5 JANUARY 2005

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Helpful information for benchmarking an LMS purchase


"The different in pricing between different learning management systems is staggering. In our most current LMS research, we asked 50 LMS vendors to provide the cumulative cost of a 3-year license, including maintenance and hosting fees (if applicable) for 500; 10,000; 25,000; and 100,000 learners. For a LOCALLY INSTALLED, behind-the-firewall implementation, the vendors reported the following price ranges:

INSTALLED Pricing Ranges

Number of Learners Low High
500 learners $8,980 $234,150
10,000 learners $11,980 $1,000,000
25,000 learners $11,980 $2,032,500
100,000 learners $11,980 $5,340,000

"To put this in perspective, the cost of the most expensive 100,000 user implementation is almost 450 times more expensive than the lowest-cost implementation. For a three-year HOSTED implementation, the price difference is only slightly smaller, with the highest-priced implementation about 410 times higher than the lowest-priced implementation.

HOSTED Pricing Ranges

Number of Learners Low High
500 learners $11,800 $320,000
10,000 learners $15,580 $1,065,000
25,000 learners $15,580 $2,115,000
100,000 learners $15,580 $6,390,000

"For many years, we were often approached at conferences by representatives of smaller companies and nonprofit organizations saying they could not afford a learning management system. They would often ask us about alternate ways to track the training of their workforce -- such as manually entering data into a spreadsheet. The good news is that learning management systems can certainly no longer be thought of as luxuries that only the wealthiest organizations can afford. Systems now exist that are within reach of any budget."

– Richard Nantel, analyst, brandon-hall.com


How to keep the organization's budget in check


It was a dark and stormy night.

A large financial institution wanted to license a learning management system. This organization required a simple e-learning portal that would provide online courses to its 10,000 learners. In addition, the company needed a system that could manage classroom-based training. Members of the selection committee had read that the average three-year cumulative price for a locally installed LMS managing 10,000 users is approximately $357,000, and they were hoping they could find a solution for less.

The organization assembled an LMS selection committee to identify a list of functionalities needed in the system. As is often the case, the committee ran amok, adding all kinds of business and technical requirements. By the end of the process, they had specified that all content must run on a Palm Pilot. They also required 360-degree evaluation, even though they already used a 360-degree evaluation program with their HR system. The committee decided they also required advanced learning object technology, although their primary plan was to create a small number of courses. Finally, they wanted telephone registration for courses automatically linked to the database, although no one was quite sure how they would ever use this.

Once the committee had identified the institution’s requirements, they drafted a request for proposal and sent it to the most popular names in the LMS industry, without first checking to see if the vendors could match their needs. A few weeks later, the vendors’ proposals arrived. The cost of the proposed systems ranged from $1.2 million to $2.3 million. The LMS selection committee couldn’t understand why the prices seemed so high.

What went wrong? Feature scope creep nearly ate them alive. This happens in far too many projects.

Unfortunately, many organizations become convinced during their LMS selection process that they require as many features as possible. Although their learners could register for a course using a browser, doing so using a telephone is just too appealing to ignore. Although the organization doesn’t have a mobile workforce, using personal digital assistants (PDAs) such as Palm Pilots and Pocket PCs becomes a must-have requirement.

LMS features such as the ability to view e-learning content on a Palm Pilot are valid requirements for some organizations. In the medical field, for instance, a growing number of medical practitioners have begun using PDAs to access training and performance support information while visiting patients. These organizations are willing to pay a premium for such a feature because it is a key business requirement. For most organizations, though, good basic LMS features are all that are required.

If your organization has limited funds for purchasing an LMS, don't despair. There are surprisingly good products out there for companies on a limited budget. Find out more about low-cost options by downloading a complimentary executive summary of our new report, Low-Cost Learning Management Systems: 17 Products for Limited Budgets.


Watch an informative pre-recorded Webinar on LMS trends


Over the past year, LMS products began adding exciting new features like analytics and more integrated virtual classroom capabilities. In this free Webinar session that took place on September 30th, 2004, Brandon Hall and Bryan Chapman share highlights from new LMS research. Full of tips, tricks, and advice, this Webinar can help you tackle the selection of an LMS for your organization or just keep abreast of the new offerings in the LMS marketplace.


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