If you and your team are considering purchasing an LMS (Learning Management System), it’s important to choose what is the right model for your organization. The price of an LMS is could be the deciding factor for which vendor you choose to partner with, so the ultimate question is what pricing model works best for your organization?
Spoiler alert: There is no solution that is ideal for every business.
Each pricing model has its pros and cons. This is why it is so important to understand which model works best for which organization, so you can determine the correct fit for your business.
The 4 most popular LMS pricing models include:
- Pay Per User System
- Purchase Structure
- Free Options
Let’s take a closer look at these four LMS pricing models.
1. Pay Per User
The pay per user system involves paying for each person that uses the LMS. Usually, this is a cloud-based service, meaning that the LMS vendor hosts the LMS platform. Regular updates and upgrades are provided through this service which allows you to focus on developing and executing online training content for your audience rather than spending time maintaining the system.
A pay per user system may be based on either registered or active users. The pay per learner model means you incur a charge for everyone who registers for the system. Pay per active user, on the other hand, means you only pay for those who actually use the system. This is an important distinction as people in an organization may register accounts without using the software very often.
- With the pay per active user model, payment is only required for employees who actively use the system, not the total number of employees in your organization.
- Enables mandatory learning requirements to be met, such as regular compliance training.
- Optimal for a company which has a relatively stable number of employees because it is easier to accurately predict the costs of training.
- Less economical for organizations with a large number of employees, many of whom may not need the training or seldom use it. This may lead to payments for employees who register but rarely log onto the system.
- If your employee count frequently changes, your costs will be hard to predict.
Who It’s Best For
Pay per user is a simple and straightforward billing model that is worth considering for small and midsized companies with obligatory training. If you want to avoid the issue of paying for non-users, look for a model that bills you based on active users rather than registered users. On the other hand, if your employees are highly motivated or compelled to log on, the pay per learner option is also a viable option.
2. Annual Licensing
Under this model you buy a license, typically on an annual basis, from an LMS vendor. There are usually several tiers based on the features you want to access. Depending on the company, costs may also be based on the number of users.
- Great model for forecasting because you pay a set fee.
- You don’t need to worry about the number of active or registered users.
- Not flexible: While it’s reassuring to pay a fixed price, this also means you have to pay this amount even if usage is lower than you anticipated.
- Carefully consider the features needed, so you choose the most appropriate tier. It can be expensive to upgrade, and a waste of money if you are not utilizing all of the features.
Who It’s Best For
The annual licensing model is a good choice for large companies with many employees who need training. This model also works best if you are clear about the features that your organization needs. Make sure to do your research before purchasing a license from an LMS provider.
3. Purchase or Perpetual License
This is another variation on the licensing model; however, rather than paying a monthly or annual fee, you purchase a permanent license and have complete ownership over the LMS.
- Simple pricing option: one-time upfront cost.
- Since you own the software, it allows for more customization, scalability and integration with other hosted applications.
- Price range for perpetual license can range from less than $500-$20,000.
- Usually need to pay for upgrades.
- In general, you need to download the software. If you prefer the convenience of a cloud-based LMS, this is a drawback.
Who It’s Best For
As with the annual license, this is a good option for large organizations as you don’t have to pay per user. Before you purchase a perpetual license, however, you should do plenty of research. Not only does the price for purchasing the software greatly vary between provider, this option also involves the greatest commitment. If you decide later on that it’s not the ideal choice (beyond the refund period, if any), the investment will be a total loss.
4. Free Options
There are two main free options for LMS plans: freemium and open source. While free sounds appealing, keep in mind that there are certain limitations or hidden costs involved with any type of free software.
With freemium, the LMS provider allows you to access basic services for free. For example, the system may be free for a certain number of users or may come without any support services. Ultimately, the hope is for businesses to eventually upgrade.
With open-source software, you can access the LMS regardless of how many users you have; however, this usually requires some tech experience. You may have to pay IT specialists to install and configure the software because it will require programming and HTML knowledge.
- You save money by not having to pay for the LMS.
- With open source LMS, you can have unlimited users and still incur no charges.
- Under the freemium model, limited access to features might mean not getting the full benefits of the software.
- With open source, the time and expense of configuring it may make it less economical than it first appears. SearchITOperations.com provides some useful guidelines for estimating actual costs of open source applications.
Who It’s Best For
The freemium model is a great fit for smaller companies who want to start off with a free LMS. This can provide a good introduction to an LMS. At some point, however, you may want to upgrade, so you can access a greater number of features.
An open-sourced LMS is best for companies that have a large IT team because the system will require a great deal of tech experience. Consider the time and costs of configuring and updating the system on your own before making a decision.
Choosing the Best LMS Pricing Model
When choosing an LMS, you have to take into account many factors, and the pricing model is always a serious consideration. You need to contemplate both your budget and the features that are essential for your organization. Calculating the price of an LMS can be trickier than it first appears. But with a good grasp of the standard LMS pricing models, it should be easy to decide which pricing works best for your organization, so you can implement the best training within your company.
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