The part of the e-Learning market which ILX operates in is dominated by a few big global players (the likes of Thomson & SkillSoft - and in the bigger scheme of things SkillSoft is small fry) who offer a generic library of content which get sold to large organisations on annual contracts for six figure sums.
Below this we have many many smaller UK based companies trying to scratch a living from developing generic content or custom builds. The market is ripe for consolidation, and a quick look round reveals that for the past 18 months or so, there has been a constant drip of corporate activity (Epic & Huveaux, RedTray & BlueU, FutureMedia & EBC and AdVal & Maxim). The market is too fragmented for anyone to make a decent and sustainable profit.
The ILX approach is slightly different in that they are specialising in the PRINCE2 and ITIL subject areas, both of which are supposed to offer significant growth prospects. Revenue growth looks impressive, but there have been several acquisitions over the past year or so, however they are generating a profit and now paying a dividend – something which few others in the industry are capable of doing.
e-Learning itself has huge potential to revolutionise the training industry, but there are several hurdles to overcome, not least the vested interest from traditional education providers and the fact that a great deal of the content is, well, em, crap.
But what's the investment case. Well from personal experience, lead times are long (and getting longer) and income can be very lumpy. If you want to make money from the education or public sector, you had better have the right contacts (good sales team), and if you make money from the private sector, just remember that this comes from a training budget – which, when times get tough, is one of the easiest to cut.
The market will look completely different in five years time due to consolidation, with the likes of Futuremedia and Huveaux currently leading the way to develop companies which are more widely focused on digital content (not just learning content).
Short term, ILX are making money from their business model focusing on PRINCE2 and ITIL. They have also stated that they are on the look-out for “further choice acquisitions”. The question is whether they can successfully role this model out into subject areas beyond their current focus.