Pricing of Learning Management Systems (LMSs)

by

Desmond Keegan

Presentation

This is a presentation of 113 in-depth interviews with leading European

authorities on e-Learning. The interviews represent a selection of
institutions in 17 European countries. They may be grouped thus:

Area Number of institutions

Southern Europe 21
Czech Republic and Slovakia 14
Norway 24
Germany 17
North Western Europe 20
Northern Europe 19
Total 113

The respondents are authoritative experts on European e-Learning, as

they are the systems managers for online learning in their institutions.

It is to be noted that information has been provided by the LMS/VLE

managers themselves, and is posted unedited. The validity of the
information and any judgement expressed in the text is therefore wholly
the responsibility of the interviewee. The author has not evaluated the
responses and potential purchasers should ensure that products satisfy
the needs of their organisation before purchasing.

2002 United States statistics place the value of the e-learning industry in the
United States alone as $3.000.000.000 and this is set to grow to
$18.000.000.000 by 2005 according to IT analysts IDC Research. A whole new
sector of educational provision has emerged. University degrees, college
diplomas and training certification are being offered nationally and internationally.
E-learning is the floavour of the month. Education and training providers are
migrating their programmes from face-to-face and distance learning to e-learning.
For all these reasons the pricing of LMS systems is of great importance.

The participating e-learning systems managers were asked:

1. Cost of the LMS (Learning Management System). What is the cost of the LMS
to the institution?

2. Annual fee. What fees have to be paid annually for the system by the
institution?

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3. Student Enrolment fee (100 students, 1000 students, 10000 students.) How
do fees to use the LMS vary when the student base is 100 students, 1000
students, 10.000 students? Is online invoicing available?

4. Maintenance costs: staff involved in management, IT specialists, trainers, etc

What is the maintenance cost to the institution of the LMS and what staff
resources are need to maintain it and keep it functioning?

5. Training of teachers and learners and system users. What costs are involved
in staff and student training to use the LMS system?

The purpose of the first question was to find out the cost to the institution of their
investment in an LMS for e-learning. A surprising number of the system
managers do not answer this question and many do not seem to know. Another
group answer that this is confidential information and cannot be disclosed. Many
of those who possess self-developed systems reply 'none', but, although some
may have been developed as staff or student projects, a number of the other
answers indicate that there is considerable cost to the institution in self-
developed systems.

The answering to the second question was poor and superficial. The purpose of
the question was to identify costs in the case where an institution paid an initial
fee for the LMS and then had to pay an annual licence fee in addition to the initial
payment.

The question: 'How do fees to use the LMS vary when the student base is 100
students, 1000 students, 10.000 students?' was answered in three ways. Many
respondents chose to ignore the question; others replied that they had bought a
campus -wide licence; others indicated varying levels of cost for varying levels of
student enrolment. The purpose of the question was to identify systems with
scalability up to and beyond 10,000 enrolments; a second purpose was to identify
systems where the price to the institution changed as the number of users
increased.

Question 4 was worded: Maintenance costs: staff involved in management, IT

specialists, trainers, etc What is the maintenance cost to the institution of the
LMS and what staff resources are need to maintain it and keep it functioning? It is
clear that the cost to an institution of establishing an e-learning system does not
stop when the LMS has been purchased and all license fees have been paid.
Staffing of the e-learning department is a further cost and this staffing is both
pedagogical and technical. There are costs in server provision and maintenance
and costs in database installation and maintenance, and it is clear from replies
from those systems that needed an Oracle database that these costs can be
substantial.

Costs to an institution for establishing an e-learning system do not end when an

LMS is purchased or developed and when staffing is provided for system
maintenance and student support, there are costs for the training of staff and
students too. From the answers to this part of the questionnaire it would appear
that the majority of the LMSs purchased or self-developed are reasonably user-
friendly and do not require lengthy staff or student training.

What is the cost of the LMS to the institution?

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29% of respondents give no answer to this question. This seems a remarkably
high percentage. Many say that they do not know. As all are systems managers
for e-learning in their institutions this reply causes surprise. It would seem that
some indicate that this is not a concern of theirs and that their responsibility is with
educational matters and the cost of the system is not of importance.

A further 7% state that this is confidential information that they cannot divulge.
The reasons for this may be that the institution negotiated a special price for the
LMS with the vendor; in other cases it appears to be institution policy not to
divulge the price of the LMS purchase.

No fewer than 25% of respondents state that their systems are self-developed.
This is a high proportion in the face of commercial e-learning LMSs in the e-
learning industry which was valued at $3.000.000.000 in the United States alone
in 2002 and was calculated by industry analyst IDC Research to grow to
$18.000.000.000 by 2005.

The institutions that have self-developed LMSs indicate the cost of their system to
the institution in various ways. Many state that it is free, or at least free plus
hardware and database costs. Typical answers are 'None - except server and
database system'; 'not calculated - it was a project'; ' not calculable, hardware and
database costs, Oracle cost ? 100.000'; 'a research project - free'; 'in house, no
fee', 'the company paid for the development'; 'the start-up costs were high';
'developed within a student project'.

Other self-developed systems realise that there is a staffing cost and development
costs to self-developed systems. One Norwegian institution states 'At the moment
there is a development team with 5-6 people who work with the development of
the LMS and our other web-related systems and services. They also handle
technical support, much content development, EU projects etc. My best estimate
is that about one third of the development team's time is spent on development of
the LMS. The annual cost is about ? 100.000'.

A German institution with a self-developed LMS puts the cost to the institution as
DM 50.000-60.000 or ? 30.000. A Czech institution puts the cost of their self-
developed system at CZK 1.100.000 or ? 36.484.

The conclusion is that although self-developed systems may be owned by the

institution and there are no annual licensing fees the costs of server space,
hardware and database provision may be considerable. In addition there can be a
considerable cost to the institution in the development of the LMS. To this must be
added the cost of maintaining the LMS and adapting it to new software releases
as they become available.

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A United Kingdom firm called Chest has provided on the internet at
http://www.chest.ac.uk/datasets/vle/checklist.html an analysis of the costings
of the major LMSs in use in the UK. These are:

• Blackboard
• FD Learning Environment
• Granada LearnWise
• Teknical Virtual Campus
• WebCT.

As most of these have figured in replies to this project's questionnaire a short

extract of the report is reproduced here, with the proviso that the costings may be
those which Chest has negotiated for its customers rather than the actual market
price. Readers are referred to the full report at the URL given above.

Features Blackboard Learning Learnwise Virtual WebCT

Environ Campus Campus
Ed Pilot
Owner www.blackb FD Granada Teknical WebCT Inc
oard.com Learning, Learning, Hessle Lynnfield
Sheffield Manchester HU13 0PF MA 01940
Agreement One year Variable Annual 3 years 12 months
period by licence
agreement
Type of Priced on Standard Based on Full site Up to 3000
licence the size of options number of Student
the with registered seats per
institution gradationsusers server
Scalability From 400 to Highly A 3-tier This offer Up to 3000
80000 Java up to student
application 10000; seats (Pilot
highly apply for Unlimited
scalable higher >100000
Entry level Dependent Varies Costs on £2900 for £4500 plus
cost on the size according banding: up to 1000 VAT pa
of the to size in 0-500£2000 £15000 pa
institution FTEs <10000 <10000
£10000 pa
<50000
£25000 pa

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WebCT is the clear leader of the major American LMSs with 17% of respondents.
Their replies on the question of the cost to their institution are confusing and
conflicting. An Icelandic university states 'the university pays for the LMS and for
the servers'.

There is a grouping of replies about the same range. A Czech university says
'$5000 for the year 2002'; another Czech university says 'unlimited licence
$5000', a Swedish university says 'the licence is SEK 40000 per year (? 5000)', a
UK university states clearly 'for 2002 the unlimited WebCT Standard Edition is
$7000 up from $5000 in 2001', another UK university says '$5000 flat fee', but
that may have been for the previous year. A French university repeats the '2002
$7000, 2001 $5000' statement whereas two Portuguese institutions state 'US
$5000 per year' and '? 5986 per year'.

On the other hand a UK FE college states clearly 'this year's unlimited user
licence for WebCT Campus is $29500'.

There seems to be some kind of consensus that 'for 2002 the unlimited WebCT
Standard Edition is $7000 up from $5000 in 2001' and many of the other costings
approximate to this and the price quoted in the Chest study is the equivalent of
$7000. The anomaly is the 'unlimited user licence for WebCT Campus' at
? 29500.

10% of respondents have purchased Blackboard and statements about the cost
to the institution from those who answered include '$80000 that is $50000 for the
learning space and $30000 for the database' from a German institution in
Lübeck; 'Blackboard Level 1 £4500 (? 7000) pa and Blackboard Learning
Systems £22000 (? 34000) pa' from a FE College at Manchester in the UK; and
an Italian institution in Bologna which gives ? 50000 as the annual fee for
Blackboard 5.

Of the other LMSs in the study a Swedish institution gives SEK 200000 or
? 22222 for LUVIT, a Norwegian institution writes: 'We pay NOK 98.000 (? 10000)
per school year for our use of FirstClass. This includes:
• Establishment fee: 10.000
• User fee (max 400 users): 27.000
• Web-structure and web-publication: 25.000
• Training: 24.000
• Misc.: 12.000.

Another Norwegian institution states:

The price we pay depends on the number of users. It totals about NOK 250,000 –
300,000 (? 27000-? 33000) per year. It includes both the LMS software and all
necessary server hardware and software. This is a good price for what we get,
but the economy section at another college thinks it is expensive. The distance
education students must pay NOK 2,000 – 3,000 per credit for a course at the
college. We operate with other tuition fees, since we sell courses to companies
and organizations.

A UK college using Ascot systems Course Maker quotes ? 62500, an Irish

institution using VISIT say ? 40000 and a Portuguese institution using EvoluiTech
says ? 40000 to ? 60000. A Swedish University using Ping Pong states: 'About

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1.000.000 kr/year (? 125.000) including licences, support, administration etc. A
Danish university using First Class quotes DKK 140000 (? 14000). A Slovakian
university using the Czech system Tutor 2000 says that it gets 50 tutors and 1000
students for $6969 but this contrasts with a Czech university which states that for
Tutor 2000 by Kontis plus Toolbook II Instructor from Click2learn they pay 'If we
consider total costs, that means the payment to Telecom, expenses for servers,
workstations, network, workers etc. then it is about ? 95,877 or 3 Million CZK.

Because of the complexity and in some cases contradictions of the data provided
by the interviews the author contacted both WebCT and Blackboard for their
official prices. Here are the replies.

For Blackboard:

There are three options – all details are for academic pricing.

• Price per course from the .com site $250 per course –
http://coursesites.blackboard.com

• Basic Learning System – one server configuration – annual licence fee

$7500.

• Learning System – multi server configuration with apis to LDAP/SIS and

Building Blocks – see http://company.blackboard.com/docs/cp/LS.pdf
Pricing based on institution's full-time-equivalent students and starting at
$25,000 per annum.

• Blackboard Community Portal – price based on institution's full-time-

equivalent students and starting at $15,000 per annum – see
http://company.blackboard.com/docs/cp/LSCP.pdf

For WebCT:

We have two levels of our Campus Edition product. WebCT

Campus Edition Focus license, which allows up to 3000 student seats and costs
$7000.

Our full Campus Edition Institution product is priced based on the FTE
or Full Time Enrollment Equivalent of the institution and allows an
unlimited number of student seats. It is priced as follows:

Full Time Enrollment Price:

2,500 or less $15,000

2,501 to 4,000 $18,000

4,001 to 8,000 $22,000

8,001 to 15,000 $26,000

15,001 to 25,000 $30,000

25,001 and over $34,000

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The move to e-learning is not cheap. Institutions need to be clear on their
return on investment, which includes the purchase or development of an
LMS, plus servers and databases and staffing.

What fees have to be paid annually for the system by the institution?

Many respondents chose not to answer this question claiming that it was included
in the previous answer or that they had a self-developed system and therefore
there were no annually recurring costs. Others stated that they had acquired full
user rights and there were no additional annual fees.

Among responses that quote a monetary figure were: a Danish institution using
TopClass who quote '28000 DKK (? 2800) plus training and systems operation', a
German institution from Lübeck who use Blackboard and quote '$50000 for the
LMS and $7000 for Oracle support', a self-developed system from Köln in
Germany who paid ? 40000 for a Sun Enterprise system.

A Danish self-developed system which states 'it is free but support costs
DKK50000 (? 5000) per year'. A Portuguese self-developed system states 'there
are no annual costs as the institution acquired all user rights'. A Portuguese
system using Blackboard says it pays for 500 licenses @ ? 30 each. A Finnish
University using WebCT states $7000 and a Czech institution using WebCT
states '$5000 rising to $7000', both answers reflecting some of the replies to the
first question.

A Czech university using the Tutor 2000 system from the Czech company Kontis
says 'The Institution does not pay any fees for already bought system from the
firm Kontis. This is a great advantage'.

How do fees to use the LMS vary when the student base is 100 students,
1000 students, 10.000 students? Is online invoicing available?

Answers to this question were also sparse most of those who did reply stating
that there was no extra charge for increased numbers of enrolments.

A German institution from Lübeck who use Blackboard say they have 'a campus
contract without limitation'. An Irish company using VISIT say they made a 'one-
off payment of ? 40000'. A UK FE college states 'we went for an unlimited user
license' with WebCT, and a Czech institution with WebCT informs us that 'the
licence for a maximum of 400 students is ? 5000 and that unlimited licences are
also available'.

A Czech university using Kontis' Tutor 2000 states: 'There exist amount discounts
for the student licenses: up to 50 students - ? 16 / 500 CZK/ license, up

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to 500 students - ? 6.4 / 200 CZK/ license, for more than 10,000 students - ? 2.6
.* / 80 CZK/license. I do not know if the online invoicing is available, but I do not
think so.

What is the maintenance cost to the institution of the LMS and what staff
resources are needed to maintain it and keep it functioning?

An additional cost to be faced by institutions considering embarking on e-learning

is the cost of staff and maintenance of the LMS. Various levels of costs are
reported by respondents to this survey.

A self-developed LMS from Darmstadt in Germany states '1 administrator, 1

course manager, ½ project leader, 1 freelancer.' Another German self-developed
system from Osnabrück puts it at 'a student for 46 hours per month'. A German
self-developed system at Hagen allocates 4 staff, while an institution at
Furtwangen using Blackboard allocates 1 full-time technician. A self-developed
system at Karlsruhe says 1 person all day and an institution in Lübeck allocates 3
staff to its Blackboard system.

An institution in Nörkoping allocates 3 web technicians and an Italian institution

with First Class says '3 teachers for 24 hours per week, 50 hours per year
technician'. A UK university using WebCT allocates 'academic: 1 staff member
per year; technical: half of one technician per year.' A Northern Ireland institution
with IT Campus costs it at £15000 per year.

A UK FE college writes: 'VLE Administrator (Online Systems Engineer) is the only

one dedicated to the VLE itself. However a specialist content team and mentoring
team are required as well as management. Another UK FE college using
Blackboard lists ' Bb administrator, BB trainers, IT technician support. Generation
of content costs much more than LMS'. Another UK FE college using WebCT
states ' Difficult to say. I work fairly full-time on it, but train, administer and
support as part of this, as well as developing some materials. We devolve e -
learning within the system to tutors within our Schools'.

A Portuguese institution using Lotus Learning Space says ' Human Resources in
the Virtual Institute – 4 to 5 people, 3 working fulltime. Annual costs of ? 99.760'.
Another Portuguese institution states ' 3 people make up the technical team: 1
Help desk, 1 multimedia technician, 1 system maintenance technician'.

A German institution in Berlin states 'At the moment, we have 2 or 4 people

working full time in maintenance. Specialists earn around 20 000 Euro a month.
Provider and online costs come on top of that.' A Czech institute in Prague states
' The staff is limited by the financial resources – the number is not satisfactory, an
enormous personal engagement is required. Selected activities are accomplished
by external specialists'. Another Czech institution in Ostrava states:

We have been working with the system juts for a short time and at the moment
we employ 5 specialists full time. One is specialised in the LMS Tutor 2000, the
second one is responsible for the work and training for ToolBook II Instructor, the
others prepare patterns for the single courses, the teachers can choose then. All
5 of them have passed the distance course for distance education. At the
moment director of the Centre for information technologies at the University is
managing the system.

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What costs are involved in staff and student training to use the LMS
system?

Replies to this question indicate that only small sums are spent on staff and
student training for e-learning. It would appear that both the commercial systems
and the self-developed systems are user-friendly.

Typical replies are:

A self-developed system from Darmstadt in Germany allocates 1 day to tutor

introduction. A self-developed system from Osnabrück in Germany suggests 1-2
hours for both tutors and students. An institution in Regensburg in Germany
allocates 4 hours for tutors and 2 hours for students. A self-developed system
from Karlsruhe in Germany states that ½ hour to 1 hour is needed to learn to use
the system. A German institution using Blackboard in Lübeck suggests ½ hour to
1 hour for students and 2 day seminars for tutors.

Other approaches are:

A Northern Ireland institution using Ascot Systems allocates 100 hours to staff
development for e-learning.

A UK college of FE states that much of training expenses is absorbed but they

allow £20000 (? 31250) per annum for it.

A Portuguese training institution states: 'Training of e-teachers and training of e-

tutors. Training of e-administrators and training of e-users. On average, 35 hours
courses cost ? 150'

Training of Teachers Course – pedagogical and technical aspects. 1 day 4

hours plus 15 days at distance. Costs are incorporated into the virtual
institute’s structural costs.

A Portuguese institution using WebCT states: 'Costs inherent to tutor and student
training in using the software (22 hours face-to-face for tutor training + 7 hours
face-to-face for student training) + travelling costs and living costs.

A German institution from Düsseldorf says: 'These costs incorporated in the total
teaching costs. Usually, each of our courses of study begins with a Presence
phase of one or two days, which includes an introduction to the system.
The introduction to administration takes one day. We cannot make any
statements regarding costs'.

A German institution from Kraushagen using Interwise states: 'Our project team
consists of six people. These are basically the usual teaching staff, but who are
allocated free hours by the Ministry of Education. These people train other tutors
free of charge. So here we just have our staff costs. The working hours involved
would cover three full-time teaching jobs. The training itself is carried out in
Presence sessions, or over the Net. This is our offer - training free of charge, in
the hope that other trainers join.

Slovakian institution reports: 'We have to divide here the training of instructors,
where the work with the systems is more complicated than by a student. For the
instructors there is a personal training needed, students normally receive a

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guidebook about the system operation in electronic form and there is the hotline
at their disposal.

A Czech university states:

Each of the teachers, who is starting the work with the LearningSpace, is trained
in two types of training. The one is a training of the tutor of distance education
(alternatively the author of the distance courses) and the second is a training how
to operate the LearningSpace system. The first one runs as a distance course,
the second one as a face-to-face course. The first one day training provided for
20 teachers by the firm Kontis cost ? 959/30,000 CZK. The following trainings are
run by the requalified employees from our Centre for information technologies
within their regular working time/content.

Conclusion

e-learning is not cheap. This project has done a considerable service to

European trainers and training organisations by collecting data on the costs of e-
learning LMSs.

There are three broad categories of approaches adopted by the European

institutions in this study to the provision of e-learning. These are (i) the purchase
of one of the major American LMSs like WebCT, (ii) the purchase of a local LMS
in their own language like Class Fronter, (iii) the development of their own
system.

Recent price rises have made the commercial LMSs a reasonably costly
investment. Although some self-developed systems were produced as a staff or
student project, when an institution honestly costs out the staff time for the
development and maintenance of their own system it proves to be a costly
investment too.

Expenditure on the LMS is only the first stage of spending. Hardware and
software to run the system is necessary too. The respondents in this research list
considerable sums for the staffing and maintenance of the e-learning system, and
others add that the provision of content is at least as much again. Expenditure on
staff and student training is, however, much less onerous.

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