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Why do You Need to Go Beyond ‘E-learning Development Cost Per Hour’?

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Why do You Need to Go Beyond ‘E-learning Development Cost Per Hour’?

Bob is the training manager of a multinational company (MNC) that employees 2500 sales people worldwide. His organization opted to use eLearning to train staff on its new product and entered into an agreement with an offshore vendor to develop an online course of 1 hour. Bob’s organization had to spend 5000 USD to develop the course.

Chris, Bob’s classmate at the B-school, is in charge of training at a firm with 250 salespersons. His firm too needed to impart training on their latest product to its sales force. Chris approached Bob’s vendor to develop a course for his company, on being referred by the latter and the development cost of this course was also 5000 USD.

Now comes the big question – Which organization, Bob’s or Chris’ got a better deal? Well, it is Bob’s company that is better-off than Chris’. Let me explain why.

As far as the cost of development of the eLearning course in dollar figures is concerned, it is the same. However, when viewed from a narrower perspective, say. the average cost incurred on each employee with respect to the course i.e. (total cost of the course/number of users) Bob’s organization spent 2 USD per salesperson (5000/2500). On the other hand, Chris’ company spent 20 USD per individual (5000/250).

Please make no mistake. I’m not saying that eLearning development cost calculated on the per hour basis is irrelevant. It’s still an important number as the average cost is calculated on its basis. All I am trying to drive home is that it cannot be the sole consideration in analyzing the cost aspect of eLearning development. An effective analysis needs to go much beyond.

Some people have suggested another method to analyze the cost implications of eLearning development. This is called the reuse ratio method. This method is based on the ratio of hours consumed in learning to the number of learning hours produced. The higher the ratio, the better. Let us now calculate the reuse ratio of Bob’s and Chris’ companies.

Bob: In this case, the number of learning hours produced is 1. Now, let us calculate the number of hours consumed in learning.

Number of hours consumed in learning = (Number of learners taking the course)* (Number of learning hours produced)

So, number of hours consumed for learning in Bob’s organization comes to 2500 (2500*1). Now let us calculate the reuse ratio.

Reuse ratio = (Number of hours consumed in learning/Number of learning hours produced)

2500/1= 2500

Applying the same formulae, we can conclude that the reuse ratio of Chris’ organization is 250.

The reuse ratio is considered by its proponents to be more realistic as it includes the time component of eLearning development. Both the methods, i.e. average cost method and reuse ratio method are “relative” methods in the sense that these figures vary for each organization, depending on the number of learners. They help analyze the cost of eLearning development more from an individual firm’s perspective as opposed to the more traditional ‘eLearning development cost per hour’ which is an absolute figure.

Thus, we see that analyzing the cost impact of eLearning development on the basis of per hour method alone does not provide the full picture. What do you think?

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