Evaluating eLearning Companies for Possible Outsourcing

So how much does it cost to hire an outside eLearning company? It depends. There are many different kinds of eLearning companies. There are large content development companies that have substantial staffing and associated overhead to cover, a panoply of one-man-band eLearning companies run out of garages around the world, and mid-range boutique companies that offer competitive pricing due to low overhead, but that have adequate resources and experience to tackle a wide range of projects. The hourly rates a company may charge is largely dictated based on several key factors:

  • Fixed Bid vs. Hourly Costs
  • Large brick and mortar vs. Virtual companies
  • US-based vs. India or off-shore

Fixed Bid vs. Hourly Costs

Many companies will not disclose the actual time and tasks that make up an eLearning development project (fixed bid). While a fixed bid ensures that the vendor cannot go over budget, a conflict is created whereby the vendor’s goal is to keep costs and scope as low as possible, even though the client may discover down the line that it wishes to increase the project complexity. The answer to evolving client needs is often That’s out of scope so it will cost you more. This can be frustrating. Whenever possible, work with vendors that offer development programs based on actual work effort. Estimates should be given based on a solid understanding of client expectations, and every effort should be made to come in on time and budget.

Large brick and mortar vs. Virtual companies

There are several large US-based eLearning companies that charge higher hourly or fixed bid project rates because they have a large full-time staff overhead to cover. If a company is not working at 100% capacity, they have to charge hire hourly rates to cover their ongoing costs. For example, even though they may have costs of $40 per hour for an instructional designer, this designer may not be working at 100% efficiency on paid projects. Therefore, the firm may have to charge and extra 15% or more on this person’s time. On the other hand, many one-man-band or small companies essentially hire freelance talent to work on projects on an as-needed basis. While they may charge lower rates, their quality and ability to meet deadlines is suspect.

US-based vs. India or off-shore

Many off-shore companies will claim rates of $18-$25 dollars US for eLearning development. Many India-based eLearning development companies are actually quite talented, but low hourly rates do not tell the whole story. While the hourly rates may be low, the actual project costs can end up being much larger as a result of several factors:

  • It is not uncommon for any firm that has a significant time and cultural difference from you to take 3-4 times the number of hours to produce the work you desire. This is not an India-specific issue, but a global fact of doing business.
  • Significant time, cultural, and language differences should not be under estimated. These factors remain considerable impediments to eLearning project management including time, cost, and quality.

When comparing eLearning companies, check their portfolio of work and confirm with satisfied clients that the project came in on-time, on-budget, and with minimal frustration.

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