When starting your first elearning project with a Learning Management System (LMS), or switching from an existing LMS platform, your first and biggest concern will always be improving the user’s learning experience to develop their knowledge/ skills so that they can provide a better contribution to the company.
Once your user’s experience has been addressed, you will look at different parameters such as IT requirements, capability to integrate with third party software, possibility to customize the platform, and LMS cost and pricing model. In this blog post we will focus on an overview of the different LMS pricing models to help you make a more conscious decision.
On premise vs Cloud licensing
Most of you will remember the time where to use any kind of software you needed a CD (or even a Floppy disk). That CD is the incarnation of the “on premise” model, which consists of the local use of software (for example through a CD or a USB drive) or hardware (in-house servers). The main benefit of this approach is control – in fact by having local access to your software and hardware, companies were able to avoid security issues, to have in-house maintenance and data control. Unfortunately this kind of licensing is not flexible at all and it requires a tremendous startup cost.
On the other hand we have the different kinds of licensing and pricing models associated with Cloud technologies. As we explained in a previous blog post, Cloud software are accessible via any internet connection, allowing vendors to apply more creative pricing strategies. For example, as a buyer, you could pay for a pre-determined number of users, time spent on a platform, actions performed, or conversions achieved.
Cloud systems offer a superior solution because of the flexibility provided by this kind of technology. If you are dealing with a global audience, not concentrated in a single location or in a limited number of locations, Cloud technology gives you the chance to reach all of your users simply through an internet connection. Some may argue that it’s important to have full control over your software, but the unlimited possibilities connected to Cloud solutions is worth some outsourcing if that’s what it comes down to (you can check this blog post to read more about the benefits of Cloud over Hosted/On Premises LMSs).
Moreover, Cloud software can now be considered a very secure solution, thanks to features such as better user access policies, more secure internet connections through third party certificates (SSL & HTTPS) etc. (you can read more about security features of Cloud LMSs here).
Different kinds of Cloud licensing
As I previously stated, Cloud licensing offers a variety of solutions in terms of pricing. Depending on your requirements and audience, you might find significant differences in TCO (Total Cost of Ownership) based on how the vendor is going to bill its services.
Here is a list of the most commonly used Cloud licensing models. Use this information to help you choose a system that will provide a good learning experience and at the same time help you to keep expenses down. The three different models:
SaaS: Software as a Service, also know as SaaS, is the most commonly used Cloud licensing method, thanks to its ease of use. SaaS simply means that you can access a software through the web, without having to install it on your computer or connecting to your company’s local infrastructure. All you need is a good internet connection and your access credentials. In the next few paragraphs I will give an overview of the different pricing models that are currently being used by SaaS vendors. Also, take a look at the business advantages of using a SaaS LMS.
PaaS: the Platform as a Service model works similarly to the SaaS model, but instead of giving you access to a software through the web, the user is given access to a platform, that can be used to create different instances of a software. This model is particularly useful for developers that need a development platform for their applications or, to give you an elearning example, for big companies with Extended Enterprise audiences or multiple customers that need different learning environments, that can be managed by the same platform.
IaaS: the Infrastructure as a Service model is probably more interesting if you are in the IT department of your company. The IaaS model allows you to use and control servers, data centers and other IT infrastructures according to the services you need, as opposed to buying your own server or data center. Once again, this kind of model gives you the flexibility to pay only for the service that you need, instead of having a fully manageable (owned) infrastructure that doesn’t allow simple and quick changes.
SaaS/PaaS pricing models
Within the SaaS/PaaS models you will find a variety of vendors offering their softwares and platforms through different pricing models. It’s important to choose the right kind of pricing according to your company and elearning project requirements, in order to avoid any (bad) surprises!
Pay per user (registered): pay per registered user is the first kind of pricing that comes to mind when talking about SaaS pricing models. Basically your company is going to pay for a determined number of students registering in the elearning platform, which are usually billed monthly or annually. This kind of licence works very well when your user base is “stable” (meaning that there are very few changes in number and identity of the users), and it works best when you know your audience very well.
Pay per active user: when your audience is not always the same or you can’t predict exactly how many seats you need in your elearning platform, the Pay per active user model is going to be a lot more effective. For example, Docebo lets buyers pay for users that actually access a course, rather than registered users within the platform.
So for example, if your company has 30,000 employees but you know that on an average you are going to have 1,000 users in a one month period, you can enroll them all at once and then pay only for the trained users.
Pay per course or module: some vendors prefer to focus on a pay per course model; in most cases this means paying a starting fee and then paying for the amount of courses your users are going to take. Another option for the vendor is to sell its core platform and then a certain amount of add-on modules that the buyer can add to the core.
Pay per licence/time: this pricing models allows the buyer to pay a one time fee based on how long the platform is going to be used, so that you don’t have to worry about number of users (active or registered) or numbers of courses taken. You simply have to click on the buy button, and you do not have to deal with payment issues again until your purchased product (per time period) has reached its expiration date!
In this blog post we presented just some of the most common pricing models available on the market now, but there are a great variety of models out there and that is constantly evolving as companies and startups look for new innovative ways to sell their services in the best win-win scenario both for the vendor and the buyer.
If you are interested in this subject you can take a look at Docebo’s pricing plans, and if you want to read more, take a look at this insightful article on Capterra’s blog about what Learning Management Systems cost.