We have been looking into Total Cost of Ownership (TCO) recently in our consulting division, it’s interested to see that this is often discussed by organizations looking to compare Learning Management System (LMS) offerings.
Here’s a few things to consider when calculating the TCO:
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Licensing costs
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Hosting costs
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Setup/implementation and consulting fees
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Integration costs
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Data migration
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Maintenance
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Change management
It’s important to note that TCO isn’t just the costs associated with moving from one enterprise software vendor to another, instead, you have to consider the other costs internally that you have. For example, from the list below training and change management would be one.
We compared Totara Learn, the leading open source enterprise LMS, with another leading enterprise proprietary LMS. We reviewed Totara Learn pricing based on several partners in the market where information was freely available.
For this test, we made a few assumptions, these were:
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3,000 – 10,000 users
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No setup, consulting or configuration fees were required with the proprietary vendor
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No integrations were required for both Totara Learn or the proprietary vendor
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Support fees and hosting not required for the proprietary vendor as they were including in their Software-as-a-Service (SaaS) offer
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All other costs in the business as part of transition were not included in the calculation (e.g. training and change management costs)
The key takeaway here is that although the upfront cost for Totara is more expensive than proprietary, you will actually save more over time than a proprietary solution due to the licensing costs. Another added benefit to open source solutions such as Totara is that you control the roadmap for your platform, not the vendor.
Some considerations when choosing your LMS vendor:
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Don’t forget TCO costs internally that are ‘hidden’ such as training and change management, ensure they are in your calculations
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Data migration is key, if you are currently using an LMS you will need to clean your data, or ask the vendor to do this
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Proprietary SaaS LMS vendors business model is to start small on a license fee, as you add more functionality modules, price per user increases significantly
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With open source LMS vendors like Totara Learn, new modules and functionality is included in your annual subscription fee
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If you move vendors in the future, be sure to check with your proprietary LMS provider what the exit fee would be, they won’t want to lose you and so it’s likely they will try and stop you in your tracks
Where would you rather spend your L&D budget? Filling the pockets of overpriced learning technology companies or investing in initiatives that drive the development of your employees?
This This blog was originally published on our UK site and rewritten/edited for the US site.