LMS Pricing 101

There is often a similarity in the pattern of a 'purchase'. Be it buying a pen, or a PC or say a Learning Management System. There are a specific set of features that can be classified under must-have, some that are good-to-have, and a few others that can enhance the overall functionality. But, even if all the perks seem surreal, the aspect that truly grounds the choice is the 'pricing'.

A recent development at my company presented us with an opportunity to relook at the pricing of our Learning Management System, UpsideLMS. A world-renowned Learning Management System, UpsideLMS had always enjoyed the status of being the 'Best Value LMS'. Our aim, with the revised pricing, was to further strengthen the 'Best Value' proposition by adding more flexibility to the pricing and simplifying the structure more so.

While both the objectives were defined from the point of view of the buyer, the latter was in response to the LMS Industry User Research Report by Capterra that reveals that, “people spend 59% more than they expect to on their LMS (the average annual spend is $70,614).” Reason? Because, most organizations hardly understand the pricing itself!The smarter way to go about is by understanding the different pricing models, comparing them with the requirements, and then making the right choice.

First things first. It is essential to understand that LMSs can be on-premise, cloud-based or hosted. The pricing model is comparatively different for each. Similarly, the pricing model that suits your requirements can differ based on the number of users, the features required etc. LMS Pricing Models 101 is about examining it in the simplest manner.

To begin with here are some pricing models that depend on the number of users/ and usage, and go by the name of 'Pay As You Go' or PAYG, as popularly known.

• Pay-Per-User

For an organization with a relatively fixed number of learners/users, considering that the chances of change in this number is relatively low, Pay-Per-User may be just the right pricing model to opt for due to the affordability it brings in. A model followed by most SaaS- (Cloud-based) based LMS service providers, it works just as the title suggests.A flat fee has to be paid for each user, and this includes most of the basic features the LMS offers. In most cases the price per user is inversely proportional to the total number of users and in some cases, additional features are added to the mix too.

For organizations with larger number of users, this can be like striking gold. However, on the downside, there are chances that many of the features that have been paid for remain unused.

• Pay-Per-Active User

A variant of the Pay-Per-User model, Pay-Per-Active User ('Active' being the operating word) is another popular pricing model amongst cloud-based, SaaS LMS vendors. Those who have been into the learning and development profession for a considerable period know that not all learners actually participate in the learning. Out of the total users enrolled for a course, at least 10% tend to be absent during the training sessions. In such cases, Pay-Per Active User model is greatly effective as it only charges for the users actually logging onto the system and/ accessing the course, and not for the users who have just enrolled.

Also, the higher base commitment allows lower per user cost. Let's understand this with the help of an example. UpsideLMS' Pay As You Go Pricing is based on the concept of 'Active User', wherein the definition of 'Active User' is a unique user that logs on to UpsideLMS at least once during the 30-day billing period. For a lower slab of up to 100 active users, the fixed cost is $299/m and additional cost per 'active' user is $3.25/m, while for a higher slab of up to 5000 active users, the fixed cost per month is $2999 and additional cost per 'active' user is just 60 cents!A boon for Training Companies that often seen a large fluctuation in the number of users availing their services at any given point in time.

It is essential however to be clear about the way in which the term “active” is defined by different LMS providers.

• Pay-Per-Use

Now this is a bit complex as the definition of ‘use’ differs from vendor to vendor. Some put it as the price-per user-per module while others put it as price-per course-per user while some others set the price based on elements or features or content delivered per course, or even on the basis of the number of attendees per training.

‍While the abovementioned models are clearly influenced by the number of learners/ users. There are other models too, that depend more on the software usage, duration of usage etc. Here are a few that are noteworthy.

• Unlimited User Flat Fee or Limited Time Licensing

Sometimes an organization’s requirements are far too large to fit into the bracket of pay-per-user/use. What works in such conditions is an overall pricing for a limited time period that needs to be renewed later on. According to this model, LMS vendor provides a fixed set of features for unlimited users for a fixed flat fee. This model is also termed as limited time license fee. The renewal can be monthly or yearly depending on the use.

As great as this sounds, it is important to note that upgrades and additional functionalities in this case often come with additional charges.

• Perpetual LMS License

Though this model is quite archaic, it is still used by vendors who offer user-hosted solutions. User-hosted LMS, whether on-premise/ behind-the-firewall or hosted at the vendor's end, are needed for government organizations and similar that deal with data of highly sensitive nature. The terms of this pricing model are simple - you buy the LMS, install it and pay annual maintenance to the vendor to avail tech support, updates and upgrades all as the part of the package. This kind of model is the best pick for organizations that plan on using the same mode of training for a long-long time.

• Freemium

Yes, you read it right- that is free and premium put together. It is a model used quite prevalently to attract buyers. Mostly used in case of SaaS software systems, a Freemium is a simple, basic, striped down version of the LMS that is offered as free-to-use, while more advanced features are offered at a premium price. For some organizations, the toned-down version may just be the perfect fit, while for those that need additional features a fixed price- monthly/yearly has to be paid depending on the number of features/users- in whichever way the vendor sets the standards.

• Free

There is undeniably a pricing model that will cost you absolutely nothing in terms of money, but quite a lot in terms of expertise. Open-sourced LMSs are free, but customizing them to your needs requires in-house expertise - an LMS expert, technical team to work on software changes etc. Though "free" is the catch-phrase here, there are 'real' costs involved in terms of both time, effort and money with respect to support, services, maintenance etc.

In the end, there is no model that is right or wrong or perfect fit for all. With the vast expanse that LMS market covers, the only relief is that there are certain standard models followed by major shareholders that makes comparison a bit easier. Buyers have quite a range to choose from, and while knowing the pricing models is a good way to learn more about the LMS market, it still gives a biased viewpoint when it comes to LMS selection. If anything, it is just a part of the selection process. The final choice should essentially depend on requirements in comparison with the pricing, implementation strategies, the support offered, the implementation team’s experience and other factors such as market value of the vendor, general opinion etc.