LMS Implementation Pricing: Take 2

Bloggers know instantly when we’ve hit a good topic that deserves further exploration. It’s easy to see in the volume and variety of feedback from readers.

Recently, I wrote about “Shrinking LMS Implementation Fees Drive Market Expansion.”  I intended to show how the hundreds of new cloud-based LMS vendors offer much lower (than historically priced) implementation and setup fees, opening the market to new first-time buyers.  In fact, of the 72 LMS vendors we surveyed, 26% said they offer free implementations, and 73% said they offer a base setup option of under $10,000.  I didn’t intend to say that LMS vendor professional services are unneeded in all (or even most) cases.

Here is some of the feedback I received:

• “Great post, John! Shared it on LinkedIn and our team is using it with new prospects.”

• “This is very interesting and very much in line with what we’re doing. I’d like to schedule a call to talk to you about your vendor services.”

• “Those below the $10K line likely belong to a separate class of vendors (smaller) and start‐ups.”

• “My first reaction is “you get what you pay for”, though with many providers moving towards a SaaS model, they probably make up the implementation fee via recurring license revenue.”

• “Downside is that this devalues services in the eyes of the inexperienced client.”

• “Since the graph is labeled as “typical” implementation fees it would then conclude that 60%‐70% of “typical” LMS implementations are very simple…”

• “Frankly, this appears to be a bait and switch price from the majority of vendors surveyed”

• “Who are you surveying?  You have 73% of the market with LMS fees below $10,000. You are hurting your credibility….”

• “So who wins here?  The customer wins if they are prepared to do all of the work of the implementation itself (and most aren’t prepared or capable).  The vendor wins only if the customer actually solves all of the problems (which never happens).  The analysts win because data sells research.  But in the end, the LMS industry gets a black eye…I think that someone really wins big if they EXPOSE the issues…”

See what I mean?  With the same blog post, I received kudos, a new potential client, a crack about my credibility and some pretty good observations and advice.  More discussion is indeed required about the current state of LMS implementation services so let’s take a deeper look!

Cloud LMS Free Trials = No Implementation Fees

There are now almost 700 LMS vendors in the world.  The vast majority that have been founded in the last 10 years are cloud-based SaaS model LMSs.  An interesting phenomenon of these vendors is the free trial.  In 2016, LMS shoppers and buyers can access free LMS trials directly from many cloud LMS vendors’ websites.  In most cases, a credit card isn’t even required.  A free trial typically lasts a few weeks after which the buyer has the option to continue on as a paid client at a price point based on their actual usage.

The trial period essentially acts as its own setup and implementation process, with the vendor supporting via online tutorials, knowledge bank and reactive customer support.   A successful trial leads to a new client and reoccurring revenue.  An unsuccessful trial leads to nothing – no revenue, but also no client dissatisfaction.  Many new LMS vendors compete for this very real, profitable, self-sold, self-implemented and most importantly “net new” client revenue.

The Reality for Most Large-Scale LMS Buyers

In 2016, most medium and large corporations already have an LMS.  They spent (and spend) a lot to implement them, and have wrapped serious business processes around their LMS.  In these cases, the cost, time and effort to replace an LMS are much the same as always.  Full-service implementations may cost well over $75,000-$100,000, and last six or more months.

In these scenarios, free-trial LMSs (or limited service vendors) will not be a great fit, because these buyers need proactive professional services – not just tutorials – to rip and replace.  Migrating from a previous LMS, or managing the complexities of multiple business units, integrations, historical data and languages is too much to figure out without serious help from the vendor or an experienced integrator.

The Reality for Most Everyone Else

The hundreds of new cloud LMSs are targeting buyers who could never buy previously – mainly for fiscal reasons.  Small and medium-sized businesses, and extended enterprise initiatives of corporations of any size are ripe hunting grounds for first-time buyers who just don’t need or want full-service implementation packages.

This shouldn’t be a surprise.  It is happening in most software industry verticals.  For example, CRM, marketing automation and accounting software all have vendors spanning the spectrum of self-service to full service.  As self-funded entrepreneurs at Talented Learning, we use self-service cloud software for all of these business functions.  As we continue to grow, we will upgrade to more sophisticated systems, and we will need professional services help from the vendor at that point.  However, we are thrilled that we have access to benefits of sophisticated software long before we can afford to buy the best.

LMSs are no different.

Defining the Level of Professional Services Required

One of the biggest mistakes LMS buyers make is not defining the level of help and support they will need to successfully implement and support their LMS.  This decision is independent of the LMS vendor and needs to be made in advance of engaging LMS vendors.  Some key points for buyers to define and then look for in the field of vendors include:

• Virtual vs. on site delivery of implementation services from vendors?
• Historical data migration requirements?
  • Cleanliness or filthiness of content?
  • What content is being migrated to new LMS?
  • How many historical content completion records do you need to migrate?
  • Is it important to migrate “in progress” course completion data into the LMS or would you anticipate a more delineated cut over?

• Integrations required?
  • HRIS
  • ERP
  • CRM
  • Single Sign On
  • eCommerce
  • Talent management
  • Advisory boards, state license boards or federal accreditation bodies
  • Virtual meeting
  • Content libraries

• Global requirements?
  • Language localizations
  • Local support
  • Taxation

• End learner help desk support?
• Type of administrative technical support you want?
  • Dedicated support contact
  • Phone
  • Email
  • Chat
• Preferred hours of support?
  • Monday-Friday business hours
  • 24/7/365
• Do you prefer automatic upgrades or the discretion to maintain your own upgrades?
• Marketing and rollout services?
• Business process, ROI, strategy consulting?
• Content development services?
• Business app development?
• Data warehouse and integrated reporting requirements?
• Administration outsourcing?

Range of Available LMS Services

If buyers come armed with their expectations and requirements defined, they will be fully prepared to engage vendors and qualify them as partners.  Generally, LMS vendors can be grouped into four types of service providers—free self-service, assisted setup, full service and system integrators.  The graphic below outlines the four professional services categories, but it is important to remember that there is plenty of gray area between these groups and the price they charge for a custom implementation.  There are hundreds and hundreds of vendors on the left side of the graphic scaling down to a dozen or so on the right.

Conclusion

Full-service and system integration vendors believe you need services to be successful.  Self-service and assisted setup vendors tend to disagree.  Both are right.  It’s up to the buyer to define what they need and only seriously evaluate vendors who are able to provide the level of services required.

Buyers on the third, fourth or fifth LMS or buyers with large numbers of employees, locations and businesses should not kid themselves that they can do an implementation for free or near free.  First-time buyers need not invest $75,000 or $100,000 for a full-service implementation.  No LMS is right for everyone, but every LMS is right for someone.  Aligning the level of professional and implementation services provided with services required is a key factor in finding your right LMS.

Clear as mud?

Thanks for reading!

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The Economics of LMS Replacement

Stuck with a learning management system that no longer meets your needs? Do you pay for annual maintenance and hosting, but haven’t upgraded in years, and rarely use tech support? Want to expand your learning program reach to customers, channel partners or others, but can’t afford the incremental licenses? Ready to move up to a new solution, but unsure about what it should cost? If any of these scenarios are familiar, this webinar is for you.

Join Talented Learning lead analyst and CEO, John Leh, as he shows you how to take charge of the LMS replacement process and lead your organization into the modern learning age. You’ll learn how to:

• Analyze what you’re currently spending (and why)
• Define what you need in a new LMS
• Outline the best license model for your intended use
• Develop realistic budget expectations
• Create a business case your stakeholders can support
• Find vendor intelligence you can trust

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