Pricing is the deciding factor for many organisations when selecting a learning management system (LMS).
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.
Our downloadable LMS Pricing Comparison Guide will help you weigh up proposals, and in this article we’ll explain the difference in popular LMS pricing models, any extra costs hidden in the fine print, and the step-by-step to choosing the right pricing model for your needs.
Are you buying or investing in LMS software?
When it comes to buying a learning management system, we prefer to think of the purchase as an investment. There are a couple of reasons behind this thinking.
Firstly, it’s important to remember an LMS is a long-term commitment. Most suppliers will offer year or multi-year contracts as a way to build a relationship with you and learn about your organisation’s needs.
Secondly, 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, but there is a solution that’s right for your industry, training and outcomes.
Thirdly, there’ll be a return on investment for managing your training programs on an LMS. If there isn’t, you should be looking to calculate one. And considering that L&D professionals have more spending power than ever, it pays to understand how you can optimise your budget.
Why it’s important to switch your mindset
Effectively matching an LMS to your organisation’s needs is crucial yet 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 technical debt associated with free products.
If you find yourself locked in a contract with hidden fees that slowly 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 LMS pricing model that doesn’t include the features you need or can’t scale as your user base grows.
But 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.
Understanding 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.
Here’s the thing about LMS pricing. You don’t just get to say, we want to pay per month because that’s the billing frequency that suits you. The LMS cost is usually dependant on two things:
- How the LMS is hosted or deployed
- Additional capabilities you need in the system.
The first factor comes down to who’s maintaining the system: You or an LMS vendor. The former scenario usually has a smaller upfront cost with larger ongoing expenses on an inconsistent basis. The latter may require setup fees, but it’ll usually see you pay a subscription for someone else to do the heavy lifting.
The second covers third party content, integrations, plugins and non-standard features. These will be costs on top of an LMS pricing model, but will contribute to the total price you pay for the LMS.
Cloud-based pricing models
Otherwise known as metered models, these pricing models are generally subscriptions based on the scope of your organisation.
There are various LMS pricing models you may see cloud-based vendors offering:
- Pay-per-active 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 a learning management system is a highly-used tool in your organisation.
But be wary of…
Potentially being overcharged. Remember what we said about ROI? If users aren’t accessing the LMS, then you’re essentially paying for people not to use it. You can’t see return on an investment that’s throwing money at the wind.
While the last model charges irrespective of usage, paying by active users allows you to add an unlimited number of users to the LMS. You’re only charged for the ones who log into the system during the billing period—i.e., the active users.
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.
But be wary of..
One specific 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.
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.
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.
But be wary of…
The lack of predictability. Though it gives you room to breathe during times of lowered usage or revenue, the pay-as-you-go model isn’t 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.
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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, it also means that past that initial cost, you’ll bear the burden of maintenance yourself.
There are three learning management system pricing models in this category:
- Subscription fee
- Single payment
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’d say to avoid 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.
Also called perpetual licensing, with this model you pay a one-time fee to download the LMS software.
Self-hosted LMSs 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.
Warning: Anything free still comes with a cost down the line—and this is more true than ever with learning management systems.
The term ‘freemium’ means that the LMS code is open source and can be freely modified. Freemium models are enticing as they can be freely distributed and modified at your will—but we’ve found many organisations don’t realise they’re paying for code, not an out of the box LMS.
The real cost, then, is the time you’ll spend on integrations, customisation and maintenance, given open source learning management systems 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
It’s not just the freemium model that has additional or hidden costs. There are many factors that can impact the total of an LMS pricing plan.
- We know a change in active users or registered users will likely bump up recurring costs, but it can also impact third party licenses, too.
- Enabling new proprietary features from a cloud-based LMS provider can cost you.
- Switching LMS vendors or systems and migrating data will cost you.
- Depending on the provider, certain standard features (like user management) may require you to go up a tier in pricing plan, too.
And that’s not all.
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 and drags out your procurement process.
And if you can view a pricing model, sometimes it’ll only get you so far. Migration, implementation and training may be added onto a proposal after you’ve received a quote. A LMS Pricing Comparison Guide can help you better vet an LMS vendor and their true offering.
Yes, we’ve talked about it already, but we’ll say it again for those in the back.
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.
Keep in mind that customisation for your own product will usually be a case of configuration. That means instead of just changing the colour scheme or dragging and dropping widgets in a dashboard, you’ll likely need a developer to make changes within the code.
Training & support
Some of the things you may find are missing from LMS pricing plans include:
- Any combination of email, phone, live chat or ticket support
- A knowledge base for DIY fixes (think videos, tipsheets and how-to guides)
- In-person system training, both as part of implementation and ongoing
- A dedicated Account or Customer Service Manager (who would champion your requests)
- Community forum, particularly for self-hosted learning management systems
- Technical support for bugs.
These might be considered perks, without which you’re left to trawl through pages of developer talk to self-diagnose and resolve issues.
We understand that for many organisations, content authoring is important. But this isn’t a standard LMS offering and some LMS providers may get tricky with their words.
There’s a difference between content authoring and course authoring. Many systems will offer the latter as a feature, wherein you can import training materials or pull them from the LMS catalogue to create training courses or programs that are hosted in the learning management system. You may be able to download this course, but it will only be compatible with your LMS unless you break it down by individual resources.
Content authoring usually requires its own software—a content authoring tool to be exact. This allows you to create courses inline with eLearning standards. That’s SCORM, TinCan and xAPI—all of which have varying versions. eLearning compliant resources can be multimedia and repurposed in other software systems outside of the LMS as a zipped file. Most importantly, these standards also allow you collect data from online and offline learning touch points.
Some learning management systems will have their own content authoring tool or will integrate with one. The takeaway here is to do your due diligence and check they’ve got content creation capabilities, not just course management features.
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
- Integrations with other software like HRIS.
The cost of not doing LMS pricing due diligence
Much like getting to the checkout at a store in the United States 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—and KPIs for the L&D function to boot—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.
Not only are succession planning and capability development stalled in this scenario, but funds may have to be pulled from other worthwhile projects or departments to change LMS solutions. And if assurances were made that a particular LMS would solve for skills and capability gaps, faith is lowered in the L&D team’s ability to act on business outcomes. Conducting an LMS pricing comparison at the start of a procurement process is a little investment to save a lot of pain down the line.
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 can help you work out the finer details. In the meantime, here are four factors you’ll want to consider when reaching out to vendors.
- Total users
- Engagement expectations
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—a cloud-based learning management system may seem expensive upfront but the vendor’s development roadmap might support things like capability development and talent management in the long run.
Determine your intended number of users
Most of the LMS 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.
If an LMS can’t scale for your projected number of active users, then it’s likely not going to be a good investment.
Calculate the time users will spend in the system
Ask yourself (and your stakeholders):
- Will user access be seasonal, like for compliance training or product training?
- How will ongoing employee training and professional development impact engagement?
- Will users only access certain parts of the system, 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. If you don’t understand what end users will be using the LMS for, you may choose a solution that’s ill-fit for your needs. And a solution that’s ill-fit for your needs is just a waste of money, period.
Know what integrations you need
LMS integrations connect the eLearning world. They are what enable security (through Single Sign On), data transfers between your LMS and HRIS software (that’s API), video conferencing (via Zoom or Microsoft Teams) and third party content (Go1, Skillsoft and LinkedIn Learning).
In short: Integrations will make the learning experience better and enable your LMS to talk to other software you already use, but they are considered optional and come with a cost since many are Software-as-a-Service businesses.
Another factor to consider is demand for them. Integrations in a cloud-based LMSs depend on the vendor’s desire (and by extension, their other clients’ desire). It’s not just about your needs—it has to be a viable investment for the LMS company, too.
Learning management systems are incredibly useful but complex products. You’re rarely paying for what you see on a vendor’s website.
Everything from your future needs to the needs of other organisations using the same system impact LMS pricing. That’s on top of the myriad of LMS pricing models out there, which depend on the type of LMS you’re buying. In short: The same pricing model can look very different between systems.
Vendor-developed cloud LMSs will usually appear more expensive as they charge recurring fees per user or based on usage. However, technical support is often included or can be added onto your pricing plan—so you need only worry about the learning management part of the LMS.
Self-hosted systems require more elbow grease but have the illusion of more control. Most are licensed or sold as an off the shelf solution, so it’s yours to modify at will. If you don’t have technical and development capabilities in your workforce, however, you’re not going to be able to customise, configure or optimally use these LMSs.
Navigating the confusing world of LMS pricing comes down to due diligence. Do your research, use some tools (a request for proposal and pricing comparison guide can help build internal consensus, by the way) and remember you’re making an investment in your organisation’s success.
Take control of your eLearning priorities
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