How
Much Will It Cost? Estimating e-Learning
Budgets
by Kevin Kruse - read article here
There is one question that training managers
ask consultants and vendors more than any
other. Consultants hear it in phone calls,
at the end of their capability demonstrations,
and at industry conventions. This question
causes vendors to cringe every time it is
uttered. The seemingly simple question is:
"What does it cost?" Variations
include, "I need a sales training CD-ROM,
what will it cost?" or "I want
Web-based training to teach people how to
use their word processor. What's a ballpark
budget?"
Consultants squirm when
asked how much a training project costs.
It is a lot like calling up a construction
company and saying, "I want to build
a house. What's it going to cost me?"
The obvious answer is always, "It
depends." The price of a house is
likely to depend on many factors, including
site preparation; total square footage;
number of rooms; style and quality of
construction; finishing details such as
flooring, counters, and cabinets; landscaping;
and even the construction schedule (is
it a rush job that will require overtime
labor?). So, too, the cost of a training
project depends on many factors.
Factors
That Influence Price
When estimating the budget
for custom e-learning programs, you need
to be able to answer at least these questions:
How will the training
be delivered - CD-ROM or Web?
If Web-based, is it high-bandwidth or
low-bandwidth?
What is the content or subject matter?
How long would it take the average student
to complete the course, or how many screens
will it contain? While not an exact measurement,
these questions get at the basic issues
of size and scope.
Will the program use audio, video, animations,
complicated illustrations?
Where will the source content come from?
Are there existing training modules? Is
there a subject matter expert readily
available?
Will the program have student-tracking
capabilities? Will it be complex?
When will the project begin? When does
it need to be delivered?
What specific services will your organization
provide, for example, script development,
audio/video clips, quality control, or
packaging and duplication?
With this information, an experienced
vendor should be able to give you a rough
estimate of the cost of program development.
With some more details you can expect
a firm price.
Pricing
Rules of Thumb
While the answer to "how
much will it cost" is not simple,
there are rules of thumb that are commonly
used. These "rules" often are
upheld wrongly as hard-and-fast, cast-in-concrete
rules, rather than the general guidelines
they are intended to be.
The most common price
reference is that it takes approximately
600 person hours to complete one hour
of high-quality multimedia training, which
is usually delivered on CD-ROM. This includes
all services - instructional design, audio
and video, programming, quality control,
and project management. For simpler web-based
or computer-based training without audio
or video, the rule of thumb is that it
takes 300 person hours, or half as much
work, to complete one student hour of
training.
Most training vendors
charge $100 to $125 per hour for their
services, which puts the cost for multimedia
CD-ROM training at $60,000 to $75,000
per finished hour. An hour of WBT or CBT
without audio or video might cost $30,000
to $40,000 to develop.
Many
informal industry surveys support these
rules of thumb. The American Society for
Training and Development reports on a
recent survey that one-hour of multimedia
could cost upward of $65,000 (Phillips,
1998).
Problems
with Pricing by the Hour
Although pricing by the
hour is a very common practice, it is
deeply flawed. The fundamental problem
is the notion of the mythic student hour.
What is it really? Because the student
controls the program's pace, it might
take a slow learner two hours to complete
a "one hour" program of computer-based
training. A fast learner might get through
the same material in only 30 minutes.
In fact, a well-designed program will
purposely vary in length based upon the
experience of the student. Pre-tests enable
some students to "test-out of"
certain lesson segments, thus reducing
the total amount of learning time.
The complexities of the
material to be taught and the instructional
strategies deployed are other important
factors in estimating the time it takes
to create a training program. A one-hour
simulation of open-heart surgery will
certainly require more time and money
to develop than a one-hour linear tutorial
on how to use Microsoft Windows.
Significant programming
tasks are required for the "first
hour" of training that do not need
to be replicated for subsequent hours
of instruction. These programming tasks
include developing the title screen, student
log-in screens, student tracking, book
marking, and the basic design of the graphical
interface the user sees. It is inaccurate,
therefore, to extrapolate that if a one-hour
program costs $60,000, then a four-hour
program would cost four times as much
or $240,000. Initial production requirements
are involved in the project setup. Just
as in producing a book, magazine, or newspaper,
the first copy off the press may cost
thousands of dollars for the writing,
art, typesetting, and design. Each additional
copy costs less and less.
An alternative approach
to per-hour pricing is pricing by the
number of screens. Many multimedia training
suppliers will quote $60,000 for 120 to
150 screens or "frames" of instruction.
But problems arise similar to those in
the "learning time" approach.
What really constitutes a screen? If one
screen plays a 30-second audio clip and
another screen plays a five-minute video
clip, shouldn't these costs vary? Are
menus, glossaries, student tracking, and
help screens included in the screen count?
What about interactive questions that
present a question, accept student input,
and provide feedback? Is this interactivity
counted as one, two, or three screens?
Simplistic per-hour or
per-screen rates mask many factors that
accurately describe and define the task
at hand. Such flat-rate estimates do not
adequately describe the quality of instruction,
the number of features, or amount of media
in the program. Frequently, technology-based
training projects that are initiated after
the acceptance of a sparse three-page
proposal conclude with the client being
disappointed with the final program and
the vendor disconcerted over the profit
margin. The client may have imagined a
program with much more interactivity.
The vendor, who was continually asked
to add complexity, may feel that the project
was not fairly represented and should
have been priced differently.
How
should a project be priced?
Developing technology-based
training programs requires the time of
many specialists including programmers,
writers, artists, audio/video specialists,
and project managers. The most accurate
way to price a project is to specify all
of its design details and estimate the
total amount of time each team member
will contribute. Applying the respective
hourly rates to each of these services
will yield an accurate total project price.
Vendors typically make
assumptions about the project that may
or may not be expressed to you, the client.
For example, an animated 3D title screen
sequence with dramatic music can cost
ten times more than a simple text screen,
but you are not likely to be asked about
this level of detail. If the production
house typically creates Hollywood-style
effects, and if they think your organization
has a substantial budget for the project,
they will likely assume you want the deluxe
opening and price it accordingly.
These vendor assumptions
should be presented to you as line items
upon request. If you are surprised by
how high or low a project estimate is,
you should ask your vendors questions.
Among the questions to ask to bring out
assumptions:
How many interactive exercises
are planned? What type of exercises are
they?
What are the plans for the post-test?
Will it print a diploma upon reaching
a mastery level?
How many graphics and animations will
be included? Are they all original or
will some be clip art?
How much total video and audio are to
be used?
These questions will force vendors to
show their cards, and force them to examine
their own plans if they are merely providing
a generic per-hour price.
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