Negotiating an LMS Contract: Traps and Pitfalls

Purchasing a learning management system (LMS) or a hosted LMS contract is like entering into a long-term relationship. However, the initial negotiations often tend to be oriented toward annual contracts. It actually takes about three years to inculcate th

First, be sure to negotiate a multi-year contract. An LMS, like any software application, tends to increase in complexity and is upgraded as time goes on. Upgrades may include new capabilities, bug fixes, feature re-design or links to other software. Regardless of what you think at the outset, you will want the new releases, and their price should be included in the contract.

For example, ETS/financialcampus purchased an LMS and has been using it for more than five years. About every 12 months, the vendor produces a new release. In conversations prior to the release, we were told by our account manager—and this is fairly typical—that the new “point” version would include an upgrade of the testing system. Inexplicably, just prior to the release, we were told the new release would not include the upgraded testing feature. Needless to say, we felt cheated and misled.

Second, you must negotiate the price of future releases with regard to what they will include. Failure to do this leaves you open to unspecified costs down the road.

Many software vendors differentiate between a “point release” and a “version release.” An example of a point release would be the release of 3.2 after the release of 3.1. An example of a version release would be 4.0 following a series of 3.x releases. Here’s the “gotcha.” A point release may be included with your initial contract for a specified period following purchase. But what if the vendor chooses to jump to a version release? A version release can cost as much as the original contract, and if you don’t buy it, you run the risk of the LMS provider cutting off support.

Another problem surfaces if, during the initial negotiations, the vendor tells you that the next point release will be in six or seven months. You naturally conclude the release will be included in the price of the contract. But what if the release is six months late? It is outside of the initial annual contract, and they will charge you for it.

Third, you need to negotiate the service and new release training contracts. “Service” in the software industry is not standard and may not meet your needs if not carefully negotiated. Service includes help fixing the bugs in the software, installing upgrades to your system and solutions to other problems such as those caused by the LMS’s interaction with the operating system and other application software.

The problem is that when you need service, you need it now and not in a week or two. Will “service” be limited to e-mail queries? What is a reasonable time frame for a response, and what is your recourse if you don’t get timely answers? How will you be protected from “service policy upgrades” that don’t benefit you?

The same is true of new release training, refresher training and new employee training. During the contract negotiations, the vendor may tell you that you will be provided with “online training” or “a day of training at our site,” but what is the quality of that training? Is the software documentation put up as an online course? Or is the course designed by someone who understands how people learn from an online course? Is the on-site training for the managers, the users or the technical administrators of the system? These are three very different groups with different training needs.

Entering into an LMS contract is tricky, and the emphasis should be on the long-term. Don’t make the typical one-year contract mistakes, such as negotiating the price down or getting them to “throw in” an extra day of training. You can be sure the difference will be made up in subsequent years. Why? The real investment your company makes is not in the LMS, but in the number of courses created and the integration into your company’s systems.

Howard B. Schechter, Ed.D., is chief learning officer for ETS/financialcampus. Schechter managed the international channel at IntraLearn, a leading LMS, led the development of the global distance learning network at Quantum Corp. and is on the faculty of Walden University. He is available at

March/April 2003 Table of Contents