Guidelines for Buying E-Learning Services
By Susan Guest and Jennifer Juday

The old adage caveat emptor certainly applies to the current e-learning marketplace. Many start-up e-learning companies have failed or have been absorbed into other companies. Consulting firms will help companies develop a strategy and select tools, but their prices are often steep and their strategic alliances with suppliers cause concerns about objectivity. So how can an e-learning manager navigate the supplier landscape to build a sound e-learning strategy and a scalable, flexible architecture?

To determine the services that your company needs, begin by developing an e-learning strategy. Start by looking at e-learning implementations at other companies, including their successes and failures. Be sure to find out whether other groups within your organization have used e-learning. You may be surprised to learn that the IT or marketing functions have already purchased e-learning services--or have plans to do so. Look for partnering opportunities and potential cost sharing.

There are a number of services your company may need to implement an e-learning strategy effectively, including

• a learning management system (LMS). Frequently referred to as the backbone of e-learning, an LMS is enterprise-wide software that integrates with the HR system to track employee records, Web-based training and classroom-delivered courses, and online course enrollments. Its user interface allows learners to review, register, and launch online courses.
• off-the-shelf courseware. Web-based courses are delivered over the Internet or an intranet, accessed via a browser. Features may include note taking, screen prints, pre and postassessments, job aids, glossaries, simulations, continuing education credits, and continuing education filing and license support services.
• custom Web-based courses. Custom course development is one of the more difficult services to select because your company must assess the instructional design, graphical skills, and technical capabilities of the supplier.
• synchronous, collaborative learning tools. While synchronous learning can occur using such simple tools as chat and teleconferencing, a new generation of tools bundles online chat, video and audioconferencing, application sharing, and more.
• advisory or information services. Information services can be industry specific, or they can provide general business information. These include news services, e-newsletters, discussion forums, and more.
• coaching and mentoring services. These services often are aimed at an IT audience, helping technical professionals pass certification examinations. However, online coaching services for general business are emerging, such as Coaching.com.
• knowledge management tools. These tools are internal enterprise-wide tools that collect, store, and distribute information within a business or other organization.
• competency management tools. These tools are used to identify skills and knowledge available within an organization and can exist as stand-alone tools or as components of HR systems or LMSs.
• library software. These tools can manage circulation, print overdue notices, import and export data, and allow you to publish a catalog to the Internet or an intranet. Your LMS may have similar functionality, or you may need a stand-alone system from a supplier, such as Sagebrush or SIRSI.

Sorting through the functionality of e-learning tools is a complex process. Adding to the confusion is determining the needs of your organization and how a tool can support those needs. Although highly integrated solutions may require less management and implementation time, choosing an integrated solution can mean compromising on features. Other key issues to consider are the longevity of the technology and supplier. Is the supplier a long-term player in the corporate learning marketplace or a flash in the pan? Is the technology viable, or will you make an investment in tools that require updating? Look for a solution that doesn't tie its success to the success of any one supplier.

Selecting an LMS

Selecting a learning management system can be the most critical decision you make when building your company's e-learning infrastructure. Implementation can take up to a year and cost from US$50,000 to US$1 million. To gauge the marketplace, determine internal needs and issue a request for proposal (RFP). In addition to functionality, key considerations are technical infrastructure, scalability, and maintenance.

Start the search process by attending several product demonstrations, or attend the supplier's user meetings. Then, meet with companies that have installed the system your company is considering and talk to their training administrators, IT department, and managers who have worked with the system. Determine the number of staff and skills required to maintain the system. You may find that it is being used differently by other customers, which can help you further assess the supplier’s capabilities or modify your implementation plans.

In terms of cost, the software license is only a portion of the investment. All learning management systems will require additional consulting, technical configuration, and administrator training. Indeed, some training managers have horror stories of expensive, yearlong implementations caused by major data conversion and customization work.

It's possible to reduce the initial time and financial resources required by focusing on core functions, with plans to implement other components at a later date. To be cost effective, select a system that requires minimal customization, and be willing to adapt internal processes to fit the new system's workflow.

When negotiating the terms of your agreement, work with legal experts, get everything in writing, and consider the following questions:

• Will the system integrate with your HR system, technical environment, Web-based courses, and any other e-learning components?
• Does the system meet the needs of global users and work from remote offices?
• Does pricing address consulting fees, training fees, and annual maintenance costs?
• Are future upgrades and system components included in the initial contract?
• Does pricing include the addition of future users?
• Are there adequate agreements for service and support levels if the supplier merges or is acquired by another company?
• If a third party consultant is implementing the LMS, who is ultimately accountable for the success of the system's functionality?
• Is there an out clause for nonperformance or failure to meet key implementation deadlines?

Negotiating WBT courses and costs

There are many providers of off-the-shelf Web-based training courses. Such companies as SmartForce, SkillSoft, and NETg market their courses directly and can either host individual courses or install course libraries on a company's internal server. Other providers are content aggregators that offer courses from different sources, often on a pay-per-course or pay-per-use model. Generally, the pay-per-use model is more expensive than the library model.

Although comparison shopping for Web-based courses seems difficult, it isn't impossible. Review course catalogs, and evaluate courses that are essential to your company's core business. Questions to consider include

• Is the curriculum structure logical and complete?
• Are the courses user-friendly and easy to navigate?
• Are the courses engaging and interactive?
• Do courses use effective instructional design?
• Do courses meet your learning objectives?
• If needed, can the courses be customized? What are cost and maintenance implications?
• How often is course content updated?
• What is the review process for course development?
• Can you replace courses based on learner usage and changing business needs?
• What special features do the courses offer? For example, do the courses create a paper record or support online note taking?

If your company has an existing LMS, test course compatibility with the system before signing a contract. Even courses that claim to be AICC- or SCORM-compliant don’t integrate quickly and effortlessly with every LMS. Determine how easy it is to get course descriptions into your catalog. Data entry can be time consuming if course descriptions are in a format that's incompatible with your LMS. Another option is to use hosted Web-based courses without purchasing a full-blown LMS. Some suppliers and course aggregators provide course launching and tracking tools that offer basic security.

When considering price, avoid overestimating usage. Be sure to determine how much your company will actually pay per user, per course based on projected usage. For example, if you license a 50-course library for 1,000 users for a US$50,000 annual license and assume that all courses will be used to the maximum of the license, the cost is US$1 per users, per course, or US$50 per employee for the library courses. However, that's a best case scenario. It's unlikely that that level of usage will occur. Therefore, a more realistic assumption is that 1,000 employees will each take one or two courses. The true cost is approximately to US$25 per user, per course. A pay-as-you-go model might cost US$25 to US$250 per user, per course.

Don't let suppliers convince you that an enterprise license is more economical if usage will be low. For instance, if only IT professionals in the company will take Oracle courses, don’t license them for everyone. Also, it's unlikely that the entire enterprise will access the Web courses when the e-learning initiative is launched. Indeed, some employees may never access the service. A more cost effective approach is to license the courses you're certain the company will use, and make the contract scalable for growing the number of users. You can always pay the supplier more if usage exceeds expectations.

Ask about discounts in the pricing structure and the level of commitment required by your company. Some suppliers offer more favorable pricing based on the potential for future business with your company, including discount pricing for multi-year agreements. These types of agreements are smart if you're certain about your company's e-learning strategy and believe the supplier is stable. Because of the rapidly changing e-learning landscape, some e-learning managers shy away from multi-year agreements in favor of flexibility provided by annual agreements. Likewise, some suppliers offer special pricing for signing an agreement by a certain deadline. However, if the supplier wants your business, they will extend the pricing for a reasonable timeframe.

Another negotiation tactic is to partner with suppliers. Suppliers can be useful business partners in building your business case and assessing the market. Advice from suppliers can be useful when selecting other e-learning services that they don't offer. For example, a Web-based training provider may have insights into integration issues with various learning management systems. But beware: Suppliers have a vested interest in your company's decisions and may not be objective.

Contracting other e-services

The wide variety of services, tools, and pricing strategies make contracting other e-learning-related services equally challenging. Here are some guidelines for buying other e-services.

News and information subscriptions. Depending on the service, companies can pay a flat rate or per use for various levels of service. Until your company determines the actual volume of use by employees, pay-per-use is a more cost effective approach.

Advisory and reference tools. A one-time enterprise licensing fee plus an annual maintenance fee is recommended for this type of service. But before contracting, test the tool in your company environment and determine whether company-specific information can be added.

Synchronous learning and KM tools. These can also be used as general meeting and business tools, so look to other departments for buy-in and partnerships. Pricing can get complicated because some providers sell their services bundled, while others sell services in components. In general, it's cheaper to buy a bundled system with a single maintenance fee.

Library tools. Try to get someone with a background in library automation or information science to help you assess products. Typically, library systems can import catalog data and allow you to choose among several catalog schemes. The new generation of tools is Web-enabled and can integrate collections from multiple libraries. They're most useful within companies with a lending library that has a large number of books, videos, and other resources. Some LMSs offer similar information management capabilities, so review those first before buying or using an LMS.

Mentoring services. Because it takes significant marketing and buy-in to get some audiences to use this type of service, companies risk paying for an underutilized product. Before contracting a mentoring service, consider the following questions:

• What are the areas of expertise and qualifications of the people offering mentoring?
• Is the service available 24/7?
• Does the service include phone support, real-time online coaching, or a combination of both?
• Are there any technical barriers? For example, some companies block the use of chat rooms.

Custom Web-based courses. Projects of any size start with an RFP. Most companies tend to use the same Web-based provider for multiple projects, building a partnership with a company that understands its business. When setting terms, be sure to agree on a specific project schedule and backup plans should the project go off course. Questions you should try to answer before contracting with a supplier include

• Who will provide subject matter expertise, content, and reviews?
• Do you want just simple content delivery with some testing, simulations, and performance support?
• Based on technical considerations and course objectives, will you use multimedia tools, such as Flash to develop the course?
• Should Web courses be able to integrate with other systems or software?
• What are the supplier's capabilities for instructional design and graphics. How is its project management? What is its technical and creative history?

Technology and suppliers change rapidly. Therefore, e-learning managers must build scalability and flexibility into their e-learning model and strategy. By building strategic relationships with proven suppliers and technologies, as well as with internal sponsors and technology support, e-learning managers can count on a successful e-learning solution.

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Published: November 2001