How to choose the right LMS pricing model
Aristek Systems
Custom Software Development inspired by humanity. eLearning, HealthTech, Logistics, and AI/ML/DS Expertise.
Seeking an efficient LMS platform to boost eLearning and corporate training? Dissatisfied with your old solution and switching to a new one? Naturally, you're doing your research on LMS pricing to avoid paying extra.
Good news! You’re in the right place.
In this article, we’ll help you wrap your head around LMS costs and find the best value for money.
What is LMS pricing?
LMS pricing refers to the costs associated with using a learning management system to deliver and manage online learning materials.
It’s no secret that pricing influences the final choice a lot. In fact, one of the biggest barriers to satisfaction with LMS software is the cost of the program (44%).
LMS costs can vary greatly depending on the number of users, functionality, level of customer support, and other things offered by your vendor.
Yet, how to estimate the total cost of LMS ownership? What expenses to be prepared for? Let’s find this out.
Factors that influence LMS costs
Various factors determine how much your LMS platform will cost. We’ll explore them below.
The most common LMS options on the market are ready-made (off-the-shelf) products and custom solutions. We’ve compared pros and cons of both LMS types here.
In general, ready-made solutions are less expensive and quick to launch (around $5-15K per year for license/subscription, based on our pricing research), but often mean a bunch of additional costs in the long run.
But is there a middle ground? Yes, a pre-built LMS.
A pre-built LMS includes all the essential features of a ready-made product but is highly customizable at the same time. A quick launch and rapid deployment make it a go-to option for those who need to get started quickly. And it's very affordable!
Plugins, integrations (e.g., SSO, content authoring tools), third-party content, non-standard features, such as gamification — all these expenses will be added to the cost of the LMS regardless of the pricing plan.
So, it's important to consider these additional costs when budgeting for an LMS implementation, as they can significantly impact the total investment.
Implementation costs and setup fees vary greatly depending on the provider and your choice of LMS type.
They may include external consultants or experts, hardware installation, migration from an old LMS, data storage, integrations with existing systems, and others.
Providers often include onboarding and basic support (knowledge base, phone, or email support) in LMS pricing. Nevertheless, advanced support, such as priority support or having a personal customer service manager, often comes with an additional cost.
LMS software requires ongoing maintenance for bug fixes, updates, and upgrades to ensure the system is running smoothly. Also, various customizations usually involve configuration, which requires the help of a developer.
Other factors that can influence LMS costs are the number of users, a mobile app version, some training courses, learning modules, and so on.
All these things can be grouped into three categories: one-time, recurring, and hidden costs.
Now that you know what LMS costs consist of, let’s explore the available pricing options on the market.
LMS pricing models
A learning management system's pricing model is actually its most obvious expense. Its options depend on the type of LMS: self-hosted (on-premises) and cloud-based. Let’s explore the main pricing strategies for each one.
1. Cloud-based
FYI. A cloud-based LMS is software that is hosted on remote servers and accessed via the internet. It allows for easy access to learning materials from any device with an internet connection, making it a convenient option for remote learning.
This LMS pricing model means you pay a fixed price for a certain number of users. It’s also called pay-per-user or pay-per-seat.
For: The more users in the LMS system, the smaller the cost for each individual. Also, it lets you enroll plenty of people at once, so it’s helpful if you need to budget for monthly or annual spending.
Against: Even if learners don’t use LMS, you’re still paying for them. So, the ROI becomes uncertain.
In contrast to the previous LMS pricing model, this option allows you to pay only for users who have created an account.
For: You don’t pay for those who haven’t registered. So, this payment model saves costs for companies with fluctuating training participation rates, providing flexibility and cost-effectiveness.
Against: Auditing and removing users on a regular basis might be necessary to make room for new students. This time-consuming process may lead to disruptions in user access and create administrative burdens for the company.
Pay-per-active-user pricing allows for unlimited users to be added to an LMS, only charging for those who log in and stay active during the billing period.
For: This model addresses the cons of pay-per-learner and registered user pricing plans because you pay for learners who really use the LMS. You also don’t need to audit and remove users regularly.
Against: As good as this model sounds, vendors provide different definitions for ‘activity’. So this pricing model doesn’t always look the same, which poses some difficulties.
A pay-as-you-go model offers minimal costs during off-peak periods but increases them during hot seasons.
For: Pay-as-you-go models allow for flexibility and scalability, making them useful for businesses with changing demand.
Against: They may not be cost-effective for businesses with high and consistent usage needs, as they could end up paying more in the long run compared to fixed subscription models.
This pricing model is suitable for companies that only need special online training and certification a few times a year.
For: You only pay for what you use, and the price increases only as the number of users grows.
Against: Unexpected user increases can significantly grow your expenses.
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2. Self-hosted:
FYI: A self-hosted LMS is installed and managed on the organization's own servers, providing more control over customization and data security. It allows organizations to tailor the platform to their specific needs and integrate it seamlessly with existing systems.
At the same time, it's the company's responsibility to maintain hardware, and potential scaling means spending more money on equipment.
A subscription model involves purchasing a periodic license, paying a monthly or annual fee, and adding the desired number of users and courses.
For: You’ll be aware of the total cost upfront. Also, it allows for a great number of users. So, you don’t need to worry if an expected number is unclear. What’s more, this model is often available for cloud-based systems.
Against: Regardless of usage, the entire monthly fee must be paid. Moreover, there’s always a risk of paying for features you don’t need.
Perpetual licenses involve a single payment that guarantees LMS use for as long as the client needs it.
For: It offers a one-time fee for LMS software download, saving time on implementation and training.
Against: However, it also involves ongoing maintenance, updates, and feature management, especially for large user bases.
Open-source are examples of free models. They are available to everyone without any upfront costs.
For: They’re free. Also, they allow for flexibility and an unlimited number of users (as long as you don't purchase any third-party materials).
Against: If you want more than a basic functionality, open-source LMSs won’t be free anymore. You’ll need to pay a yearly subscription fee, which covers customization, integrations, maintenance, etc.
Choosing the best LMS pricing model
Congrats! Now you know how LMS pricing models work. So, it’s time to choose one for yourself. Here are five simple steps to get started.
First things first. These are the main questions to ask yourself for starters:
Once you’ve decided on the LMS type, it will be easier for you to move further and exclude unnecessary options.
2. Describe must-have functionality
It’s important to define what features you can’t do without and use them as a key criteria. You can also research two more categories: nice-to-have and unnecessary functionality.
This will help you save time, effort, and money, as you won’t consider options that you don’t really need.
Here are some features and integrations examples:
SSO automates the login process using authentication supplied by companies such as Microsoft and Google.
As a result, you’ll make the login process easy and painless for your LMS users.
This feature will allow you to monitor progress with detailed analytics devoted to any course, skill, or test.
What’s more, you’ll be able to export detailed reports, integrate with BI tools, provide personalized recommendations, and much more.
The customer received a fully GDPR and FERPA-compliant data analytics solution that improved operational efficiency and provided actionable insights on curriculum effectiveness, platform usage and engagement metrics, district and school performance, and much more.
A virtual event, webinar, or conference can be easily hosted in real time within your learning platform with the help of these integrations. This allows for seamless communication and collaboration among participants, regardless of their physical location.
To make your LMS truly cutting-edge and retain more learners, you can boost the platform with elements of gamification (leaderboards, badges, and levels), an inbuilt chat to keep all learning communication in one place, notifications to remind you about uncompleted courses, or AI-powered tools!
Learn how we built an AI-driven content generator for an EdTech platform, saving up to 90% of the time typically spent on quiz creation.
3. Estimate the number of users
Most LMS pricing models depend on user count, so it's crucial to calculate the total number of users during your ideal billing cycle. This is to determine if the LMS can scale for your projected active users.
Moreover, consider any potential growth in users over time to ensure the LMS can accommodate future needs without significant cost increases.
4. Consider hidden costs
Don’t forget to estimate hidden costs, as they’re also a part of the total LMS ownership. Therefore, it’s essential to evaluate them to make an informed choice that aligns with your budget and subscription requirements.
They may include upgrades and downgrades, cancellation and refund policies, exit costs, and so on.
For example, if downgrading is possible, you should determine if users can log in after reaching the limit and if fees apply.
5. Analyze potential vendors
To choose a reliable and trustworthy partner, do some research. Analyze potential vendors’ area of expertise and years of experience, go through the portfolio of projects, check for company reputation, and others.
To learn more, read our previous edition: Five Q&As that will help choose an eLearning vendor.
What’s more, you might need some tips to create an efficient LMS RFP. So, here you go!
Making the right choice
LMS costs are influenced by various factors: LMS type, pricing model, features and integrations, onboarding and customer support, and much more. Moreover, different vendors offer different solutions and pricing plans.
It is important to carefully evaluate each vendor's offerings and compare them based on your organization's specific needs and budget. Additionally, consider the long-term and hidden costs of maintenance, upgrades, and potential scalability as your organization grows.
We hope this LMS pricing guide has been of use to you! If you have any other questions, don’t hesitate to reach out.