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Sep 2008

Making the business case for elearning

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Shaping the future of learning

The new economic realities mean that every manager up and down your organisation is going to have to fight to spend money on anything. You can expect elearning to come under as much scrutiny as the next line item. It pays to be prepared. If you’re responsible for commissioning e-learning or running an internal team, be ready to fight the good fight. For this insight, let’s concentrate on the cost savings from elearning compared to instructor-led alternatives. Here are a few bullets to have ready when someone comes asking why we should spend on elearning.

1. Travel costs = zero

May as well start with the no-brainer. Many organisations are currently putting a lockdown on all travel for employees, while still expecting training delivery to persist. This plays very well to elearning, as it has no travel cost. If you want to argue the benefits for elearning, start here. With increasing numbers of home workers, bear in mind that their travel costs can also be reduced as they don’t need to get into an office for training events. It helps to have a few stats to support this:

Dow Chemical reduced average spending of $95 per learner / per course on classroom training, to only $11 per learner / per course with electronic delivery, giving rise to an annual saving of $34 million (Shepherd, 2002).

2. Marginal cost of delivery = zero

The cost of e-learning is all in the production. There’s no marginal cost of delivery – rolling out elearning to 100 or 10,000 learners costs the same, assuming you’re not producing thousands of CD ROMS (and if you are – we assume you are also still listening to tapes in your ghetto blaster to score double retro points). No classrooms, no additional trainer costs, no lunches – and binders. Nice for your CFO – and the environment, lest we forget.

3. Learner time is better spent

E-learning is generally shorter than classroom training on the same subject by as much as 25-60% (according to Brandon Hall, 2001 and Rosenberg 2001). Time is compressed in elearning, as you don’t have all the logistics that come with the classroom: welcomes, introductions, setting-up and winding-up sessions, breaks and the like. Since the biggest cost of any training is learner time spent in training, this makes a big difference to the bottom line.

Need an example? Ernst & Young cut training costs 35 percent while improving consistency and scalability. They condensed about 2,900 hours of classroom training into 700 hours of web-based learning, 200 hours of distance learning and 500 hours of classroom instruction: a cut of 52%. (Brandon Hall, 2000).

4. It works for specialist content too

Don’t think that you have to be at the 1,000+ learners level before elearning makes sense. The cost per hour of e-learning can be dramatically reduced by taking a rapid approach, using low-cost or open source tools, and taking on some tasks in-house. This means that even quite specialised areas that may have small audiences can still use elearning, and from a cost perspective come out better than they would with a classroom alternative.

If in doubt, do the math

It’s not difficult to construct a side-by-side analysis of the cost of delivering one hour of e-learning vs. an instructor-led session (if you need help, ask us at Kineo). Prepare a simple spreadsheet showing what it costs for an hour of trainer time, learner time, travel costs, opportunity costs, material production, and room rental, and then scale it up to the size of your target audience. Compare it to e-learning’s upfront development costs. Even allowing for a small maintenance cost for e-learning, the business case for e-learning is nearly always going to win out – especially in a downturn.

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Shaping the future of learning

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