E-Learning Market Update (September 09)

This month we take a look at developments in the world of learning management systems; and explore key trends and pricing.

According to market analysts Bersin, organizations in the US will spend over $817m on LMS systems in 2009, up from $754m last year.  Over 70% of large organizations now have an LMS installed as increased importance is placed on developing staff and tracking learning.

Given these trends surely now is a good time to be a traditional LMS company? It ain’t necessarily so.

It appears people are far from happy with their LMS. According to Bersin about one third of organizations want to change their LMS. That means over 50% of large organizations either don’t have an LMS or want to change their LMS. The unhappiness appears to stem from a number of key factors which we consider below.


The traditional software licensing  per user per year model is very expensive when it comes to buying an LMS. Given that organizations want to manage all their staff learning the large number of users means large fees. According to Richard Nantel at Brandon Hall in an informative blog posting this summer, the average cost of a locally installed LMS behind the firewall for 10,000 users was $260,000, or over $8 a user for three years.  The average cost of a hosted software as a service LMS including maintenance was higher at $314,000 or over $10 a user.  Average prices varied by the number of users as follows for a 3 year deal:

Number of Users Hosted SaaS Installed behind Firewall













Is it worth it?

Well, ask Peter Butler, Chief Learning Officer at BT. When discussing the learning initiatives at BT he said “If we had to do it all over again, I’m not sure we would have spent so much money on our LMS.”

The older LMS solutions were effectively good tools for scheduling courses, providing catalogues of content and tracking scores. However, needs change and organizations are looking for tailored solutions, for example:

  • To encourage knowledge sharing and informal learning in addition to more formal learning interventions
  • To manage and develop staff performance including staff appraisals, succession planning and overall talent management
  • To provide just in time performance support and learning to specific groups of staff such as sales teams, line managers and engineers
  • More sophistication around career path management

A Competitive Market

“Today’s LMS platforms are not yet playing a large enough role in informal learning and knowledge sharing, and the vendors are scrambling to keep up. Most companies are implementing other systems to solve this problem today.”

As we have commented here many times before the rise of open source software is changing the rules of the game.  In the LMS market we are seeing the relentless advance of open source solutions, particularly Moodle LMS. Previously many organizations were nervous of open source solutions even though they offered robust licence free solutions. However, such nervousness is fading as a growing range of organisations such as Shell, Capita, Open University, BP, McDonalds and M&S embrace it. In parallel of course, a growing list of professional e-learning companies offer hosted Moodle services and support. These companies can now provide robust and functionally rich solutions with web 2.0 features at a significant price advantage to the traditional LMS companies.

Moodle has already become the most used LMS according to last year’s E-Learning Guild survey and the sixth most used amongst large organizations, a figure that is growing daily. We have been busy but we will be setting up a demo version for you to explore in the near future, for those that can’t wait contact us for a demonstration.

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