Finding the True Cost of a Learning Management System

Calendar Icon June 14, 2022
Reading Time Icon Read Time: 4 min
By Firmwater

The cost of a learning management system (LMS) can be hard to determine because there are two kinds of associated costs: upfront and hidden costs. We want to help you understand the true cost of an LMS. Whether your company is looking to change vendors or purchasing an LMS for the first time, this guide is for you.

Let’s get started!

Understanding the types of costs

Upfront costs

Most people are familiar with these types of costs. They are also referred to as hard costs and include things like licensing fees, one-off setup fees, and staffing costs for the LMS.

Hidden costs

These costs come up after you have either selected and/or implemented the LMS. To be clear, it doesn’t mean you have made an incorrect decision; it simply means there are costs that often surface later.

An example of a hidden cost can be the total overall cost of LMS implementation, which can go beyond the overall installation. It includes things like:

  • The conversion of users from one system to the other
  • Uploading content into the new LMS and the time that it takes to do that
  • Training time and cost for training new admins or users

Other hidden costs can be the decision to start using e-learning authoring software and purchasing that software, as well as the cost of training employees to use it. These costs can also include things that range from staffing hours to additional software purchases.

There’s also the cost of low user engagement with the LMS. Basically, you might have a team of staff creating content that goes largely unused. This can be due to:

  • A lack of new sales
  • Poor or limited marketing of course content

These are other things that could be costly depending on what pricing model your LMS vendor uses. For example, with pay per learner or pay per active user, you could end up in a situation where you are paying for users who are technically considered active because they have logged in or launched a course but are not actively completing your training program. Therefore, these users take up a paid spot, and you may end up having to pay more to add additional users.

These costs can add up quickly, which is why we recommend doing a cost-benefit analysis. This type of analysis should be done over the life of the contract, to make sure everything is in proper alignment.

Review of popular LMS pricing models

We hope that you are beginning to see that the true cost of an LMS goes beyond just the hard cash needed to sign the deal.

Now let’s review popular pricing models for an LMS. These might be familiar to you from other types of services in either your business or personal life.

Pay per learner

Pay per learner is also referred to as pay per seat. This model is based on paying a fixed price for a certain number of learners within the LMS.

The upfront cost that you might experience in this model is similar to the cost to add more users later.

Pay per active users

Like pay per learner, pay per active users enables you to only pay based on the number of accounts in the LMS. The real difference is that this model only looks at users who are active.

An active user is one who regularly logs into the LMS. If your LMS vendor uses this model, make a point to get an understanding of not only the upfront login cost but also what it will cost to add more active users if needed.

License fee/subscription

This model is most likely the one that you are most familiar with. You buy a license or subscription and pay based on what that license or subscription covers.

For example, your vendor may offer subscription tiers that are based on either users, uploaded content, or years of service. However, this model can have hidden costs that need to be discussed, including upgrading your LMS, training new administrators, or even having additional features outside of your license.

Pay per course-start

In this model, you are charged when a user starts a single course. The user has access to the course for as long as the admin decides, and they can relaunch it as many times as the admin chooses. It is still considered a single-course start. 

This model is best suited for long courses, like compliance training, where users need to spend several hours in a course. However, it can be applied to any course length.

Another benefit of this model is that it’s easy for training providers to price their individual courses because they know exactly what the LMS cost is going to be. This is ideal when selling courses via e-commerce because you can easily build the LMS cost of a single course into your overall pricing strategy.

Free/Open-source LMS

For a quick definition, open-source means the original source code of the LMS is open and can be freely distributed and modified.

An open-source LMS might lack hard costs, but there can be plenty of hidden costs, such as hosting, user access, and customization.

These costs can add up and shouldn’t be ignored when considering the true cost of an LMS.

Conclusion

The true cost of an LMS can be boiled down to two things: an upfront cost and a hidden cost. To deal with these costs, it’s best to understand them as best you can and be honest about the affordability of having an LMS. One way to handle this is to conduct regular cost-benefit analyses to ensure that you are getting a return on your investment.

Ultimately, the true cost of an LMS is determined by what your learners need and how they will interact with your content.

If you found this information helpful, check out these resources to continue learning about the different types of LMS and how they can grow your business:

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