This article first appeared on Acorn Resources early 2021.
Pricing is the deciding factor for many organisations when selecting a learning management system.
Organisations of every size have a price in mind when browsing for an eLearning solution. But just as budgets vary, so too do LMS pricing models — and any sneaky additional costs suppliers may surprise you with.
Investing in LMS software
Business sizes and needs vary across industries, and so do the corresponding eLearning platforms and how they are managed and regulated. There is no one-size-fits-all solution, and those who think as such end up wildly disappointed.
It’s also important to remember an LMS is a long-term commitment. Most suppliers will offer year or multi-year contracts as a way to build your relationship and learn about your organisation’s needs. For this reason, we recommend you switch your mindset from viewing the selection process as a purchase, to an investment.
Why it’s important to switch your mindset
Matching the right LMS to your organisation’s needs is crucial and often difficult because the features and functionalities you’re after come with a price tag. Even something marked as free will inevitably cost you something (time, resources, or lost opportunities/potential revenue) because of the inherently limiting nature of free products.
If you find yourself locked in a contract with hidden fees that reveal themselves over time, you might end up in a position where money is pulled from other areas of your organisation to pay for it. You run the risk of choosing a particular pricing model that doesn’t include the features you need or can’t scale as your user base grows. When you view the purchase as an investment, you see the long-term benefits and ramifications of your choice instead of just the immediate gratification.
Popular LMS pricing models
To avoid paying up to 59% more than you expect, you need to conduct due diligence before committing to a price point for an LMS. A comprehensive LMS Pricing Comparison Guide will be your best friend in this process.
There are a few things you’ll need to consider, such as how long users will be online for, how many you plan to onboard now and projections for how that figure will grow, and if you plan to host all your organisational training and knowledge in the system. There’s also the price tag for data storage to factor in, those non-standard features that are tacked on to the bill when you start to upgrade your system, and the type of LMS itself.
Cloud-based pricing models
Otherwise known as metered models, these pricing models are generally based on the scope of your organisation to match the capacity cloud-based LMS have to scale.
Pay-per-learner
The most popular pricing model thanks in part to its simplicity, paying per learner means you pay a fixed figure for a certain number of users. As you increase the number of users in the system, the cost is lowered for each individual. It’s a good option if you need to budget for monthly or yearly expenses, since it allows you to onboard hundreds of users upfront.
The pay-per-learner model is right for you if…
Your number of users stays relatively constant over a long period of time and eLearning is a highly-used tool in your organisation.
Pay-per-active-user
While the last model charges irrespective of usage, pay-per-active-user allows you to add an unlimited number of users to the LMS but only charges you for the ones who log into the system during the billing period. One catch: the price is still prepaid and bundled, so even if you purchase a plan for a forecasted 300 users and just 200 log into the system, you still have to pay for the 300.
The pay-per-active-user model is right for you if…
Your user base fluctuates seasonally, such as in large enterprises with graduate programs or businesses with sales teams who need routine access to new product information.
Pay-as-you-go
Pay-as-you-go is best exemplified by the ski season: the cost is minimal during off-peak times but substantial when a rush of users access the system. Though it gives you room to breathe during times of lowered usage or revenue, it’s not all that complementary to the nature of eLearning, which moves fast and demands a long-term investment. This means the resources required to launch and maintain it often aren’t balanced by the usage, and ad hoc billing makes it tricky to budget for.
The pay-as-you-go model is right for you if…
You create and sell your own content, as it guarantees costs only go up when your revenue does.
Self-hosted pricing models
These models are usually all-inclusive, at least in the sense you purchase the software outright and own all the data. But they also mean you burden the cost of maintenance and hosting past that upfront cost yourself.
Subscription/licensing fee
Purchasing a periodic license for an LMS, paying for a monthly or annual fee, and adding the number of users and courses you desire is known as a subscription model. Most suppliers will offer two or three flat-fee plans to choose from. Like a phone plan, with each increase in price you unlock new functionalities. This model is often available for cloud-based systems as well.
The subscription model is right for you if…
You’re budgeting for an upfront payment but don’t know the exact number of users. We recommend avoiding this model if you’re new to eLearning, as you may end up paying for features you don’t need or blowing your budget if you find you need to upgrade.
Single payment
Also called perpetual licensing, with this model you pay a one-time fee to download the LMS software. Self-hosted LMS’ under this category save time on implementation and training, but as with the following ‘freemium’ option, you are then burdened with the responsibility and costs of ongoing maintenance, software updates and managing features.
The single payment model is right for you if…
You have a large user base and plan on using the same LMS, features and all, for a long period of time.
Freemium
Anything free still comes at a cost. In this case, the ‘freemium’ model is enticing as it can be freely distributed and modified at your will — but we’ve found many organisations don’t realise they’re paying for code without support. The real cost, then, is the time you’ll spend on integrations, customisation and maintenance, given open source LMS’ require extensive configuration, even if you have sound programming knowledge.
The freemium model is right for you if…
Full system control and customisation is important to your organisation, particularly for startups or small organisations with limited budgets.
Additional costs to consider
Some suppliers will hide pricing on their website behind a form that requires you to fill out your information, forcing you to wait for them to contact you. They’ll market it as the supplier providing value to you (such as sending you informational emails in future), but really, your data just gets pulled into their marketing metrics. This benefits suppliers, who see your contact details as a lead, but doesn’t provide you with any real information or value.
If you can view a pricing model, sadly, it’ll only get you so far. There are a few extra (read: hidden) costs you’ll likely find added onto a proposal, which can be easily overlooked if you’re unaware of the fine print.
Maintenance
One of those costs that fly under the radar — and which you should be all the more aware of — is system maintenance. An LMS is a software product, which means it requires ongoing maintenance for bug fixes, updates and upgrades. It’s usually included with cloud-based LMS’, but not for licensed or self-hosted platforms.
Training & support
Basic support (via email, phone or ticket system, or tipsheets and forums) is not always included in your price packet, and neither is in-person and on-premise training, advanced and priority support, or access to a dedicated Customer Success Manager. Those might be considered perks, without which you’re left to trawl through pages of developer talk to self-diagnose and resolve issues.
Content creation
We understand for many organisations it’s important that they can create custom content, but while this is a standard part of the system functionality of some platforms, others may charge you for the service. Some suppliers might even create content for you, but this could be charged anywhere from a one-time fee to per hour.
Implementation
The cost of implementation varies wildly by supplier and whether your choice of LMS is cloud-based or self-hosted. Implementation costs may include (but notably aren’t limited to): external consultants or specialists, hardware installation, customisation of software, data migration, data storage, and integration with other internal or third party software.
Why this is important to consider
Much like getting to the checkout at a store in the US and finding your reasonably priced item now has GST tacked on, additional costs can come as an unwelcome surprise when purchasing an LMS. If you have a budget set and approved by C-Suite, it’ll be hard to go back to them with your tail between your legs and ask for money or explain you didn’t do your research properly. This may also result in funds being pulled from other worthwhile projects or departments, and could lower faith in decision makers’ competence.
Open source & freemium LMS software
Some organisations find an open source, or freemium, LMS model to be the best option for their needs. Open source simply means the source code is publicly available and freely customisable once installed. ‘Freemium’ usually means there are a limited number of features, courses and users you can access, upload and onboard, but you’ll still gain a basic understanding of the software as a standalone solution.
We’ve found open source software is best for those with the advantage of an in-house IT team, as the source code can then be masterfully modified and enhanced to suit a certain organisation’s needs.
Why it’s important to know this
Small businesses that use free LMS’ may find they have lower software costs while still accessing some benefits of the core software. For those who sell content through an LMS, the high level of customisation afforded to them will be important to maintaining consistent branding. However, you will still have to pay for implementation, customisation, integrations and maintenance — complicated processes for people and organisations with no technical expertise. There’s no support if something goes wrong, which means a ‘free’ LMS could end up costing you more in resources and time than you first imagined.
How to choose the best LMS pricing model
Nobody wants to be caught out paying more than they have to, least of all for an expensive, long-term investment like an LMS. Our LMS Pricing Comparison Guide will help you work out the finer details. In the meantime, determining what is value for your money comes down to the following four steps.
Define non-negotiable features and integrations
Research what features you need, what’s nice-to-have, and what’s probably unnecessary. This will save you time on negotiations, demos and sales pitches from suppliers who don’t have what you need. It’ll also help you better understand the real value of each pricing model.
Determine your intended number of users
Most of the pricing models we mentioned above are based on the number of users in the system. As such, it’s crucial to tally the total number of users during your ideal billing cycle (e.g. a year) and determine if this number will be stable, fluctuate or likely to grow.
Calculate the time users will spend in the system
Ask yourself (and your stakeholders): will all users be the same people for the same length of time, will they come and go, or might they even use different parts of the system at different times, say for onboarding? If it’s the latter scenario, it means the core number of users will be relatively constant, but the users themselves will be different.
Know how many courses you’re uploading
Some LMS pricing models will centre more on the space needed for storage, which affects the number of courses you can upload. If you expect training to be held all day, everyday, you’ll want to look for a supplier and pricing plan with high or even unlimited data storage.
Why this is important
It’s too easy to trust a generic plan at face value, but that’s a sure-fire way to miss hidden or added costs or find yourself with a pricing model that locks you into a certain number of users, an upper limit for data storage, or even locks you out of certain features you may need in time. If a pricing model isn’t flexible enough to grow with you in future, or even offering all you need now, there’s no real value to what you’re paying for. A comprehensive request for proposal will help you wade through the tech talk and align your needs with the right system and pricing.
