Buying vs Building a Learning Management System

The research firm MarketsandMarkets has estimated that by 2025, the global market size of learning management systems (LMS) will reach 25.7 billion US dollars. A recent survey by the Clear Company stated that 68% of employees say the biggest benefit a company can provide is training and self-development opportunities. Other research also shows that companies that start providing professional training and development opportunities have a 38% increase in employee retention rate.

A learning management system is a software application for the administration, documentation, tracking, reporting, automation and delivery of educational courses, training programs, or learning and development programs¹. For educational institutions and businesses in various industries that need to choose a LMS, price may be one of the biggest deciding factors.

The comparison of LMS prices is a very time-consuming task, because each supplier has different billing models and methods, and not all suppliers will list their price on the websites, e.g. need to contact them for a quote.

G2 Grid® for Learning Management System (LMS)

This article aims to summarize the popular LMS price models in the LMS market in a comprehensive manner, so as to provide references for LMS buyers and suppliers.

LMS Price Models

With the vast market of LMS, customers need to have a good grasp of the charging methods to make a realistic budget plan. LMS solutions usually use software as a service (SaaS) pricing model, and customers subscribe to licenses for the functional modules they need to use on a monthly or annual basis. Some LMS vendors provide annual or one-time full software licenses, and some vendors provide freemiums of the system.

The following are the 5 most common LMS price models.

Per learner per month

The system subscription fee is paid on a monthly basis per learner account. The total number of student accounts is either calculated based on the number of registered users or the number of active users who have scheduled courses in the current month. This billing method is suitable for small and medium enterprises (SMB) with general training management needs.

The monthly cost of each learner usually does not exceed $5. However, an initial system configuration or installation fee may be required. Some suppliers display monthly prices on the websites, but only accept annual payments. And providers typically set up price tier packages according to the number of learners. Here’s an example:

iSpring Learn | Pricing

Per use

Not every institution will use all the functionalities, courses, modules and tools provided by the LMS system. If there is a pay-per-use method, customers can only pay for the functionalities and content they use. This charging model is more suitable for organizations that do not have training needs on a regular basis.

The definitions of “use” vary from different providers. It can be specific to which functional modules, the number of active users, the courses, and user-based value-added services. Suppliers and institutions can negotiate and sign customized contracts. The price for each learner to use a set of functional modules is between $5 and $15. An example of this kind of pricing model:

PiiQ by Cornerstone | Pricing

Per course

Some LMS vendors provide solutions that charge by course for certain industries that require certification of qualification. These suppliers may provide course content or cooperate with third parties to provide courses through their LMS platforms.

This pricing model has the characteristics of a charge-by-use model, but its core lies in per-content payment. Applicable to industries with strict qualification requirements, students must obtain certification, such as human resources, medical care, security, etc. The price per course varies depending on the course provider. Each user pays for the content he can see.

UpSkill Learning Management System | Pricing

Software license

Institutions purchase licenses to deploy LMS software locally, and pay the license fees annually or one-time. Generally, additional costs such as deployment, data migration, and training will also be incurred. Suitable for medium and large enterprises with their own data centers and internal IT staff. The perpetual license fees are usually between $500 and $20,000, and installation and deployment costs may exceed $25,000. Top LMS vendors that provide one-time licenses are Adobe Captivate, Kallidus Learn, etc.

Open source or free

Open source LMS software is free for download, installation, and custom development. Some non-open source LMS systems also provide free versions.

The open source version and the free version of the LMS system generally only contain basic functions or are limited in terms of use time and number of users. Choosing this kind of free system will actually still incur deployment, customization, integration, and maintenance costs.

Especially for companies without LMS experience, the deployment and custom development of open source software is a very complex project, and there is no support service if there is a problem. Companies that choose this type of system need to have a professional internal IT team or hire technical support.

If you think an open source is what your organization or institution needs, you can search for the right platform in this listings and ratings of the top open source LMSs provided by the eLearning Industry.

The customers of the learning management system include companies, schools, hospitals and other organizations, and the customer industries vary greatly. LMS solutions usually combine the above-mentioned price models to provide various flexible fee packages.

Most Valuable LMS Features

The learning management system (LMS) provides a central repository for digital teaching and learning content, and keeps track of learner’s learning progress. Companies use LMS to train employees, and educational institutions use LMS to teach students. Before deciding to buy or build an LMS, ask yourself — What features and services do I need?

LMS usually contains various e-learning tools, i.e. customized course content, mobile courses and gamified learning.

The following are common modules found in learning management systems. Check which ones you need and whether your solution has them covered.

• Learning management — Automatic management of teaching and learning, such as user management, scheduling, reminders, messages, and publishing content.
• Built-in authoring tools — Institutions can design and apply templates to create and publish personalized course content. Administrators can use course editing tools to create multimedia courses and add course content such as videos, PDFs, icons, animations, and PPTs.
• Course library — Many LMSs provide preset materials and courses. The course library may cover various topics such as safety regulations, customer service, management skills, etc.
• Instructor & location management— Arranging virtual or physical classrooms and instructor assignment for managing group learning events for organizations that deliver instructor-led training.
• SCORM standard — The Shareable Content Object Reference Model (SCORM) is a standard that allows learning management systems to integrate third-party content through non-copying and recording methods.
• Asynchronous learning — Allows students to access course materials at any time and place, so that users can arrange their own learning schedule.
• Synchronous learning — Learners are required to take classes in online classrooms or offline locations at a specific time.
• Mobile -ready/responsive— Learners access learning materials through mobile/tablet apps or phone web browsers.
• Gamification — Also known as the game-based learning method. It motivates learning through earning points, badges and other achievements.
• Exams & assessments — Exams, assessments and quizzes can check whether the learners have mastered the knowledge.
• Compliance & certification management — Many organizations are concerned with regulatory compliance. Many LMS products offers features for assigning, prompting, and reporting regulatory compliance training.
• Performance management — Performance tracking and reporting functions are perfect to verify the effectiveness of the learning program.
• Social learning — Gives learners the opportunity to interact with peers and share their experiences.
• Localization — Multilingual support is essential for organizations planning to provide global online training resources.

Additional Consideration

Other important cost-relevant determinant for LMS suppliers and customers to think about apart from the subscription fees or license fees is, whether the solution also require payment for other value-added services (VAS). Here are a few common VAS:

• System deployment — Choosing a cloud-based LMS system or an local-hosted system will vary greatly in deployment costs, which may include technical consultation, hardware installation, software deployment, data migration, and integration with other systems (such as internal ERP).
• System training — Many LMS suppliers provide free remote training, but onsite face-to-face training usually requires additional fees.
• Technical support — Generally, the price package of LMS will include basic technical support services (such as knowledge base, email support, etc.). LMS suppliers may also provide optional more advanced support service packages, such as priority response, dedicated account managers, etc.
• System maintenance — The LMS system requires continuous maintenance, such as regular updates, system patches, and system upgrades. Usually, the system maintenance is included in the system subscription package fee, but not included in the software license package.
• Customized development — Many LMS suppliers also provide services of customizing the development of school websites and creating courses for institutions and schools. Some suppliers even provide services for making course videos and system customization. The development fees often charge by hour, or negotiating requirements with suppliers and signing a one-time service contract.

In addition to the price of LMS, pricing policies are equally important. Whether buying or building, at least think about the following 4 questions:

• What features and services do each package of the gradient pricing table include?
• Are all costs included in the package or are there additional services that would cost extra?
• How can customers upgrade or downgrade the package? Are there any conditions to meet to change the package?
• What is the cancellation and refund policy?

Conclusion

The LMS solution you choose depends on your business needs. Do you need custom features, cloud hosting, or just an easy way to arrange your company’s annual training? In general, building an LMS would demand higher upfront costs and time comparing to buying an enterprise LMS software. Though SaaS solutions usually come with recurring costs and might not provide all the wanted features in one product.

While companies can benefit from LMS solutions with pre-made course libraries, and free basic version systems can be a low-cost option for startups. Building an LMS would still be good for organizations that want to own the LMS brand and solution, and anticipate requirements to scale up as the organizations grow.

Need help decide the right LMS solution or look for a LMS development partner? Contact 57Blocks! Our team is always ready to answer your questions.

[1]: Retrieved from https://en.wikipedia.org/wiki/Learning_management_system