charges $300 per person per session for its Web-based training. A $150-per-hour charge for development fees is added to customized Web-based classes.

While acknowledging that a training-as-profit-center approach might work more naturally for technology companies, New Market's Gray says similar models can work in other industries. "Even products that require minimal training can benefit from technology-based training," she says. "Customers always want to find better ways to maximize a product's value. With less technical products, I could see using a bundled pricing model where you wouldn't necessarily differentiate between training and the cost of the product." —E.K.