Calculating the ROI for an LMS: Open Source vs. Proprietary

August 31, 2016

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Open Source vs. Proprietary Learning Management Systems

We're looking at the key cost differences between closed or proprietary solutions, and open source solutions such as Moodle or Totara LMS.

ROI: User Fees or No?

If you are considering a new LMS, a fundamental ROI question to consider is whether your organization is interested in paying a license fee per user on a perpetual basis. Proprietary learning management systems (LMS) require licensing fees per user (anywhere between $15-$100) usually on an annual basis, with a subscription and maintenance fee on top of that, to make sure your LMS is kept up to date. LMS’s based on open source software, like Moodle, do not require a licensing fee, and the software is distributed freely — this reduces the overall cost per user. In addition, any new functionalies available in new versions cost nothing to implement – save perhaps a bit of thought with regard to how best to take advantage of the new features! The per license costs for proprietary software may or may not include free upgrades, so be sure to find out exactly what the license fee involves if you are investigating proprietary systems like Litmos, Topyx, Saba, or Blackboard.

Open Source Systems are Free, but You Will Still Incur Costs

If your organization decided to adopt Moodle today, the software itself would cost nothing. However, you would have to purchase servers to host it, and hire or train people to run the servers and optimize the software to work effectively in your environment. If you estimate that you can do this for less than the $20,000 to $30,000 per year for a hosted LMS, then it might be better value for you to bring the LMS in house, but most companies run these numbers and realize that it's more cost efficient to move to an outsourced model. Outsourced hosting saves money and allows your organization to take advantage of experts familiar with running the Moodle LMS. If you are not sure, take a look at what is included in a managed hosting solution.

Considerations Beyond Costs

Assessing whether a proprietary or open source system is better for you should go beyond costs.Take into consideration the risks associated with the potential for proprietary product disruption because of a merger, or collapse — open source systems provide a lower risk option since the source code “belongs” to everyone. In addition, because thousands of developers can access the core, bugs get fixed more quickly, security patch releases occur more often, and features are upgraded continuously.

Developers of proprietary systems will argue that their LMS is easier to use than an open source LMS. That may have been true in the past, but today, Moodle offers many of the same ease of use features that proprietary systems developed. As well, open source systems are developed by the community at large. As a result, the number of features available as Moodle plugins provide an amazing array of options.

Finally, if you were an online learning consultant, which platform would you want to specialize in —The most popular LMS on earth with millions of users, or a small, proprietary system with customer’s in the thousands? Many online learning consultancies choose to support Moodle LMS (or Totara Learn for those in the corporate environment) over other systems to pass on its cost benefits to customers. As a result, the collective level of knowledge with regard to optimizing and using Moodle as a learning tool is massive compared to other systems. Need to get more specific pricing for Moodle or Totara? Contact one of LMS specialists.

For more informtation, take a look at our Guide to Assessing Return on Investment (ROI). If you are considering adopting a learning management system (LMS) and need to build a business case, then the ROI is top on your list of things to find out. After reading this whitepaper you’ll be able to determine what platform best suits your organization’s training needs.

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