With a world economy floundering and travel costs mounting, one drug company knew it must cut training costs aggressively, and discovered that the best global classroom deal is on the Web.

Kendle International Inc., a pharmaceutical research company in Cincinnati, employs researchers throughout the globe who must be trained before every clinical trial. Scaling back on training without compromising quality, the 1,800-person firm knew, would require high-powered software--technology that couldn't be maintained in-house--to launch an effective online program. So the company embarked on a hunt for an emerging technology known as a learning management system, or LMS, a vehicle that is used to automate the administration of online training programs.

The system can register users and track courses, record data on a student's progress, and forward reports to management--work otherwise conducted by on-site trainers. Brandon Hall, LMS guru and head of a Sunnyvale, California, e-learning consulting firm, defines the system as "the foundation of most e-learning programs."

But it is also the most expensive tool involved in establishing an e-learning initiative. In a 2001 report, Hall estimated that the average LMS system costs $550,000 for 8,000 users over a five-year stretch, and the price tag is increasing. For human resources professionals, training executives, and others who are involved in making such an investment, picking the right system can result in saving an organization huge amounts of money while advancing workforce development.

Making the right pick, however, isn't easy. There are several factors to consider when making a choice, including the company's in-house IT capabilities, the expectation for return on investment, the nature of customization needs, and the dizzying array of models and vendors. Choosing a vendor is perhaps most important, because LMS investments are often multi-year deals. You'll want to know that your vendor will be around for the duration, although there are no guarantees in the swiftly changing marketplace.

Two years ago, there were at least 200 players in the LMS business; today only half as many still exist. Much of the dramatic reduction is related to the troubled economy. "It's complex and expensive software to deploy, and with IT budgets down lately, there's only so much business to go around," says Nate Swanson, a Minneapolis-based e-learning analyst with ThinkEquity.

But the shakeout also is related to the fact that the burgeoning industry is still weeding out its weakest links. Vendors that marketed viable products and generated customers quickly were able to establish themselves and grow revenue before venture capitalists closed the spigot on all things Web-related. Those that were less established were left behind.

The LMS market is growing, but it is doing so in the hands of fewer and fewer vendors. For those in HR, that means it's essential to do your homework before shopping for a vendor.

Sherry Gevedon, Kendle's director of global training and development, and a small team of assistants spent nine weeks in 2000 interviewing more than 50 vendors. They knew that they wanted to be able to customize the software and later add to it. They eventually whittled the list down to three companies, and price became a significant factor. They selected California-based Saba Software.

Before the selection process began, Gevedon and her crew had to make sure that top management really wanted the system and supported the move. They also had to determine if the IT department could ensure the necessary infrastructure to make the new system work, and that the LMS could get the kind of return on investment that would make the program self-supporting.

"Be prepared. Make sure the support is there," Gevedon says. "We made the case, and the support just flowed down from the top. That's why it has worked for us."

In May of 2001, the company went live with its eKendleCollege, an online corporate university that caters to hundreds of associates at 21 different domestic and international locations. In its first 15 months, associates accessed more than 5,000 online courses. Inperson training sessions once held at corporate headquarters in Ohio became history.

To illustrate how much the company has saved, Gevedon uses this example: About 300 Kendle associates had to get up to speed on the basics of a new trial, such as its size and information about the drug. Before the advent of the LMS, they needed four two-hour training sessions. Most participants had to travel to receive instruction, and would spend three days in the program. The online university made it possible for all 300 employees to complete the training in a matter of hours without leaving their offices.

The savings: $500,000 in travel and hotel costs alone. "This has gone very, very well," Gevedon says. "The training programs now are running more efficiently than they did before, and staff development has been bolstered." And the company's savings on e-learning programs has already offset the nearly $2 million that was invested in an LMS.

"Managers and human resource people have to think about this as more than a training thing," says Brook Manville, Saba's chief learning officer. "It's also about the management and alignment of human capital across the organization." That leaves HR leaders to answer the most fundamental question: Is there truly a compelling business need for an LMS? Do you have to invest in a comprehensive e-learning program to speed up training or make it more efficient and less costly by cuffing back on travel expenses?

If so, HR must work to make certain the whole organization is on board and thinking about the same goals. Gevedon and other decision-makers boil the process down to four areas of advice:

* Think bard about ROI. This is, after all, what any major business move is all about. How will you measure the success of the system? How quickly do you need it up and running? Do you want the system to pay for itself within a year, five years, eight years?

The largest companies are more likely to look for shorter contracts, expecting to make upgrades or other changes--perhaps with a different vendor--in the near future. Xcel Energy, the power behemoth created by the merger of Minneapolis-based Northern States Power Co. and New Century Energies in Denver, earlier this year needed a new LMS to consolidate and track a range of compliance training efforts involving 13,000 employees.

It had to quickly set up dozens of courses covering everything from regulatory compliance to on-the-job safety, and it had to be able to track who completed the courses and when. Most pressing, Xcel wanted its costs covered in the first year. The firm signed a deal with Plateau Systems in Arlington, Virginia, to get that specific training initiative handled fast to "get an accurate picture of where we stand as an enterprise," says Daniel Marshall, project director of Xcel's e-learning department.

By contrast, smaller companies with 5,000 employees or less are much more likely to view an LMS as a long-term investment, which would, by extension, stretch their ROI expectations out over several years.

* To get any meaningful return on an investment, you have to make sure it is necessary. What are your business needs and how will an LMS help? Are you looking to create an enterprise-wide e-learning program? Or do you simply want a program to automate the administration of a certain training program? Will the LMS be integrated with existing systems such as customer relationship management software? Or will it stand alone?

The answers to these questions will help determine whether you should make in-house IT investments before signing any deal with an LMS vendor. They also will help you determine which vendor will match up best with your IT resources.

"In the end, you need to find out what the problem is that you're trying to fix or the issue is that you're trying to address," says Massood Zarrabian, chief executive of OutStart, an e-learning services company in Boston.

Then, you have to decide what kind of help you need outside your own company. He stresses that all parts of the company that may be involved in the training initiative must have a say in LMS decisions.

When Cisco Systems needed an LMS that could manage a multi-language support system and a variety of content-delivery types for 40,000 employees in 75 countries, the Silicon Valley Internet networking company sought input from all of its business units. That meant dealing with dozens of offices in many places. But the result is an LMS that sets and tracks learning requirements, certification levels, and development plans. And it elicits feedback on progress against those plans--all things that the entire enterprise agreed were necessary. The company says the result has been a successful training program that employees buy into.