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Thursday, September 10, 2009

eLearning Costs

A reader sent a note asking my opinion on the vendor pricing in The Great eTrain Robbery? (Please Opine). Here's his brief description:

The particular course in question is approximately 2 hours of classroom soft skills training that needs to be delivered in an eLearning format. The content has already been written for the classroom. It needs to be repurposed for eLearning. The course will be developed using a Lectora-style system that produces what is essentially an HTML/javascript page turner. Multimedia (animation, narration, etc.) will be minimal. The course will not be narrated in its entirety, but there may be some snippets of narration here and there. Interactions should be basic form-based questions created within the development application. Graphics will include basic stock images/clip art in the classic “eLearning that looks like a bad PowerPoint presentation” style.

The fixed-price contract that has been signed with the vendor for this course is for 766 hours of development at an average hourly rate of $116 for a total of $89,000+.

His question is whether this price is reasonable, high or worth raising a stink.

From his brief description, the price sounds high, but I would need to know a bit more detail to be sure. For example, how much rewrite of the original course will be done. Are you coming up with "simulations" or more complex exercises to teach the soft skills? In many cases, there can be significant work to design that kind of learning experience.

If it's merely a port without significant redesign, then that's a pretty high price.

If you are going to raise a stink, I would suggest you do it by pointing to various resources that discuss costs. I went to my favorite resource (eLearning Learning) and looked at the keywords: Cost and Ratio and found some pretty good sources:

When you look at these, you will come up with various ratios and costs. The one from Karl Kapp in Learning Circuits (Time to Develop One Hour of Training) would seem good to cite.

Take a look and the ratios range from 122 to 243 hours per finished hour for simple courses. This aligns with Bryan Chapman's 220:1 ratio. However, before you jump all over the 383 per finished hour that the vendor is citing, note that Kapp includes Soft Skills Simulations that ranges from 320 to 731 per finished hour.

So, again, a big question is whether they are designing a kind of simulation that plays within the simple interactions you describe?


Karl Kapp said...


Interesting post, and unfortunately, while the ratios we discovered are there as guidelines, many variable exist to complicate the process. It could very well be a high commitment of hours due to a number of variables or it could be underestimated.

I agree with your questions and have some of my own.

For example, does the course have branching scenarios? How good was the instructor-led course? How comprehensive were the instructor notes? Is there consensus on the content? How many SME have to be involved? Making a crappy instructor-led course into an effective e-learning course is a long and difficult process.

Also, often times a client does not give the vendor enough concrete details so vendors have to make assumptions about content. If they have to make a lot, it could add up to extra hours.

For some ideas on pricing, you can see Kapp Notes: How Much for that E-Learning in the Window?

However, I question the entire expense at all. If you are going to attempt to teach soft skills with little interactions or branching, little engagement, no video, no animation and little narration then $89,000 is just being thrown away.

The module will be created, learners will diligently take the module, completion will be recorded and no one will learn a thing!

I guess a classroom experience for soft skills training would take a significant re-write to be effective in an e-learning environment (assuming it was effective in the classroom) and that the time to create it would be more tied up in the design than the creation of multimedia elements.


Lars Hyland said...

Tony - good question to pose.
Karl - great comment which I fully endorse.

If you are interested in designing a learning experience, then no one metric fits. You need to review all the variables (business objectives, cultural starting place, environment in which learning will predominantly take place, mix of media most suited to content, time available amongst learner base, performance change required etc etc ).

If it is a case of providing something fairly standardised in terms of online information provision, then metrics start to appear potentially useful - up to a point.

A lot of what is called e-learning is not really effective in terms of learning experience, the same being true of much classroom based training.

Performance support and behaviour change are the real areas to focus on and that can lead you to design quite different solutions to the traditional "course" whether delivered face to face or online.

In this case, I agree with Karl. It looks like little value will be generated from this "conversion" other than allowing the face to face to NOT be delivered and so saving time and money for all involved.

Anonymous said...

I've done a 13-module, self-paced, Flash-based soft skills course with approximately 10-12 interactive exercises in each module, including branching videos and a variety of other things for around that price. It sounds like a rip-off.

Unknown said...


This is a useful exchange. One of the things we are doing is upgrading elearning to V-Learning(TM) which is the use of 3D VR technology such as you can see at We do custom work and even with all the advanced technology, animation, motion capture, virtual world creation, your price can still be in the ballpark. As has been said, the more complex the learning objectve, the greater the cost. But there are some economies of scale and payment methods that can reduce the pain.

Scott Hewitt said...

I've read several posts on how much should an hour of elearning cost. Is it really that simple to cost?

If there was a standard matrix for costing e-learning development then would we all not have the same standard, style and format of courses being produced on each occasion? This is a creative industry just like any industry with a design elemen involved so you get different prices and peoples view of what to provide will always be different.

The quote does seem high but does anyone really have enough information to make an accurate assessment? Was the tender document clear? Did they get other quotes?

I think the hour of learning does cloud the debate on pricing. Just what is an hour of learning? It means different things to different people. You could generate an hour in a rapid tool, a 3d engine or HTML and come up with numerous options and costs on each occatsion. Each learner is different so how can we suggest that they will all do a course in a set time? There will always be an average so perhaps this should be used?

Karl makes a good comment about the content that is provided. If they have got to work with poor documentation and have a lot of prelim work to complete before the start of the project this will then affect the cost.

It does seem high, there are some issues but it is sometimes too simple to do a straight compare without knowing all the facts.

Dawn Poulos said...

Tony, let me preface my comment by saying I am going to go a bit off point here but I think it’s relevant to the discussion. Like Scott, I’ve been reading several blog posts on the cost of creating e-learning and what is surprising to me is that the subject of content reuse is never mentioned - though the Converting Content from ILT to WBT post that you reference touches on it to some extent.

A good portion of the cost of creating e-learning comes from having to translate content from one proprietary format to another - not to mention then having to maintain both of them. Bryan Chapman’s research, which is quoted in many of these articles, yours included, points this out. Bryan says that while it takes 34 hours of work to create one hour of instructor-led training, it takes an additional 33 hours simply to convert the PowerPoint slides from this same training into e-learning. In other words, the raw task of simply translating a message to another medium takes as much time as creating the message in the first place. I cannot find anything positive out of this statistic.

The point I am trying to make here is that while there will always be some redesign required to accommodate differences in delivery methods, Bryan’s research shows that there are still real and significant saving to be had from separating content from presentation. Bryan presents on this notion of single-source content development on a regular basis. He’s even podcasted about it.

I don’t disagree with the comments that if the money is going towards interaction, engagement, video, branching, etc., then the $89K may not be so out of the ballpark. However the description states that the content has already been written for the classroom and needs to be re-purposed for e-learning. It also states that multimedia will be minimal. So, perhaps Karl is correct when he states that the IL course may be a crappy one and require significant work to make it effective e-learning. However, what happens when you have $89K worth of effective but proprietary e-learning and need to adapt that to a future delivery channel?

Tony Karrer said...

These are fantastic comments. I'm nodding my head a lot as I read them.

Fantastic point that without some kind of "simulation" - really how much are you going to learn relative to the soft skills being taught. Definitely a better understanding of the design process and likely result is important.

Great point about being able to leverage existing content as well. A lot of times, I've found that there's not that much you can actually take from the classroom materials. Often there's some basic learning objectives, some diagrams, etc. But in many cases, it starts to feel a lot like designing from scratch to create a good experience.

So - there's quite a bit of additional detail any of us would need.

That said - how many RFPs use exactly this kind of language?

Vic Uzumeri said...


One point that is missing from the cost analysis is consideration of the scope of the customer interaction process.

Much of the cost in any eLearning project is tied up in the interaction between the developer and the subject matter expert (SME).

In ideal circumstances, that interaction would be designed into the project in an efficient and optimized form. When that happens, the costs are mainly related to the actual eLearning production and can be quite modest.

Under less than ideal conditions, the eLearning developer may have to chase down experts across the country, wait weeks or months for authoritative feedback, deal with conflicting (and possibly unresolvable) opinions and satisfy conflicting aesthetics and instructional philosophies concerning the finished design.

Being charitable, I could imagine that the eLearning vendor in question knew their client's modus operandi and knew that they would be facing the worst-case situation.

Or not.

Michael Glazer said...

Karl and Lars,

First, let me pile on to say that I agree with your comments. And...

Maybe there's another angle to this: Set aside the classroom versus eLearning conversation for a moment and ask whether the results Tony's reader is aiming for are worth an $89,000 investment.

If they aren't, then it doesn't matter much how effective the course is or in what format it would be delivered. If the results *are* worth more than $89K to the company, then it becomes much easier to set a budget for the project.

For the budget to make business sense, the cost of the training should be less than the value of the desired outcomes.

And once the budget is set, it should be easier to evaluate whether $89K is a good value for the eLearning deliverables the vendor proposed.

Karl Kapp said...


Good point, it might be that $89,000 is a bargain if the results are worth a couple million in productivity or other extremely valuable results or it may be that $89,000 is way over priced because the results are minimal.


Tony Karrer said...

@Vic - great point that often a big part of the cost is the interaction with the customer.

@Michael and @Karl - I agree that from a value proposition it might be worth it (or not). But the question is more of a "fair price" - in other words, if they got quotes from somewhere else, how would they compare. Of course, that doesn't mean that the quotes would relate to the same thing or achieve the same result.

Could you spend $50K or $89K and get the same return?

John P. Cragin, Ph.D. said...

This exchange continues to broaden the issue of costs and pricing in a way that should be beneficial to many. The comments about the relationship between production and the client is right on target. Like building a house, tract or custom, working with the client is one of the bigges factors in cost and time overruns. Just a note about how we are keeping costs down with the advent of V-Learning(TM) technologies for enhancing distance educatinn and training. One expensive component of creating a truly engaging experience that is MEMORABLE is the use of virtual reality animation and flash. We have found that our investment in Motion Capture technology makes a big difference in costs and pricing. With a 16 camera system, gloves and facial capture, motion capture allows us to do more for less, indoors or outdoors. We have seen our speed double in the last 18 months, our manual animation/flash creation drop by 75% and editing costs also reduced. While everyone is probably not going to make this kind of investment in-house, we have found that we can often extend this "more for less" to collaborators using our NYC studio. Another factor that helps us reduce costs is using high quality talent that is in ample supply. Talent is expensive and poor talent is even more expensive. We use professional stage and film actors for our voice over and great talent is readily available in NYC, which suprisingly has helped to reduce costs. My point here is that Karl and Tony are on target. It is the VALUE, bang for buck, in the mind of the client that matters. We can often produce a $50,000 accredited graduate level course with full animation that would achieve equal or better results than a $90,000 course, and deliver it quicker. We have to respond to the specific customer needs. I want to raise an issue that has not been touched yet. That is economies of scale. If a product costs $100,000 to produce, it might still be sold for $25,000 as long as it can be tailored for five or six different clients. In a school SYSTEM where a course can be used by 10-20 schools, this dramatically reduces the price to each and allows an investment in quality. I would love to hear how my colleagues are using this approach to allow them to give higher quality for a lower per unit cost.

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Emma King said...

I'm currently working on a project where I have been tasked to find out the potential cost savings/economies of scale for converting existing Formal Training, KM into a Performance Support/Informal Strategy

@Lars I totally agree that the true focus should be on Performance support and behavior change but how can we quantify the cost savings attributable to this?