Reality check - Open Source LMS: a costly affair

What is the Cost of an Open Source LMS?
Summary: A fair number of people who seek out an open source LMS have a major misconception that it is free. Over 60% people want to choose an open source LMS while looking for a solution to manage their learning cycle is because they have no license fee and is supported by a large; very large community. Yes it is an open source and it is free! But dig further and you will find out that free does not mean you have no costs. Dig a little further and you may actually find that you could spend more on your open source LMS than a proprietary LMS. Let us explain how…

What is the Cost of an Open Source LMS?

Open source LMS is the one that is freely available with an open source code. This precisely means that you have access to the code for free and you can modify it to gain a high level of customization to suit your requirements. Since Moodle is the most popular, let us consider it during this analysis.

Let us look at the actual costs upfront to set-up and recurring costs for running a professional grade Moodle installation on an ongoing basis. For the purpose of this example, let us look at a total user-base of 3,000 users in a year with an expected traffic per month – not more than 500. Moderate level of customization required.

The good news: freeing yourself from paying off the license fee is a good decision.

Moodle Notes
License Cost One-Time costs Recurring costs
Moodle License  -  - Open Source
Sub-Total  -  -

However, to run your system, you need more than just a code. There are other elements to successfully launch your LMS, run and administer it during the life time.

Additional Open Source LMS Cost elements

Cost element (other than License Cost)  Moodle  Notes
One-Time costs Recurring costs
Server Set-up  $4,000 It is not easy to predict the usage patterns upfront. You may need to set up a server and a hosting architecture to handle concurrency (simultaneous users connecting) Installing Moodle on a server takes 1-hour. But assuming you are running a mission critical operation, this may not the way to go. This is a minimum cost a professional IT vendor will charge who will speak to you, listen to your needs and recommend a proper server configuration based on your needs which can last you for a few years without upgrade. If you hire an experienced freelancer, he may do it cheaper. Lowest cost vendor may not be the best in this aspect!
Site Branding and look and feel  $1,500 We are assuming you would use a design agency or a designer to do this one-time task.
Customization of features  $10,000 Moodle is feature rich but that is a double edged sword. You will not need all the features as is. You will 100% need to customize to remove/hide or add or tweak the features that come standard. Let us assume low to moderate level of customization. Anything that changes the workflow of the ‘free’ system will cost upwards of 15,000 USD.
Hosting  $3,000 Two options here. Buy your own hardware or rent space in the cloud. It would be unfair to use ‘Buy your own hardware’ costs here so let us assume that you may use a solid hosting service like Amazon, Google, Rackspace or GoDaddy or something like that and pay monthly or yearly. 200 to 350 USD per month is not a big amount for hosting with a good company. Don’t even think about using your existing website to run Moodle!
Security certificate (SSL certificate)  $150 Let us not assume you have any single-sign-on needs and just need an SSL certificate Depending on provider. In order of costs - Godaddy, Comodo, Digicert, Symantec etc.
IT Personal (full/part-time or Vendor)  $12,000 If we assume that your vendor installs, this becomes a one-time cost but you will need someone to assist you with server related issues ongoing especially if you have 500-1000 plus users Calculated as 25 hours/month @ 40 USD per hour
Administrator (full/part-time or vendor) $14,400 Whether you are doing the administration yourself or full-time or hire someone part-time, you will need help. Moodle is not simple to administer. Calculated as 40 hrs./month @ 30 USD per hour
Administrator and user Training $3,000 Assuming that you need multiple administrators to be trained on using the LMS, you will need to train them to use the system effectively. The person installing your system would be the best person to do this especially since the system is customized. You will need it. Moodle is complex. Calculated as WebEx or GoToMeeting – 6-8 sessions of 2 hours
Upgrades  $3,000 Now this one is actually the most important cost element – no one considers this upfront very often and this is what may really cause distress. Especially if combined with item 3 Customization of features. Moodle rolls out at least 2 stable upgrades a year. Assuming you choose to upgrade once a year, this is the minimum you will have to spend to upgrade your system assuming moderate customization. If your customization is high, it could be even more! This cost will be directly proportional to the amount you customize your system upfront! So think before you customize! Vendors love to set up and customize upfront. But when you ask them to migrate or upgrade after 2 years and handle the customization they did then – it is likely that their enthusiasm for the project will not be as high! I am talking about the same vendor. Take the customized Moodle to another vendor for upgrade and don’t be surprised if you don’t get a quick response.
Sub-Total  $18,500  $32,550
Total Cost for 3 years  $18,500 $97,650 


The costs we have considered above are conservative so that we don’t have a bias! Depending on which city or country you are in, this is a cost, which will not be way off. Some Moodle administrators may say we are too high or too low! Apologies to both but we had to use some numbers in our assumptions.

If you are going to manage Moodle yourself, just remember to calculate your costs plus the time that you will be doing Moodle Administration instead of focusing on running your business or your training department.

If you consider a conservative 75,000 USD salary for yourself (given that you know PHP/MySQL, Web-design and server administration!) then if you consider your time is worth 40 USD per hour, then if you spend 100 hours (2.5 weeks) over a 2 month period to set up the system and customize, tweak etc. you server you have spent 4,000 USD for set-up cost. Assume that you spend 25 hours per month or 40 hours per month on your system admin etc., which means you are spending close to 1,000 USD per month or 1,500 USD per month of your time.

Now, let us do a simplistic calculation for a proprietary LMS, which is licensed per user etc. and fully hosted.

Taking an example as above; total user-base of 3,000 users in a year with an expected traffic per month is not more than 500. Moderate level of customization required. To keep this fair, let us assume that this fully managed LMS service also requires customization and for argument sake, let us assume that the cost of customization will be the same.

Let us assume that the cost for the proprietary fully hosted system may be 60,000 USD more expensive as compared to Moodle over 3 years. That is 20,000 a year or less than 2,000 a month. Think about the time and effort you would save in doing all of this yourself in-house. That is around 40 hours of yours (calculated @40 USD per hour of your time) saved.

You have to consider the time and effort for vendor management, project management to get Moodle set-up, customized, deployed and running over a 3-year basis.

So in summary, let us do a check if Moodle or Open Source is right for you:

  1. The open source systems have 100s of features for Corporate Clients, Schools, Colleges, Training Organizations etc. Out of all those 100s of features offered, which do you really need? And do you need additional features, which this system does not have and require customization? If you have to customize a whole lot, perhaps you need another system, which is closer to your needs. Also, note, your costs to upgrade to the latest version of Moodle in the future will be directly proportional to the amount of customization you do upfront.
  2. Do you have the time, IT resources and skill-sets in-house that can double up and manage Moodle at no additional cost? If yes, great. If not, you may end up spending more than a proprietary LMS, which is hosted in the cloud and you only pay a subscription fee.
  3. What is your budget in hand? Would you like to go ahead and see what it will cost you to customize an open source LMS eventually or you want a one stop commercially available solution with a transparent breakdown of expenditure?
  4. Additionally, have you got a plan in your mind in times of increasing the number of users/content on your LMS or you want to think about it later as you go up? We are emphasizing here because the cost can really shoot up if you select a solution without doing this assessment.
  5. Many people would still like to cast their votes to whatever is the cheapest will be the best for them upfront with the license fee but it is critical to look at the big picture as far as the real cost. It should be well aligned with you short and long term goals.

In short, Free does not mean no-costs. Just no license cost. Running a Moodle installation that is secure, hosted to run having close to 3000 total users and 500 monthly users etc., back-ups, with support for users, and upgraded at least once in 2-3 year cycle is not cheap. The costs will surprise you.