Published On: September 9, 2014By
Is your LMS vendor fleecing you? Independent analyst John Leh gets real about pricing for learning management systems

If you’ve been reading our blog (thank you), you know that cloud LMSs have changed the learning platform game.  They were born at the start of this decade, and are designed from the ground up to support mobile, social and gamification requirements.  Cloud LMSs typically offer an engaging user interface and a customer friendly license model.  And for multiple reasons, many are ideal for extended enterprise learning scenarios, where users pursue training on a voluntary basis.

However, in my travels as an independent consultant, I’ve discovered that no matter how badly you want to migrate to a cloud LMS, many or you (both with extended enterprise and internal employee LMSs) feel you are stuck contractually or logistically with your old-school LMS.  Worse yet, you may suspect that you’re paying too much for that sad privilege.  You’re probably right.  And there is a way out.  But for best results, I recommend that you approach the process thoughtfully, with your eyes wide open.

First step — complete this simple, five-question quiz to determine if your LMS vendor may be taking advantage of you:

1)  Did You “Marry” Your LMS Vendor Before 2011-2012?

LMS business models have changed dramatically with the advent of the cloud LMS.  This shift has made traditional LMS business models obsolete.  Before 2010, the status quo featured longer-term contracts, perpetual licenses, high-cost implementations, poor customer service and no pricing differentiation for extended enterprise business scenarios.  Today, consumption-based pricing, quick implementations and monthly contracts are the norm.  These buyer-friendly terms typically come with great customer service because vendors have an incentive to continue earning your business, month after month.

If you are still playing by the old rules, a divorce is probably past-due.

2)  Do You Pay Annual Support & Maintenance?

Paying annual support and maintenance on your LMS means your organization bought a perpetual license LMS at some point in the past.  When you purchase this kind of license up front, you own the right to use that solution indefinitely.  However, you still need to pay annual support and maintenance fees if you want to have the ability to contact your vendor’s technical support staff and if you want access to any LMS updates, upgrades and bug fixes that the vendor releases.  Of course, these “free” updates come at an additional cost — which can be quite substantial — when you need vendor-provided professional services to make them work.  As a result, if you don’t have sufficient budget to pay for these ongoing updates and updates, your LMS may remain stuck in an old version for years on end.

Annual support and maintenance costs typically total about 15-20% of the original perpetual license.  LMS vendors also bake automatic 2-5% increases into the contracts.  So, if your organization purchased a 10,000-user perpetual license for $200,000, that translates into $30,000-$40,000+ per year just to keep the system alive and report bugs.

In today’s terms, that would buy a lot of a cloud LMS functionality!

3) Do You Pay Annual Hosting Fees?

LMS vendors call it many things – private cloud, hosted deployment, ASP – but those terms essentially mean the same thing:  the vendor sets up your organization’s LMS inside its hosted data center and then they run your stand-alone LMS on their servers for as long as you remain a subscriber.  The hosting fee includes all IT costs — servers, data center, bandwidth, backups and the like.  I’ve seen annual hosting fees range from $10,000 to $200,000 per year, depending on the number of users, global scale and security concerns involved in an implementation.

There is nothing wrong with paying for annual hosting rather than hosting an LMS yourself, but here’s what you should consider:  When you add self-hosting to the cost of annual support and maintenance, the annual sum to maintain your current on-premises LMS starts to become staggering, compared to cloud LMS solutions.

4) Do You Know Your LMS Vendor Contact?

Have you survived so many mergers that you don’t know the name of your LMS vendor or your contact anymore?  If you have questions, concerns or malfunctions is it almost impossible to get your vendor on the phone or get any personalized help?  Does your vendor have no idea about your business or how you use the LMS?  Are you locked into a long-term contract and only hear from your vendor — conveniently– at renewal time?

All of these symptoms suggest you are paying too much to an organization that doesn’t value your business.

5) Do You Continually Activate and Deactivate Users?

If you’re spending time regularly deactivating users so you don’t have to pay incremental license fees, you are definitely paying too much for your learning platform.  This is especially common with extended enterprise solutions, where you might have a large group of potential users, but only a subset of them actually participate in training each year.

Old-school LMS vendors refuse to consider the difference in user types (internal/employees vs. external/partners and others).  This makes their LMS impractical for extended enterprise initiatives.  On the other hand, cloud LMS providers allow you to have an unlimited number of records in your database, while you actually pay only for the active users.

Are You Getting Fleeced by Your LMS Vendor?

If you answered “yes” to ANY of the above questions, then yes, you’re very likely paying too much for your current LMS.  If you answered “yes” to ALL FIVE questions, then you really should contact me (or the police) — yesterday.

Do you want to get rid of your current LMS and trade it in for a new shiny cloud LMS with a sleek new cost-effective LMS smell?  You can.

The next step is to conduct an LMS audit.  This audit is the process of documenting everything your LMS does for every audience group and determining what it costs you.  You also define all the things you can’t accomplish with your current LMS but wish you could — along with an estimate of associated costs.  With that complete analysis in hand, you can shop your requirements around to the LMS vendors and get quotes that you can compare in an “apples-to-apples” fashion.  I’m willing to bet you’ll find a new LMS that lets you serve exponentially more users with much more functionality, free upgrades, shorter implementation and excellent customer service.

If you’d like to learn how that’s possible, I’m always happy to talk by phone or Skype for 30 minutes to verify your situation and recommend next steps.  Feel free to contact me for a preliminary consultation.

Thanks for reading!


Want more LMS insights? Check this on-demand webinar:

Insider’s Guide to LMS Selection Success

The LMS landscape is crowded, complex and difficult for potential buyers to navigate. What should learning technology buyers do?

Join Talented Learning Lead Analyst John Leh and Docebo North American Sales Director Corey Marcel as they explain what you should know before you choose the right LMS for your organization. You will learn:

  • What an effective LMS selection process looks like
  • The factors that matter most in choosing a learning platform
  • Where to find the most reliable LMS vendor intelligence, and
  • How to avoid common LMS selection missteps

If you’re selecting a new LMS this year (or are only thinking about it), replay this on-demand webinar, and start putting your selection strategy to work!


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About the Author: John Leh

John Leh is Founder, CEO and Lead Analyst at Talented Learning and the Talented Learning Center. John is a fiercely independent consultant, blogger, podcaster, speaker and educator who helps organizations select and implement learning technology strategies, primarily for extended enterprise applications. His advice is based upon more than 25+years of learning-tech industry experience, serving as a trusted LMS selection and sales adviser to hundreds of learning organizations with a total technology spend of more than $100+ million and growing. John would love to connect with you on Twitter or on LinkedIn.

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