Does anyone know how to price eLearning?


I came across a piece of research on Brandon Hall the other day (care of Twitter), looking at the price ranges for Learning Management Systems in 2009.

The report is based on 92 commercial systems (so no Moodle) and the results are startling.  They are a complete mess.  Prices for a 1 year license, locally installed LMS for 500 learners start at $499 and end at $111,630.  If you look at a 3 year license the disparity is even worse – a 3 year license for 100,000 users starts at $12,980 and ends at $14,940,000.

That’s $15 million dollars we’re talking here.

What else can $15m get you these days?  Well, you could shell out on an A-10 Thunderbolt II Ground Attack aircraft but they only cost $11.7m so you’d have some change.  Or you could buy 35,000 Dell laptops for your workforce.  Perhaps the best option would be to send your entire 200 person executive team to Harvard to do an MBA for a year.

These figures seem to reaffirm a belief that I’ve held for a long time.  No one knows how to price eLearning, much less Learning Management Systems.

The first point to touch on here is the nature of the phrase “Learning Management System”.  It would seem to be rendered completely useless by these figures.  The disparity here isn’t the same disparity we see when we buy a car; going from the cheap end of the 2nd hand market, to the top tier of supercars.  No, it’s vastly more than that.  We’re talking the difference between buying a nice bicycle and buying a nice yacht.  It’s not even the same ballpark.

So we need to be much more precise with the phrase Learning Management System.  As it stands, it means nothing.  And this is hugely confusing for the average person in the street.  I don’t know about you, but when I tell a room full of strangers what I do for a living I often start out at eLearning professional and end at website designer.  So we know that Joe Bloggs has absolutely no chance when it comes to the defining the intricate differences between two LMS.

There seems to be an underlying difficulty in articulating exactly what differentiates these systems.  Some will no doubt integrate with other Enterprise systems, others will manage much more than learning, but whilst they all have the same tag as “Learning Management Systems” differentiation is tough.  LMS have one key role, to serve content.  So if they all tick this basic box, the rest is just optional extras.

Imagine how stupid it must sound to a procurement officer when a range of companies offer the fundamentally same product (at least it is in their perception) with such price differences.  How can one cost £5k and another £5million?  This isn’t going to reflect well on vendors.  And so we come up with other acronyms, VLE, LCMS etc…  But these still have the same problems; no one knows what you’re talking about or why it costs a million pounds more than your rivals offering.

I’ll be very transparent here.  My company has an LMS, we built it about 8 years ago when we decided to ditch Blackboard.  It’s built on the .net framework, it can be hosted or installed locally and it serves content.  We do have a few on-site, large scale installations (max 17,000 users), where it cost the client less than £1 per user for a permanent license.  I sell it as a loss-leader mostly to get content development work, because on its own it’s worthless. It is purely a cost centre.

A nice UX design might make it easier to get at the eLearning held on a system and begin training, but the LMS on its own does nothing.  It provides Management Information on learning, yes, but no one seems to be able to articulate what a good ROI for eLearning is anyway, and evaluating exactly what difference training makes in organisations is notoriously tough.  So that’s just peace of mind, a few MI facts which may or may not be significant.

A friend of mine who works in software licensing once told me that the basics of his job involve evaluating exactly how much revenue a system will derive or how much it will save over its life.  Does an LMS do either?

This brings me to my second point.  According to CIPD training spend figures, as highlighted by Clive Sheperd, the median training spend per employee, per year  is £220 for 2009.  Brandon Hall’s figures show that the average cost of a 500 learner LMS (installed locally for 1 year) is about £37.61 (at today’s exchange rates).  So we’re talking 17% of annual training spend is currently going on the LMS.

This is a really significant barrier to developing eLearning as a viable alternative.  Its not cheap.  I have to spend one fifth of my training budget just to enable access to content.  And we cannot forget that in most organisations, eLearning accounts for the minority of training spend versus more traditional means.  So in reality, let’s say my company is quite forward focused and a third of my total spend goes on eLearning.  That means that half of my total eLearning spend each year is going on my LMS.

I believe the future of Learning Management Systems should not lie in far reaching enterprise software solutions that cost us $15m a year, but in light-weight nimble systems which do the basics well.  And these two variations need to be suitably branded by the vendor community to allow for quick and easy differentiation of the offering.  Then perhaps we could stop looking like idiots when we fish a number out of the sky and put it on a quote.

Something needs to give here and with products like Google Wave looking like they might harness a method to develop informal learning solutions within the firewall, the traditional LMS might not be long for this world.  I hope.

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  1. #1 by Yael K. Miller at August 2nd, 2009

    I found this post and by extension you because @AngelaMaiers tweeted about it. What is/are “Learning Management Systems?”

  2. #2 by Ben at August 3rd, 2009

    Learning Management Systems are pieces of software which organisations use to administrate online learning and to allow students appropriate levels of access to content.

    Wikipedia explains it better than I do..!

    See: http://en.wikipedia.org/wiki/Learning_management_system

  3. #3 by Paul Service at August 28th, 2009

    Great post – Thanks for sharing.

    Reading was this was timed perfectly as we have just come back from a pitch meeting with a large prospect. LMS came up and other than saying ‘Yes we can help you with that’ it was tricky to know how to proceed as you highlight the options are so extreme.

    Good Luck!

  4. #4 by Scott Hewitt at September 1st, 2009

    Great post. There is a real issue about how to price creative work like e-learning as well as how much should an LMS cost?

    .net have a ran a number of articles on pricing work including one in the current issue. Do you pay just for the hours or the expertise gained by the designer?

    The LMS examples that you provide are amazing. I presume that they are related to license costs? A comparision of features would be very interesting – for example Moodle versus the 15 million LMS!

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