Mistakes To Avoid When Purchasing a Learning Management System
Introduction
Many organizations spend in excess of $100,000 to conduct a Learning Management System (LMS) procurement. In some cases the cost of conducting the procurement is greater than the value of the technology being procured for the organization. For many organizations, assumptions regarding available product capabilities and anticipated expense result in extremely poor procurement process outcomes. In this edition, we will address the pitfalls and mistakes many organizations make when conducting a learning technology procurement.
Understand Your Current Situation
Nearly all “competitive” procurements for LMS technologies are generated by one or more of the following factors:
1. Organizational policies that require purchases exceeding a certain dollar threshold to be competitively awarded.
2. Dissatisfaction with the results being achieved with the current provider.
3. Assignment of new management personnel overseeing the organization’s training, education and talent management programs that are unfamiliar with the organization's current technologies.
4. Changes in business conditions that require that the organization seek either more capable or less expensive technology.
It is worth noting that few if any organizations have a process in place to determine if the price being paid for the organization’s current LMS technology is reasonably competitive based on the organization’s requirements. Following an “if it is not broken, don’t fix it” approach to avoid replacement of technologies to satisfy the organization’s requirements, but are wildly over-priced is not a good business practice.
Nearly all organizations fail to do the following prior to expending tens or even hundreds of thousands of dollars to conduct an LMS procurement process:
1. Conduct a Request for Information (RFI) to determine if the organization’s requirements can be met with a technology that costs less than the organization’s competitive procurement requirement threshold.
2. Hold upper-management discussions with the organization’s current LMS provider to determine if the organization’s dissatisfaction and/or concerns can be easily resolved thru personnel training or minor modifications. You may be surprised at how fast the issue(s) can be resolved if the provider is faced with a potential loss of business.
3. Check to see if the organization’s current provider can supply the additional capabilities or price reduction required by a change in business conditions.
Defining Organizational Requirements
The first step in planning a learning technology procurement should always be to conduct a thorough assessment of the organization’s requirements. Click here to download a comprehensive example requirements listing. It is an editable spreadsheet to enable you to tailor it to your organization's needs. Always identify the total number of technology end-users as this factor can significantly influence the pricing from many suppliers. Please feel free to use our online Learning & Talent Management Technology Evaluation Tools to get started and compare features an pricing of LMS suppliers.
Develop a List of Potential Suppliers
The identification of prospective suppliers and collection of independent reviews of their technology offerings should also be accomplished. As a starting point, I suggest including the following suppliers:
While this list is not meant to be exhaustive; it is representative of the majority of LMS installations. The pricing, marketing focus and scalability of these suppliers varies widely. For example, very few of these suppliers are experienced in hosting large-scale (>100,000 user) implementations. Some are narrowly focused on primary and higher education. Others are solely focused on small (<500 user) clients. Providing your requirements in the form of an RFI to any or all of these suppliers will give you a better sense of how their capabilities, pricing and focus align with your organization’s objectives.
Always Conduct an Request for Information
There is never a good reason to not conduct a Request for Information (RFI) or a sources-sought process prior to spending tens of thousands of dollars to conduct a competitive procurement. The RFI process is inexpensive and will provide the organization with the information needed to determine the following:
1. The suppliers that are qualified to support the organization’s requirements.
2. The scope/range of pricing offered by each supplier to meet the organization’s requirements.
3. Capabilities and requirements that the organization may have failed to consider.
4. The suppliers that can satisfy the organization’s requirement at a price less than the threshold that mandates the conduct of an expensive competitive procurement process.
Many of our clients (both Government and Commercial) have used sole-source purchase procurement methods to acquire our KMx Learning Platform. Our KMxSaaS and unlimited user KMxASP hosted solutions are priced less than the competitive procurement threshold mandated by most organizations.
Click here for information and instructions to assist with preparation of RFI and sole-source procurement documentation.
Assignment of Qualified Personnel and Use of Procurement Consultants
Many organizations fail to include the personnel that are actually qualified to assess responses from an LMS supplier on the team responsible for supplier selection. Trust me, the minute an RFI or RFP is released by the organization, the people that are qualified are going to wonder why they were not included. This mistake will cost the organization regardless of the outcome of the anticipated procurement.
Some organizations hire “Procurement Consultants” that make representations of being honest brokers and experts in the field. Unless an organization has staffed their human resources, training, information technology and talent management teams with wholly unqualified personnel, use of a “Procurement Consultant” is always a mistake. The only “experts” of what your organization is trying to achieve with its’ training, certification, education and talent management programs should already be employed by the organization. If not, stop even considering the conduct of an LMS procurement until this personnel gap is resolved.
Budgets and Assumed Expenses
What an organization is paying for learning technology today is not a good starting point for projection of future costs and the development of budgets. An organization that procured their current learning management technology more than 4 years ago almost certainly paid more than what technology with the same capabilities would cost today. It is also likely that your current supplier has reduced their pricing in this time-frame. The reason for these price reductions is threefold:
1. LMS vendor competition has increased significantly.
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2. Many LMS providers have merged or been acquired by a competitor.
3. Technology and data-center hosting services capabilities are advancing at a rapid clip, making both much less expense for LMS providers.
It is also important to understand that none of the most expensive Learning Management Systems provide additional capabilities that justify their price. This is because many of the lower priced Learning Management Systems have been developed with superior architectures and more advance engineering methods that enable features and capabilities far beyond that of even the highest priced LMS technologies.
Many LMS customers are completely unaware of the history of the company providing their current LMS. All of our primary competitors have gone thru acquisition or merger with another LMS supplier. In most cases, these mergers and acquisitions have been the result of poor financial performance of one or more of the merged/acquired entities. Several of these competitors are now owned by entities that are either venture capital organizations or corporations that do not provide LMS technology as a primary offering.
Itemize and Understand Cost Elements
The pricing from the various LMS technology suppliers varies widely. Most suppliers charge fees based on the size, scope and complexity of the customer's programs. Some suppliers, including KMSI, provide unlimited use pricing that can be significantly less for organizations with more than 2,000 users, have a large library of offerings, or have complex assignment and access requirements.
All organizations have unique information technology security requirements, specifications and integrations standards. This information should be itemized early in the process to ensure that any resulting procurement documentation provides prospective suppliers with accurate information to ensure that these items are fully addressed in their cost estimates.
Transition from one LMS to another does not have to be expensive. The price for most LMS transitions should be in the range of $5,000 to $25,000. If a supplier is quoting a price higher than $25,000, it is usually either due to lack of standards conformance or experience.
Use of 3rd Party Technologies to Satisfy Requirements
Unlike KMSI, most of our competitors cobble their offerings together with other 3rd party technologies (authoring tools, virtual classroom technologies, visualization tools, etc.) to satisfy customer requirements. This approach significantly increases security vulnerabilities, integration expenses and customer support issues. In most cases, this approach leads to the distribution of customer confidential information and personnel data to a number of 3rd party suppliers; each with their own security vulnerabilities. Customers should always require that suppliers clearly identify any 3rd party technologies needed to satisfy their requirements to mitigate risk, control expenses and to ensure the long-term viability of the solution being offered. Issues to consider include:
1. Storage and maintenance of sensitive personnel and program data elements with multiple suppliers.
2. Implementation of system access authentication protocols across multiple platforms that may significantly increase expense and introduce unnecessary security risk.
3. Program management efforts associated with procurement and integration of technologies from multiple suppliers normally presents unnecessary financial and schedule risk.
4. System availability and stability will always be degraded with a multiple supplier solution.
At KMSI, all core services (virtual classroom, proctored testing, AI features, authoring tools, gamification, adaptive learning, visualizations, etc.) are provided in the central architecture of our KMx offerings from our core software installations. This methodology eliminates 3rd party system security vulnerabilities, system availability issues, integration expense and propagation of client sensitive data and personnel information.
Read the Supplier Product Reviews
There are two types of LMS Supplier Product reviews:
· Independent
· Sponsored
An independent review is one where the reviewing entity has no financial interests in the company that produces the product being reviewed. These are generally rare in the LMS industry. Click here for an example of an independent review.
A sponsored review is one where the reviewing entity has received compensation from the company that produces the product. This compensation can be direct or indirect. Direct compensation is the payment of a fee to the reviewing entity for their time to write the review. Direct compensation reviews are always glowing. Often, the method of compensation is indirect and hidden from the public. Indirect methods come in many forms, including:
1. Fees paid for awards issued by the reviewing organization.
2. Fees paid for trade show booths and sponsorship of conferences and events.
3. Fees paid to obtain membership in the reviewing organization.
4. Fees paid for advertising thru the reviewing organization.
5. Fees paid for article inclusion in the reviewing organization’s periodicals and/or magazine.
Obviously, significant weight can be applied to independent reviews in conduct of a procurement evaluation. No weight should ever be applied to a sponsored review. Sponsored reviews are simply paid advertisements
Award to the Supplier that Meets the Requirements at the Best Price
Most organizations have strict rules for obtaining the best value as a result of procurement actions. There is never a good reason to pay more for one solution over another that meets your requirements. Selection of a provider that “exceeds” your requirements means that the vendor proposed a capability or feature that was not included as a requirement in the RFI/RFP.
All of the responding vendors are going to provide you with the best price to meet your stated requirements. If a capability or feature is offered by a supplier that “exceeds” your requirements, almost certainly that vendor’s price will be higher. If this situation arises, provide the other vendors that met your stated requirements with the opportunity to meet your “new” requirements. This approach will always result in a better price and value for your organization.
A good rule to follow is to use go/no-go criteria for your stated requirements and then ask the 3 lowest priced suppliers to conduct demonstrations. One of the three will impress your evaluation team. If not, keep moving up the ladder.
For additional information and free procurement support tools, click here.
Critical read! Can you share tips for navigating the complexities of choosing an LMS?
Looking forward to insights! Which common mistakes do you find most impactful for LMS purchases?