How much should you pay for e-learning provision?

Are you getting the best price for your e-learning? Do suppliers expect you to haggle? We ask the experts.

Taking on the mantle of Minder character Arthur Daley and wheeling and dealing your way through the e-learning market is probably not a role many training managers see themselves in. But with training departments having to keep an eye on the company purse, knowing how to cut the best deal for your organisation arises is no bad thing.

Recent research into e-learning carried out by learning and communications company Epic revealed that while e-learning providers have seen year-on-year growth of 18% at a time when general training revenues were static or declining, in some cases they have been prepared to sacrifice profitability in a bid to build market share.

We should also remember that while e-learning as we know it today has been around more than 10 years, in many ways it is still more of an emerging sector than an established one.

And while recent years have seen some consolidation, especially at the top end, it also remains a relatively fragmented market with providers jostling for position and seeking to mark out their patch. So does this mean it is a good time to buy e-learning?

As you would expect, the answer comes in various shades of grey. Overall, it does seem providers are receptive to negotiation in many instances, but customers should enter into negotiations with their eyes wide open so that a perceived good deal doesn’t turn into a false economy. Crucially, they should know precisely where the savings are being made.

“There is always scope for negotiating price, whether you are buying bananas or branded learning,” says David Hill, director of Echelon Learning. “But make sure it is the processing costs, not the learning or product design features, where you look to make the savings – the quality of design is all-important to the learner and to the programme’s success.”

Alan Samuel, head of UK operations for Tata Interactive Systems, one of the pioneer e-learning companies and part of the global Tata Group, says there is usually scope for negotiation, but it will be based on tailoring the solution to budget, as well as size and duration of the course and the potential volume of business in a given timeframe. But he admits clients are benefiting from a competitive marketplace. “Developers are tending to deliver more value for the price,” he says.

Indeed, training managers might be surprised at the level of discounts.

David Marshall, managing director of London-based e-learning and career management consultancy Marshall ACM, says there is massive scope to negotiate off-the-shelf content, with some e-learning salespeople given almost free rein to quote a per-person fee. He said it is quite realistic to think you could negotiate a provider down from £15 to £7.50 per person, which could add up to a considerable cost-saving across a large organisation.

Flexible pricing

Open Mind, a Henley-on-Thames-based independent supplier of generic e‑­learning courses from 20 different producers, says price per user can range from £25 down to around 15p depending on the range and number of users.

“Some producers we represent are willing to be flexible on pricing, usually by offering extra courses or increasing the number of users,” adds managing director Alun Harvey.

As long as you have already assessed or road-tested the product and know it meets your training needs, haggling over a per-user price for a piece of off-the-shelf content should not represent too much of a minefield. But, with bespoke content, there are more variables to contend with, and screwing down a supplier too tightly may mean your end product falls short of your own expectation.

The pricing model is usually project-based and if you want lots of interactivity, along with rich media such as video, then you’ll be unlikely to do it on a shoestring. That said, advances in technology mean you can expect more for your money than five, or even three, years ago.

Rob Arnsten, managing director of York-based MyKnowledgemap, which provides a range of web-based learning and knowledge systems, says new ways of working have brought development costs down. But he adds: “Clients’ expectations have also risen: they want to purchase extras – tools that let them customise courses to suit particular learners, support for mobile devices, podcasts and socially networked sites to support a particular course.

“As e-learning becomes more modular, negotiating on price can often involve having to make careful decisions about which options and add-ons will best support a particular course,” he says.

Get what you want

The key to getting what you want at the right price when it comes to bespoke learning, says Marshall, is good project management.

“You need to be very tight with your requirements – course length etc,” he says, “and you have to let the consultancy know it is a competitive tender.”

The reduction in development costs and time should not be overlooked or underestimated by purchasers of bespoke learning programmes.

Improvements in e-learning creation tools and software has even spawned the advent of a genre – rapid e‑learning – which sees drastically reduced turnaround times come down from months to days and costs from several thousand to a few hundred pounds, if not less (Training & Coaching Today, January 2007).

The ease of use of these tools also means that providers increasingly face competition from their own clients.

“Some providers, especially custom development houses, are seeing this sort of pressure from new rapid development tools being used in-house to create proprietary content,” says Kevin Young, managing director of Skillsoft.

“And/or there is the increased use of offshoring of the coding of such content from a number of companies.”

It is likely that new working models and cost models will emerge as we see more offshoring and more companies opting to move content design and production in-house. And rather than going to a bespoke e-learning consultancy to deliver the entire programme, customers may pick and choose which parts of the process they want to do themselves and which they want to outsource.

For instance, in many cases, clients are their own subject matter experts and they can assign people in-house to create the bulk of the content for a particular programme.

Justifying the learning

Whatever form the new models take, ­clients should be the winners when it comes to cost. But for those who need to make a business case to their bosses to justify the learning, an historic like-for-like cost comparison will not be straightforward, says Steve Hill, head of research services at Learning Light, the Sheffield-based learning technologies specialist.

“These days, the cost of e-learning is often part of a more complex cost/benefit model associated with a bigger picture of client organisations offshoring and outsourcing their infrastructure services,” he says, warning that clients should be aware of additional costs as e-learning projects mature within organisations.

These could include ensuring there are also budgets for quality assessments, change management programmes and ongoing communication with the business. Hill says: “There will be more costs associated with short- and long-term evaluation of the business impact of e‑learning.”

“The days of organisations experimenting with e-learning and learning from the experience of doing something innovative have gone,” he concludes.

Negotiation tips

There is more scope for haggling when it comes to off-the-shelf software than custom-built, but ensure you have road-tested any generic courseware before you commit to a deal.

When negotiating for bespoke e-learning, be sure to balance the budget with your expectations. The more interaction and rich media, such as video, you want, the more you’ll have to pay. It is important to be clear about your requirements.

If you are presented with a good deal, make sure you know where the cost-savings have been made. If it is in processing time and effort, fine if it has been made at the content creation or design stage, it may not be.

Let the provider know it is a competitive tender. Shop around and make sure you are aware of typical development and production costs.

Beware of hidden costs, such as quality assessments and communication and the marketing of the e-learning programme to the target audience.

If you decide to take the e-learning production in-house and use some of the rapid development tools available in a bid to cut costs, be realistic about your team’s time and resources. Carry out a careful assessment of what you can do yourselves and what you might need to outsource.

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