Forecasting Total Cost of Ownership for Learning Technology

Given the accelerated growth of digital enablement across the enterprise this past year, I’ve been regularly engaged with learning and development organizations (small and large) to help formulate practical roadmaps for implementing varied learning technologies, platforms, and solutions. Much of these efforts focus initially on surfacing current state learner challenges and defining business needs and requirements, but soon reach the inevitable question of “How much is this really going to cost us?” This has never been an easy question to answer, and today’s cloud-driven enterprise learning systems and service models often require meticulous analysis and review to gain a clear understanding of the full investment picture that lies ahead.

I try to regularly remind my clients and partners to ensure they are capturing the full total cost of ownership (TCO). This certainly isn’t a new concept but requires a disciplined process with the appropriate cross-functional procurement, technology, and business stakeholders.  Below is just a handful of the many cost modeling techniques and considerations I’ve put into practice over the years that has helped effectively formulate a comprehensive TCO forecast for learning technology investments.

  • Normalize the investment summary data across providers. Whether you are activating a formal RFP process or simply solicitating ballpark estimates, you will generally find similarities to how point providers articulate their “core” costs. However, translating and forecasting the nuances of ad hoc costs and services, content and data integrations, multi-year licensing agreements and discounts, etc. can quickly start to feel like comparing apples to oranges. Proactively requesting your providers to follow a consistent budget template and taxonomy should help reduce some of this up-front forensic work.
  • Clearly identify and define the entire business resource impact. For new technology or even current system upgrades, this can be one of the most overlooked considerations that can arise during or soon after implementation. Functional roles and activities can vary significantly throughout the project implementation cycle, and will require varying staffing needs and capabilities. Current roles will likely change, and new roles and responsibilities will likely emerge, starting with a dedicated upskilling period. I’m a big advocate of delineating Product Ownership from Administrative Ownership for learning tech portfolios as part of a modern L&D operating model. Solution providers should be sharing recommendations and expectations of what internal resources will be needed for implementation, process reengineering, and platform activation. This can include a time-phased approach of outsourced vendor platform “start up” resource support (and related costs) to a fully internal support model if desired.
  • Recognize transformative IT organization costs and processes. The shift to a “cloud first” technology strategy can create an expectation that traditional IT costs can be significantly reduced, even eliminated. There are solution scenarios where technical resource efficiencies can be achieved, but new IT roles and processes are also being introduced. Cloud systems providers generally deploy quarterly functional updates, requiring multiple cycles of internal adoption testing and QA to be planned and supported throughout the year. Risk mitigation efforts, including annual technology security assessments and system compliance audits have reached a mandate that may be charged back to the business functions.
  • Include relevant scope for a dedicated change management strategy. This is another sometimes forgotten piece to the investment puzzle, but defining a comprehensive change management framework to ensure a successful launch and adoption process over time is a critical part of the solution. This is not always included within the platform provider’s scope and may require a combination of internal and third-party resources with the right mix of capabilities to execute effectively.