Calculating the Return on Investment (ROI) for your LMS

If you’re adopting a learning management system (LMS), then chances are you will need to prove the return on investment (ROI). The method for proving ROI of your LMS will depend on the method your company is currently using for training. We’ll explore some of the differences below.

If your company is not currently using an online method for enrolling, training and tracking learner progress, the ROI equation is not only simple to generate, it also makes LMS-based training look quite attractive.

Here are some of the cost items to take into consideration when calculating the ROI of your LMS:

• How many people in your organization (new or reoccurring) do you train per year?
• What is the average cost of each course?
• Do you pay people to travel to courses?
• Do they require accommodation?
• What is the annual cost for an LMS that will fit your requirements?

Let’s take a look at these considerations using an example scenario. Say you have three job sites in Los Angeles, and one site in San Diego. The costs are as follows:

• 100 people per year take two, two-day courses @ $595 per person. Total = $119,000
• 50 people on average have to travel to a site in order to attend training, at an average travel cost of $0.60 per mile and with an average travel distance of 30 miles. Total = $1,800
• 25 of those 50 travelling require accommodations during the course @ $130 per night. Total = $6,500.00
• The total for 100 people to attend two, two-day courses in person = $127,300

Other costs that aren't included here:

• Flights (if air travel is required)
• Food
• Administration costs of keeping track of who has attended, completed and passed training need to be added. 

Record keeping may be manual, or online through a human resource management system.

By way of comparison, an average annual cost for a hosted LMS system based on Totara or Moodle is around $20,000 to $30,000 - depending on what add-ons you choose. A hosted LMS will accommodate well over 100 learners—we have clients with nearly 100,000 learners. You can also run as many courses as you like, make them available 24/7/365, and receive real-time reporting on learner progress.

What isn't included here is the cost of course development or purchase, if you do not own the content. Most companies have proprietary systems they need to ensure their employees are competent with, so many will either develop their own courses, or contract instructional developers to produce on their behalf. When paid for on this basis, a course can cost anywhere from $10,000 to $100,000 – depending on length and level of detail involved. When you have paid for course development, you can use the course any number of times you like -- reducing the per student learning fee significantly over time. The cost for the platform does not change no matter how many courses you run in a year.

We realize there are many variables that will affect the cost (and therefore the ROI) of implementing your LMS, such as your industry, compliance requirements, whether you are a public or private institution and the size of your company, among others. Need to get an idea of how much you could be saving with a professionally hosted LMS? Contact our LMS experts to find out more.

If you're looking for more details on return on investment, take a look at our Guide to Assessing ROI here.