Dornubari Vizor January 2, 2024

LMS Cost Simplified – Ultimate LMS Pricing Guide 2024

Choosing the right Learning Management System (LMS) software can significantly impact your operations. One of the principal factors to consider is the cost of the LMS.

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So, how can you make an informed decision?

The best approach is to thoroughly understand LMS cost and pricing. Often, there are additional and hidden costs that you may discover after payment. An LMS that initially seems the least expensive might end up costing you more in the long run. Remember, LMS costs can vary greatly.

To make an informed decision, you need a comprehensive understanding of LMS pricing and its structure. Fortunately, you’re already in the right place.

Welcome to the Ultimate LMS Pricing Guide 2024 by GroupApp.

In this guide, you will learn about:

  1. How does LMS Pricing work?
  2. Why do LMS Costs vary a lot?
  3. Why it’s important to understand LMS pricing?
  4. 6 LMS Pricing Models with Pros and Cons
  5. Types of LMS Costs
  6. The Hidden LMS Costs – 3 Non-Monetary LMS Costs
  7. Solid Tips – LMS Pricing Research & Evaluation
  8. A Little Heads Up! (Don’t Miss)
  9. Smarter and Better Alternative to LMS

First, what’s an LMS?

What is a Learning Management System (LMS)?

An LMS (Learning Management System) is a digital platform that facilitates learning experiences. It can be broken down as follows:

L – Learning: This involves creating and delivering online courses and training programs.

M – Management: This deals with the organization and management of online courses, learner progress, and data.

S – System: This is a centralized location for all learning, managing, and tracking processes.

An LMS comprises two main sections:

  1. Admin Interface: This is the ‘back office’ of an LMS, where a manager or team creates, manages, and delivers online learning programs. It facilitates enrollment management, progress tracking, reporting, pricing, billing, grading, learner support, and automation.
  2. User Interface: This is where learners engage in online learning experiences, typically within a browser.

LMSs are utilized by a wide array of entities, including individuals, small businesses, government organizations, non-profits, and large enterprises.

There are mainly two types of LMSs:

  1. On-Premise LMS: This type is hosted on the company’s server or a third-party server and is often referred to as a “self-hosted LMS”.
  2. On-Cloud LMS: This type of LMS is provided as a SaaS (Software as a Service) and is hosted on the vendor’s server.

For a comprehensive understanding of LMS features, refer to 15 Key Learning Management System Features.

How does LMS Pricing work?

Let’s dive in.

Presently, there are over 1000 LMS vendors, contributing to the billion-dollar LMS market. Moreover, 83% of organizations use an LMS. These vendors primarily employ six types of pricing models for their LMS software and services.

The cost of an LMS encompasses the main offering, which is the LMS or a digital learning product. Additionally, it includes setup fees, charges for extra features, customization fees, training fees, and data migration fees.

We will delve into these costs in more detail later in the article. Please keep in mind that these costs can greatly vary.

LMS costs vary a lot. Why?

This is because no Learning Management System (LMS) is a one-size-fits-all solution and the options available on the market vary greatly.

Here are some reasons:

  1. The type of LMS is a significant factor. Generally, an On-Premise LMS is more expensive, while a SaaS LMS is a more cost-effective solution.
  2. The cost can also vary depending on the range of features offered. Some LMSs provide basic features, while others come equipped with advanced features.
  3. The pricing model of the LMS also plays a role. For instance, some LMSs operate on a monthly subscription basis, while others are available as open-source. We’ll delve deeper into this shortly.

Why It’s Important to Understand LMS Pricing?

Learning Management Systems (LMSs) are vital for organizations with Learning and Development needs. Approximately 89% of organizations in the US utilized an LMS in 2022, making it a staple for entities of all sizes.

A significant portion of their budgets is often allocated to LMSs. Consider the following statistics:

  • A study revealed that 38% of the average learning tech budget is consumed by LMS costs.
  • Capterra research indicated that enterprises spend an average of $70,614 per year on LMSs.
  • The same research shows that the typical annual LMS cost per learner is $10,234.
  • A Statistica 2022 study found that US-based businesses with fewer than 1000 employees spend a maximum of $1400 per learner on training.

These figures demonstrate the substantial investment made in LMSs. Given the expense, this investment must provide value. However, LMS pricing can be complicated, and unforeseen costs can arise over time, potentially destabilizing your budget and overall business.

Capterra research revealed that unexpected expenses led 59% of LMS users to exceed their initial budget. This suggests that most LMS purchases are not adequately budgeted.

So, why not prepare thoroughly and gain a comprehensive understanding of LMS pricing?

Take the time to plan your LMS purchase with your team. Ensure you derive maximum value from this investment. Understand your budget, anticipate potential costs, and be aware of your present and future LMS needs. Familiarize yourself with LMS pricing models and the different types of LMS costs.

The six LMS pricing models provide a structure for collating all LMS costs, making it crucial to understand these models.

Below, I’ve simplified all LMS pricing models, outlining their pros, cons, and suitability.

Let’s dive in.

6 LMS Pricing Models Simplified

Understanding 6 LMS pricing models is your first and most important step to understanding LMS pricing inside out. These models differ in structure, benefits, prices, and user requirements.

Let’s round off the 6 LMS pricing models. For each model, I have provided suitability, pros, and cons.

1 – Pay Per Learner/User Model

This is the most straightforward LMS pricing model.

What’s This?

In this model, you pay a set price every month for a specific number of learners/users added to your system. It means you pay upfront for both active and inactive members. This approach aids in budgeting and expense forecasting.

Typically, the fee for the pay-per-learner model is $5 per learner.

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Some LMSs offer lower rates as user numbers increase, making the pay-per-learner model sensible.

Suitable For

The pay-per-user/learner model is ideal for entities with mandatory learning where enrollments remain stable over time. It’s particularly well-suited for medium to large-sized businesses and government organizations.

Pros

  • This model is straightforward and easy to comprehend.
  • It offers predictability and accurate budget planning since all expenses are known.
  • There are no surprises or hidden costs.
  • It helps prevent overspending.

Cons

  • You pay for all users, regardless of whether every learner makes use of the LMS.

2 – Pay Per Active User

We now offer the most economical LMS pricing model.

What is this?

The Pay Per Active User Model only charges you for active users/learners, ensuring you don’t pay for usage that doesn’t occur. This model addresses the concerns raised with previous pricing models.

The fee for the pay-per-active-user model generally ranges from $1-$10 per active user.

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Your LMS allows you to add an unlimited number of users. However, charges only apply to actively logged-in users using your learning products during the billing period. Typically, a small upfront registration fee is also required.

In some instances, the pricing structure comes in bundles. Each bundle corresponds to a certain number of learners. For instance, if you anticipate around 100 learners, you would select a 120-learner bundle. Regardless of whether you reach 120 users or not, payment for the 120-learner bundle is necessary.

Suitable For

This pricing model is ideal for entities with temporary or one-time training needs. It’s also effective for those conducting training in batches throughout the year.

It’s particularly suitable for individual course sellers, startups, large enterprises, or businesses operating on tight budgets.

Pros

  • No payment is needed for inactive users or ghost accounts on your LMS.
  • Provides clarity in user metrics and improves cost projections aligned with your business goals.
  • Simplifies management by focusing only on active users.
  • Offers flexibility and is suitable for training various learner groups.

Cons

  • Payment for the complete plan is required, even if the set number of active users isn’t reached.

3 – Pay As You Go Model

This is the most flexible LMS pricing model.

What’s This?

You pay for what you use. For example, if you want to use a certain online learning product or attend an online workshop, you’ll pay only for that. Sounds good, right? There’s no registration fee or any recurring fee in this model.

The fee for the pay-as-you-go model is generally less than $1 up to $10 per use of the digital learning product.

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Learning management systems using this model retain a certain percentage of your earnings for each product sale or usage. This share offsets the LMS’s setup and operational costs.

Depending on the situation, you may be required to pay a one-time fee for a specific e-learning product, or a monthly fee for its use. Moreover, prices can vary significantly. For example, a surge in users might increase the cost.

Suitable For

This model is perfect for individual course and digital product sellers. It guarantees revenue growth as demand increases, making it also suitable for entities without specific training needs.

Pros

  • It’s ideal for solo entrepreneurs and course sellers.
  • You only pay for what you use.
  • There are no additional or recurring fees.
  • In high-demand scenarios, prices increase, proving profitable for course sellers.

Cons

  • The Pay As You Go Model can make pricing risky.
  • Upgrades may be costly for your users.
  • The features offered are limited.

4 – Subscription-Based License Model

Here comes the most popular LMS pricing model.

What’s This?

You pay a set subscription fee regularly that can be either on a monthly or yearly billing cycle. This model is also referred to as the Recurring License Model.

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Typically, this pricing model is combined with a subscription tier or level system. This model offers 3-4 plans, each with different benefits and features. If your needs change, you can conveniently upgrade to a higher tier or downgrade.

As you progress up the tier ladder to more costly plans, you gain access to additional advanced features. The least expensive plan includes basic LMS features such as a course creator, progress tracker, etc. More costly plans generally offer advanced features like SCORM compliance, AI tools, and integrations.

Additional charges apply for any add-ons. Discounts are usually available if you choose an annual billing cycle. This enables you to add a large number of learners to your LMS and offer digital learning products.

Suitable For

This LMS pricing model is particularly suitable for educational and training service providers. It’s also a great option for organizations that require regular team training.

Pros

  • You pay a flat recurring fee for the chosen plan with the necessary features.
  • Upgrades and add-ons are easy to accommodate.
  • The option to add unlimited users or a large number is available.
  • Upfront costs are low.
  • It’s easy to switch between pricing tiers based on your needs.
  • You have constant direct access to support.
  • You have access to the latest features and updates.

Cons

  • Your costs could significantly increase with usage growth.
  • Customization options are very limited.
  • Choosing a plan can be challenging, as one might offer too many features while another might offer too few.

5 – Licensing Model

Now, we have the most transparent LMS pricing model.

What’s This?

You purchase a period license for a learning management system. This model enables you to pay a one-time upfront fee or annual fee for licensing an LMS. This license can be for a lifetime or a fixed period.

A one-time upfront fee for a license can range from less than $500 to more than $20,000.

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Please note that the license payment may NOT include the cost of setup, customer support, updates, and maintenance. Some LMS providers may also charge extra for data migration and LMS training.

In some instances, the LMS vendor may require you to sign a contract for a period license. Once purchased, you have the right to fully operate the LMS or install it on-premise.

A license-based LMS is often chosen after careful consideration and a cost-benefit analysis of training requirements. This is due to its substantial investment, typically affordable for large corporations only.

Some LMS providers also offer add-ons and specific features that align with the company’s goals and needs. An unlimited number of users can be added as well.

Suitable For

This LMS pricing model is suitable for government organizations and large corporations with a high user count.

Pros

  • This is the most cost-effective option for large companies and government organizations.
  • It’s transparent, with no additional or hidden costs.
  • You pay a flat fee for your license, either one time or annually.
  • This model allows you to add an unlimited number of users.
  • You have complete control over LMS operation.

Cons

  • Purchasing an LMS license can be expensive, with higher upfront costs.
  • There’s limited access to support from the LMS provider.
  • It’s complex and requires an onsite team for maintenance.
  • You are responsible for LMS upgrades.

6 – Open Source LMS Model

Finally, we come to the Open Source Learning Management System (LMS) model, which technically isn’t a pricing model.

What is this?

This refers to an LMS whose source code is freely distributed and can be modified. Approximately 60% of users are inclined to choose an open-source LMS. It is important to note that only the source code is free. You’ll need to cover setup costs, such as hiring experts for development and customization.

The one-time setup cost for an Open Source LMS exceeds $18,000.

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An open-source Learning Management System (LMS) might require expenses for storage, security, team development, and compliance like SCORM. While the code might be free, there could be charges for setup and customization.

However, if you have the technical expertise, opting for an open-source LMS can be worth it. This option eliminates any upfront costs, and numerous free online resources can assist you in setting it up.

Estimating the cost of setting up an LMS with open-source code can be challenging. However, a simple formula might give you a good idea:

Simple Cost Formula for Open Source LMS

LMS Price (Can be free) + Hosting + Setup Fee + Customization + IT Specialist cost

Suitable For This option is ideal for entities with small budgets and the necessary technical expertise to set up an LMS.

Pros

  • It’s a relatively affordable option.
  • You have complete control over features and customizations.
  • You can add unlimited users to your LMS.
  • There are no upfront or recurring fees.

Cons

  • It’s not completely free.
  • Technical expertise or a specialized team is necessary.
  • Setup and customization costs can escalate.
  • You need to pay for hosting, data security, and maintenance.
  • Customer support is not available.

Next, let’s quickly look at different types of LMS costs.

Types of LMS Costs

The LMS price you pay is a combination of different costs.

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These costs, like puzzle pieces, come together to provide a comprehensive view of your total LMS costs. Understanding these costs can help you make informed decisions and find the best solutions.

These clear LMS costs are also known as “Hard Costs”. Let’s break them down for a better understanding.

1 – Setup Cost

The setup cost is typically a one-time upfront fee when purchasing a learning management system. This cost enables platform configuration and integration support. Some LMSs also include customization and user training in the setup fee.

The setup fee for a cloud-based SaaS LMS typically ranges from $4000 to $7000, while a self-hosted LMS setup fee can reach $25,000.

Good-To-Know: Some LMSs may not charge an upfront setup fee, choosing instead to recoup their costs through higher recurring fees. Hence, it’s crucial to thoroughly research all costs.

2 – Hosting Cost

The hosting cost is needed to launch and store an LMS on a third-party cloud or the client’s server. This cost varies greatly and depends on your feature, customization, and support needs.

A basic cloud-hosting cost ranges from $10 to $50 per month. For enterprises, this cost can reach into the thousands.

3 – User Fees

User fees are the costs you pay for your users to access the LMS. These fees typically cover the LMS provider’s profit and operational costs, including technical support, upgrades, and maintenance.

User fees vary depending on the LMS pricing model and your selection. These fees can be charged either regularly or one-time.

4 – Customization Cost

Customization costs are incurred when you tailor the LMS to meet your specific needs. These customizations can include compliance with regulations, special features, personalization, and adding integrations.

Good-To-Know: Customization often comes with a significant cost, as it requires a team with special expertise to alter the LMS architecture. Therefore, it’s important to clearly define your customization objectives to avoid unnecessary expenses.

The Hidden LMS Costs – 3 Non-Monetary LMS Costs

This is something you need to know! Not all LMS costs are monetary.

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Purchasing a Learning Management System (LMS) involves more than just the financial aspect. Several non-monetary costs, such as time, resources, and energy need to be considered for a well-informed decision.

Hidden costs often surface after purchasing the LMS. However, thorough planning and research can help mitigate these costs.

Let’s look at three non-monetary costs associated with LMS.

1 – Data Migration

Data migration is the process of transferring your data and content to the new LMS. This process can be a burden on your internal teams, particularly if the LMS vendor doesn’t provide this service.

Doing it yourself is not easy and can take months, especially if you’re migrating data manually. This could lead to data loss and require additional manpower. It can also strain your teams.

2 – Customization

Finding an LMS that perfectly fits your needs may not be possible. Customization is often necessary to align the LMS with your goals and training requirements.

Customizing the LMS architecture requires time and expertise. As the saying goes, time is money, and customization can divert time from other important projects.

3 – Learner Onboarding

Onboarding users to the new LMS is a crucial part of the transition. This process doesn’t happen overnight. A reasonable timeframe and resources need to be allocated to ensure smooth onboarding.

Preparing learners through email communication and setting deadlines is necessary. Additionally, existing learners need to be trained on how to use the new LMS.

Solid Tips – LMS Pricing Research & Evaluation

Now, you’re well-equipped with an understanding of LMS pricing, ready to find the best possible LMS pricing. Here are useful tips to guide your research and evaluation:

  1. Allocate ample time for researching and evaluating LMS options. 62% of the LMS buyers invest significant time in this process. It can take between 1 to 6 months to decide the most suitable option.
  2. Clearly define your L&D objectives, budget, and requirements. Involve your team in this process. Research LMS providers offering features aligned with your objectives, especially those within your budget.
  3. Establish a dedicated LMS budget. Even an estimated budget can help narrow down your options to an LMS that fits your financial constraints. Remember to consider long-term costs.
  4. Utilize LMS directories such as GetApp and Capterra for extensive pricing information. These platforms provide detailed reviews, pricing packages, and some offer price comparison features for effective evaluation.
  5. Understand all the hard and potential costs of a particular LMS. For more information, reach out directly to LMS vendors.
  6. Set aside time to identify your LMS customization and integration needs, if any. Include these costs in your budget.
  7. Be clear on your industry regulation and data privacy needs. This will help you find an LMS that adheres to necessary compliance standards like GDPR and SCORM.

There You Are! – LMS Pricing Covered

You’re all set! With this comprehensive understanding of LMS pricing models and cost types, you’ll be equipped to make informed decisions.

As an LMS client, it’s important to stay informed about the rapidly evolving e-learning landscape. New trends and platforms are constantly emerging. Recognizing these changes can help you make better decisions.

Beyond traditional LMSs, there are game-changing platforms. LMSs have become somewhat conventional as learners increasingly seek innovative and social features.

A study reveals that 43% of e-learners now want social and collaborative features, which most LMSs lack. Furthermore, 48% of e-learners are seeking new and different learning technologies.

While these statistics may be concerning, rest assured that there are platforms that cater to these evolving needs.

Smart Alternative to LMS – Online Learning Community Platforms

These platforms leverage the power of connection and community to deliver learning programs, courses, and tools. They allow you to offer collaborative learning experiences and facilitate authentic human connections.

These platforms let you fully utilize community-based learning, which represents the cutting edge of e-learning.

Looking for an example? Consider GroupApp.

GroupApp – All-In-One Learning Community Platform

GroupApp is an all-in-one online learning community platform

With GroupApp, you can offer online courses, live sessions, and coaching to a community. You can create a community around your content or the other way around. The main focus is to foster a thriving community.

Platforms like GroupApp will enable you to create a thriving and profitable experience for yourself with the power of Community-Led Growth.

GroupApp offers features like

  • Course Builder
  • Drip Courses
  • Content Library
  • Event Creator
  • Community Builder
  • iOS & Android Mobile App
  • Free Trial

That’s all you need to offer a complete online learning experience.

Why Choose Online Learning Community Platforms like GroupApp over LMS?

  • Less expensive than LMS with more value
  • Innovative and better customer support
  • Free of complexities and easy to use
  • Offers community-building tools
  • Better connection with your users/learners
  • Offers an event hosting feature
  • Suitable for all-sized entities
  • Best for education businesses, associations, certification programs, cohort-based learning

That sounds like a good deal! Why not check out GroupApp?

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