The Cost of eLearning 2.0

In a recent article by Howard Schechter, eLearning consultant for eLearn Magazine, Mr. Schechter details the cost of implementing the traditional learning management systems.

Here is what he says:

“A typical first-year budget may be in the $100,000-$200,000 range for a Fortune 1000 company, while a small business or divisional learning initiative may spend $30,000–$50,000. Smaller learning initiatives cost less because there are fewer concerns, such as tying it in with CRM software.”

Enterprise level implementations require a lot more design and upfront work (money), as there are more players, issues, and integration. The bigger the project, the more it’s going to cost.

This discussion focuses on the concerns of this mid-market, which covers learning systems engaging between 1,000 and 5,000 learners.

Mid-Market Costs
The costs of mid-market programs vary significantly, and there are several different costs within, including:

• initial cost of the LMS, LCMS, and authoring software
• annual software maintenance (typically 15 percent to 20 percent of the purchase price),
• software licenses required to run the applications such as SQL Server, Cold Fusion, Crystal Reports, among others
• “free” systems of the open source genre, such as Moodle.org (costs are different for “free” systems) NOTE:  Please read blog on the real cost of Moodle at http://interactyx.com/social-learning-blog/uncovering-the-hidden-costs-of-moodle/
• the initial and ongoing cost of training people on three or four different software applications,
• integrating, maintaining, and updating the software and servers, and other IT needs
• managing multiple vendor relationships
• having additional employees specialized in content management, instructional design, interactive designers, and authoring tools
• having subject matter experts

Here’s a recent example of costs from a small company that manufactures products and is a leader in its field. The company decided to move its internal and external customer training courses online, about 30 courses in all. The HR manager in charge had experience as a trainer but no background in designing, creating, and managing an online learning initiative. The manager received advice from various vendors and had decided the following were needed:

1. A learning management system (LMS): $50,000–$200,000. A cumbersome, home-grown database application was being used to track training, and the company saw the need to upgrade to a commercial LMS. The perception was fueled by 1) cost projections of bringing the home-grown application up to speed to learning standards conformance (SCORM) and open source standards, 2) the perceived need to import a purchased library of 200 courses, and 3) the need for certain features, such as reporting. The LMS packages being evaluated ranged from $50,000–$200,000.

2. A learning content management system (LCMS): $50,000–$150,000. The manager did an online search for “content management” and came up with three candidate packages. The prices for this trio ranged from $50,000 –$150,000.

3. An authoring tool: $1,500 per workstation. An authoring package that is aggressively marketed and widely used was priced at $1,500 per workstation, and two full-time employees were slated for the authoring positions. Additional costs included initial training, annual upgrades for the software, and sustainment training.

The low-end estimate reached approximately $175,000 for the project. The only “moving target” difficult to quantify is the LMS pricing model, which is rarely a fixed cost. Indeed, the cost often escalates as the number of learners on the system increases or on the whim of the LMS company. This can make the annual cost of having an LMS an open-ended budget item, unless it’s tightly managed.

Sticker shock is not unusual. Initial costs from $100,000–$500,000 have caused many “small implementation” managers to say, “Hold on. All we want to do is offer a few courses online. Isn’t there a cheaper way to do this?”

The answer is YES WE CAN.

We have discussed the strengths of TOPYX® as it relates to bringing collaborative/informal learning with an integrated social networking to traditional LMS functionality.  Please learn more by visiting interactyx.com, take a test drive, view some videos, read some collateral material.

But when I read the costs of putting in traditional LMSs, Moodle, etc. at multiples of the cost of TOPYX, and with less engaging features to enhance the learners’ experience, I want to ensure that you know YES, there is a cheaper way and better way to do this.

We have a very compelling value proposition: