SmartForce PLC

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SmartForce PLC

900 Chesapeake Drive
Redwood City, California 94063
U.S.A.
Telephone: (888) 395-0014
Fax: (888) 395-0015
Web site:http://www.smartforce.com

Public Company
Incorporated: 1984
Employees: 1,684 (est.)
Sales: $168.2 million (2000 est.)
Stock Exchanges: NASDAQ
Ticker Symbol: SMTF
NAIC: 611710 Educational Support Services

Based in Redwood City, California, SmartForce PLC is the largest online training company in the world. The company develops and sells interactive, Web-based educational and training courses that are designed to enrich and empower a company’s employees, customers, suppliers, distributors and other business partners. Course offerings help develop knowledge and skills in a variety of subjects, including information technology (IT), business and some professional trades. SmartForce also complements its courses with an online mentoring program, online seminars, training assessment tools, and administrative and reporting tools. And with its latest e-learning technology, the company makes it easy for clients to use SmartForce software to create courses. Clients include 2,500 of the world’s largest companies, government agencies and other organizations, with most of its business derived from U.S.-based multinationals. The company has operations in 35 countries and courseware translated into several languages. SmartForce is the first and only profitable, publicly-traded company devoted to online training, and, in 2000, ranked among the top one percent of the world’s best performing companies, as rated by Deloitte Touche Tohmatsu.

Irish Beginnings

SmartForce was established as CBT Systems and based in Dublin, Ireland. Founded in 1984 by Pat McDonagh and stockbroker Dermot Desmond, CBT Systems was one of the pioneers among Irish software firms expanding overseas. McDonagh was a primary schoolteacher in the early 1970s, and later sold encyclopedias and worked in sales with Rank Xerox and ICL. After working for Deltax, a U.S. education software company, he took out a $15,000 loan to set up CBT Systems. Desmond left the company one year after it was founded. McDonagh stayed on, and 12 years later, made $45 million after CBT Systems debuted on the NASDAQ.

CBT Systems counted on businesses seeking alternatives to classroom-based instruction for their workforce training needs. As companies become more global, time and location constraints make deploying only classroom-based training less feasible. As a result, companies were increasingly opting for computer-based training for employees. Although CBT Systems originally developed video-based training for IBM mainframe environments, it quickly shifted its focus to client-server technologies and steadily built its business on packaged educational software on diskettes and CD-ROMs. Courseware topics at the time covered information technology (IT) subjects such as back-office technical certification and desktop applications training. In the 1980s, CBT Systems could rely on developing courseware strictly for an IT audience, because IT professionals adopted computer-based training early. When computer-based training became more prevalent, the company expanded its curriculum to cover non-IT topics.

Phenomenal Growth and Expansion

CBT Systems had focused on serving Irish companies until 1987, when Bill McCabe joined the company and helped it expand its business to Britain and the United States. During his tenure as Chief Executive Officer, CBT Systems grew into the largest interactive educational software company in the world. In 1992, the company’s sales totaled $6.1 million. That went up to $8.8 million the next year, and in 1994, sales had already reached $19.3 million. During that period, the company moved from a loss of $410,000 to profits of $2.67 million. Amid such positive developments, the company went public on NASDAQ in April 1995, making it the first Irish technology company to take this path.

By 1995, 70 percent of CBT System’s business came from the U.S. Soon after it went public, CBT Systems went on to secure its position in the U.S. market with a handful of major deals and moving its headquarters to Redwood City, California. It signed its first agreement with Microsoft Corporation, to develop interactive, educational software for the Microsoft Certified Professional (MCP) program. Also, the company signed a contract with Manpower, Inc., the world’s largest staffing organization at the time, to provide 160 interactive educational training courses for its technical services employees. Another major deal was signed with Oracle to design and develop courseware for the Oracle Developer and Database Administrator Curricula.

By the mid-1990s, CBT Systems had moved into networked offerings and some forms of Web-based training. In December 1996, CBT Systems launched CBT Web, which enabled customers to deploy CBT System’s entire library of interactive training software titles over a corporate intranet. This marked the first time that users were not limited to a local area network and could access CBT System’s courseware from anywhere in the world. Also, CBT Systems acquired scholars.com, which was the leader in Internet-based training, having developed an innovative mentoring service that made learning advisors accessible by students 12 hours each day, seven days per week, via online chats, e-mail, and newsgroups.

In late 1996, McCabe stepped down as CEO, but remained chairman of CBT System’s board of directors. Ex-Apple Computer executive James Buckley took over as CEO, and by 1997, CBT Systems had secured 11 strategic partnership agreements with software groups and had nearly doubled its research and development efforts. In the first quarter of 1997, CBT Systems created an education sales group to address the growing training and education needs in universities, community colleges, and primary and secondary schools. In 1998, Buckley replaced McCabe as chairman of the board of directors, and Greg Priest was named CEO. CBT Systems had acquired Knowledge Well, a company that was a leader in developing interactive educational software for non-IT business and education subjects.

Though CBT Systems had made significant investments to try to capture non-IT markets, it did not lose any ground in the corporate IT market. Corporations were expected to pour an estimated $21.5 billion into technical training in 1998, according to International Data Corp (IDC). By 1998, CBT Systems had expanded internationally by acquiring its distributors in Germany, Canada, Australia, the Middle East, India, Belgium, Luxembourg, and the Netherlands. CBT System’s most popular IT courseware was delivered in 191 foreign language versions, primarily French and German. The company added Japanese, Portuguese, Italian, and Spanish to its portfolio of translated titles. Overall, more than 300 titles were translated into various languages.

Redefining a Company— and an Industry

By the end of 1998, CBT Systems had established itself as the world leader in computer-based training, but during 1999, it needed to do much more to secure its leadership. CBT Systems extended its market reach, and increased its course offerings and launched a bold new Web-based training solution.

In May 1999, CBT Systems launched CBTNow, an e-commerce catalog of more than 900 course titles. Individuals were now able to directly purchase course titles. In that same month, CBT Systems launched cbt.community, an innovative, Web-based virtual community, rich in up-to-the-minute educational resources and information, in which learners can interact with each other and with experts in real time. In October 1999, CBT Systems changed its name to SmartForce, signifying another major pioneering shift—this time, to a completely Web-based subscription business. The flagship product was called My SmartForce, a completely Web-based, SmartForce-hosted environment that clients could access via the Internet at smartforce.com.

Developed from scratch, the new e-learning solution was designed to incorporate all the benefits of Web-based training and classroom methods. My SmartForce was conceived as an online destination for workers to go for all of their knowledge needs, and offered a seamless package of learning activities that covered four major learning categories: instruction, collaboration, practice and assessment. Instructional activities included courses, seminars, workshops, articles and white papers. Students could collaborate by accessing live workshops and seminars, meetings, virtual classrooms, one-on-one mentoring sessions, informal chats, threaded discussions and e-mail interaction. Students could apply what they had learned by participating in workshops, task-based simulations, strategy exercises, business modeling simulations and situational exercises. A number of assessment tools were made available: performance-based assessments, proficiency assessments, exam preparation tests, online certification tools and secure e-testing. One of the major, new offerings through My SmartForce was one-to-one online mentoring. About 200 mentors were available to students around the clock to help them set up courses, solve problems, motivate them, and make suggestions. By the end of 2000, the company had moved nearly all of its course offerings to the new platform.

Company Perspectives:

At SmartForce—formerly CBT Systems —we’ve made a name for ourselves as the largest e-learning company in the world today, leading the professional education market into the Internet Age through e-learning —a fundamentally faster and better way to learn. Changing our company’s name to SmartForce was a dramatic step taken to demonstrate to our customers and the industry our continual commitment to helping organizations create a smarter workforce —essentially a “smart force” that thrives in the new economy. Simply put, SmartForce is nothing short of the reinvention of learning for the Internet Age, with e-learning empowering individual learners and enabling enterprises to gain a competitive advantage in today’s ever-changing business world.

The company’s shift to the new My SmartForce e-learning solution signified how technology, content, and services were equally key to SmartForce’s robust solutions and continued success—it was the successful manifestation of a trend toward highly manageable component-style approaches to learning, with the Web as key to the delivery. The speed and remarkably sophisticated nature of SmartForce’s transformation could easily be attributed to the size and agility of its research and development operation. Although SmartForce moved its headquarters to the United States, research and development remained in Dublin. With more than 500 content development professionals on staff, the facility was the largest in-house courseware development center in the world. Led by educational instructors, each team consisted of expert instructional designers, writers, editors, and information systems specialists.

Although SmartForce’s bread-and-butter subjects had always been IT-oriented, which still made up about 80 percent of all its subject areas, it also expanded into other critical areas such as business, soft skills, and some professional trades, such as engineering, accounting, and law. Tom Barron, of Learning Circuits observed, ’In many ways, the success of IT e-learning has paved the way for this broader adoption of technology for non-technical skills. Having proved its worth to many CEOs in “upskilling” technical staff quickly, more executives are approving wider rollouts of the learning medium to non-technical staff. And as technical staff increasingly find themselves in roles that call for business knowledge, they, too, become targets for soft-skills training.” Some of the non-technical business topics that SmartForce came to offer were project management, interpersonal skills, sales training, and other forms of employee orientation. By forging new alliances with business simulation developer Strategic Management Group (SMG) in 2000 and classroom-based soft-skills provider Provant in 2001, SmartForce was poised to offer even more learning modules for non-technical skills development.

SmartForce’s Asia-Pacific general manager, Brian Kelly, explains that the company is looking to grow well beyond its IT roots: “We’re dipping our toes into the healthcare industry now, too, at least in the U.S. healthcare and banking and finance are massive untapped markets for training. Same with e-business—we’re going in there in a big way at the moment. Obviously, there’s a huge demand.” SmartForce launched its e-Business product portfolio in November 2000. The broadest and most comprehensive set of its e-Learning offerings, SmartForce’s e-business portfolio was designed to help companies transform their traditional businesses into e-businesses. It covers both the technical and the business aspects of Internet marketing, e-procurement, e-CRM, Internet security, enterprise applications development, Internetworking, Web site design, and Web development.

By November 2000, SmartForce unveiled the next-generation “e3” technology that would drive the e-learning solution in a way that was faster and completely customizable. Now, not only did SmartForce launch a customizable product that could offer almost everything a person could need at work, it also offered it in a way so that clients did not have to invest in the SmartForce infrastructure, or in the risky venture of integrating online learning courses with their own intranets.

SmartForce’s shift to Web-based training wasn’t easy—the company reported losses in the first three quarters of 2000. However, many believe it was a short-term adjustment, because SmartForce reached profitability in the fourth quarter of 2000, one quarter ahead of schedule. Also by that year’s end, the company had a backlog of business totaling $357 million. Developing networked and Web-based courses proved to be a good move for SmartForce—by 2001, roughly 60 percent of its clients put SmartForce’s courses on their intranets. And it might have been only the beginning of a significant trend. In 2000, industry publication IDC estimated that $19.5 billion was spent on corporate training, with roughly 11 percent going to Web-based training. And of the $29.3 billion that was projected to be spent on training in 2003, an estimated 40 percent was expected to be Web-based. SmartForce led and enabled this trend by quickly developing powerful tools that make e-learning cost-effective, convenient, and easy to use.

Principal Competitors

Aris; Canterbury Consulting; click21earn.com; DigitalThink; Docent Inc; EarthWeb; Educational Video Conferencing; Element K; Futuremedia; Global Knowledge; Harcourt General; kenexa; Knowledge Universe; Learn2.com; Learning Tree; MindLeaders.com; New Horizons Worldwide; O’Reilly & Associates; ProsoftTraining; SkillSoft; VCampus.

Key Dates:

1984:: CBT Systems is founded in Dublin, Ireland.
1987:: New CEO Bill McCabe begins the company’s global expansion.
1995:: CBT Systems debuts on NASDAQ.
1996:: The company launches CBT Web for corporate intranets.
1999:: CBT Systems becomes SmartForce and launches its flagship Web-based solution.
2000:: SmartForce launches e3 technology for customizable Web-based training.
2000:: Company achieves profitability ahead of schedule.
2001:: SmartForce signs 100^th million-dollar agreement.