Cost of developing 1 hour of elearning

I occasionally have clients ask me if there are any industry standards regarding elearning development, particularly around cost.

"Sean," they say, "How much should we be paying for an hour of elearning?"

"It depends," I say.

And honestly, they are never terribly happy with that answer. So I'm trying to come up with something a little more detailed. Obviously, there are any number of factors that come into play, but I was wondering if there were any quick and dirty estimates that you all use.

Thanks!

sean

103 Replies
Steve Flowers

I've referenced Karl Kapp's article on estimation.

http://www.astd.org/LC/2009/0809_kapp.htm

In my experience "it depends" is a big x-factor. But you should be able to get a rough order of magnitude that you can line up against an expectation of quality on delivery.

I've attached a document to this post - will attach another to a follow-on post. The first document is a quick estimator based on this chart and my experience in the industry. This is based on GSA schedules (government) which may be significantly higher than what you might experience in your industry. These are also rough estimates for proportions of distribution between labor categories. Your mileage may vary. The second is a definition of some factors commonly associated with interactivity rubrics (one factor in the calculation of cost / value).

I've found the best things for maximizing value and minimizing risk are:

  1. Complete a good pre-design analysis. If you go into a statement of work with a weak description of the delivery, or leave your expectations to interpretation... you are going to pay more for that risk.
  2. Separate the expensive and special outputs into separate deliverables. Need a 3D model or a complex animation? Make that a separate delivery. The risk is that if you define one type of output, the vendor may tend to paint the entire deliverable with the same level of effort brush - handily masking more simple tasks under this level of complexity. They are, of course, a business. Maximizing profits is the name of the game. Particularly if you can do this while wowing the customer.
  3. Be aware of labor categories. Instructional media design and development takes all kinds of team talents. If your contract is not firm fixed price, you'll end up racking up expensive hours if you don't have stratification of those hours specifically spelled out in the contract (an ISD is more expensive than a graphic artist, and typically less efficient at those tasks).
  4. Stick with known quantities. A trusted partner is worth it. The best way to remove risk is to know who and what you're dealing with (this point and number 1 can lift huge weights of worry off your very own shoulders).

~Steve

Steve Flowers

Here's the second document - interactivity factors. For the record... I don't like the LOI models like this one. They tend reduce interaction to a generalization when interaction is intentional and by design. A tool is just a tool unless it's used by a *tool*.

Randy Borum

So - if I'm understanding Chapman's presentation - the average development cost is a little over $100 per hour.  I appreciate that different people, contributing different elements to the team effort may have an hourly rate above or below that, so...

everyone - Is USD$100/hour fairly consistent with your experience of usual and  customary billing rates?

Please say: "It depends."  ....

Thinking about Sean's original query here - when asked: "How much should we be paying for an hour of elearning?" - would folks generally feel comfortable saying something like this?:  

"Industry research suggests that a basic, but professionally produced, hour of eLearning requires about 185 hours of effort at an average cost of about USD $19,000.  But the reality is that price varies a lot.  Costs can be lower if the hour doesn't involve any interactive learning exercises or higher if it includes higher-end elements like simulations or games."

Steve Flowers

Yes, I think that "it depends" statement captures fairly accurately. It comes down to expectations. Complex media requires complex design specialization and specialized development labor. That's expensive no matter which way you slice it.

I think the problem is in packaging expectations and the lack of granularity to most statements of work. In many cases you can spend a little on some highlights and get a lot of mileage out of those AND the rest of your design package. Too often projects are scoped in one hour increments. I always say "part task is powerful", focus on the elements that will give you the greatest gains first. If everything else falls away you still have the powerful stuff.

I work for government so I have that expectation framing. But I also work independently as a consultant. The price range difference is staggering, in my opinion. My rates are significantly lower and my work quality is generally higher than many of the contract providers I've worked with. But I also bite off smaller pieces. Usually much smaller and normally specialized outputs. My point is I don't think the value is often there for many of the deliveries that people pay for (this isn't always true, I've seen some really kick ass stuff do some really kick ass stuff).

I tend to view my independent work rates sort of like an auto mechanic would. I have an hourly rate that flexes a little based on the complexity of the output. I know how long it will take to do X. So I can quote a firm fixed bracket based on a set of assumptions. I like to keep the modules small and tuned around a measurable skill change. A 15-20 minute module could cost between 2k and 4.5k depending on the types, quality, and quantity of media. I'll usually build Level II IMI with some Level 3 highlights, content chains, or assessment chains. This is on the low side of my industry estimator. But I don't really have much overhead.

Steve Flowers

To your other point, $100 is atypically high for an independent contractor.  For a large vendor, the rates may balance near this level due to the overhead carried by a large firm.

Offshore work will be significantly lower for similar quantities (and is gaining quality every year). This should drive competition and quality edge.

Holly MacDonald

Steve Flowers said:

I've referenced Karl Kapp's article on estimation.

http://www.astd.org/LC/2009/0809_kapp.htm

In my experience "it depends" is a big x-factor. But you should be able to get a rough order of magnitude that you can line up against an expectation of quality on delivery.

I've attached a document to this post - will attach another to a follow-on post. The first document is a quick estimator based on this chart and my experience in the industry. This is based on GSA schedules (government) which may be significantly higher than what you might experience in your industry. These are also rough estimates for proportions of distribution between labor categories. Your mileage may vary. The second is a definition of some factors commonly associated with interactivity rubrics (one factor in the calculation of cost / value).

I've found the best things for maximizing value and minimizing risk are:

  1. Complete a good pre-design analysis. If you go into a statement of work with a weak description of the delivery, or leave your expectations to interpretation... you are going to pay more for that risk.
  2. Separate the expensive and special outputs into separate deliverables. Need a 3D model or a complex animation? Make that a separate delivery. The risk is that if you define one type of output, the vendor may tend to paint the entire deliverable with the same level of effort brush - handily masking more simple tasks under this level of complexity. They are, of course, a business. Maximizing profits is the name of the game. Particularly if you can do this while wowing the customer.
  3. Be aware of labor categories. Instructional media design and development takes all kinds of team talents. If your contract is not firm fixed price, you'll end up racking up expensive hours if you don't have stratification of those hours specifically spelled out in the contract (an ISD is more expensive than a graphic artist, and typically less efficient at those tasks).
  4. Stick with known quantities. A trusted partner is worth it. The best way to remove risk is to know who and what you're dealing with (this point and number 1 can lift huge weights of worry off your very own shoulders).

~Steve


Awesome resources Steve, it's always good to have confirmation that you are in the ballpark.

And nice that when I go searching in the forum I find the answer I'm looking for. 

Shane Robinson

I'm looking for someone with real-world boutique training company experience, to throw out some ball park figures on what their compnanies are charging small to medium size businesses for a 1 hour medium-complexity e-learning course built with Articulate Presenter, from the client's PPT deck.

Basically, I need a range. Can someone provide a price-range that works for clients in that market (small to medium size) that they have found from experience, just works. I would imagine that someone could say "don't settle for anything less than $2000 (insert real amount here) above your time and materials....but we price these courses out at no more than $15,000 (insert real amount here) per hour of seat time, because we have found that beyond that, we exceed what clients are willing to invest in the training project."

I understand the work-effort calculators. That is not exactly what I am looking for here. I am asking what the fair market price is.

Thanks,

Shane

Chris Fletcher

I looked at that presentation and was thinking "wow, that's really expensive" but then when you think about it, most of the eLearning I create is probably 15-20 minutes long, and the ratios are actually pretty accurate for the amount of time I spend on them.

That's some really interesting information that I think I can use to help me approximate the time it takes me to build my modules.

Thanks everyone! 


C

John Moore

$30/hr to $50/hr is the range (level 1-3).

$40/hr is the mean.

The mean range is $35 -$45/hr.

Again, $40/hr is the mean.

You should charge a least $38 to $45/hr to do anything in

eLearning. The low end is if you can get a 12 month+ contract. 

Shorter contract = higher hourly rate ($45+/hr).

To do higher level 3 work (lots of simulations, etc...),

the fair rate is $45 -$60/hr.

This is for doing eLearning production (development) work.

If you have to do everything (clean-up storyboards, develop 

simulations, track QA, tight deadline, etc...) the range is $50 -$70/hr.

These are for freelancer eLearning developers.  

But, it's capitalism, so YMMV. Any thoughts? Comments, etc...?

http://goo.gl/Dlu5R

John Moore

Yes, US contract work. The key is that many employers/companies are really "pushing down" on labor cost. Weather you can get those rates is a whole other issue. But those are fair rates to do eLearning development production work. This type of work often means looking over and making edits to each slide of a 100+ slide project. Reworking simulations and creating slides that ID did not create, etc... It's not easy work. Even with great tools like Storyline, its hard work (time) putting together good online learning.

http://www.kubepharm.com/JGM_2013_Resume.html