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-5. How much confidence should you put in an ROI?

- An ROI is a analysis tool. You use it as input for your business decisions.

- Think of an ROI as a speedometer on your car—it doesn't control how you drive but gives you one measurement that will influence how you drive.

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It's reassuring to look at the numbers and pick the answer based on what the numbers say. ("Case A says we gain 500 ducats, and case B says we gain only 450 ducats. Clearly we go with Case A.") It seems very objective. All the subjectivity seems to have been driven out.

But my experience in dealing with good businesspeople is that ROI calculations are a guide and a double check for making good business decisions—not the other way around.

I know this sounds backwards at first. But I observe that good businesspersons don't simply follow where the numbers lead, positively or negatively. They know that the numbers are important, but they also know that there is a certain amount of subjectivity in even the most objective-looking numbers. Even if the ROI analysis says that you'll get one hundred ducats for every ducat you invest, that's a prediction, not a guarantee. Surprises can happen along the way to getting those one hundred ducats—predicted things might not occur, or unpredicted things might occur (war could break out, the stock market could crash, your key designer could be hit by a truck). An ROI analysis is a statement of what's likely to happen, at a reasonable risk level. The risk cannot be eliminated completely. It might not work out the way the numbers seem to promise.

Besides the fact that predictions of the future don't always work, ROI analyses are sometimes suspect because of the assumptions that went into calculating the numbers. Sometimes you'll find that the expected profit of a million ducats is built on faulty assumptions that will in fact result in a profit of only a hundred ducats. Or you might find that faulty assumptions cause you to turn down a good business alternative that the ROI understates.

There are lots of pitfalls—but if you're a successful business person, then you already know about these pitfalls. And you already know that making good business decisions is like making good bets at the race track. It's important to do your homework and at least check the racing form. It's even better, however, if you do your homework and also have a knack for picking winners.

-6. What are your make/buy elements for e-learning?

- There are several e-learning elements that you can decide to make or buy:

- Courseware

- Instructors

- Learning management system (LMS)

- Hosting

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As in many other areas of your business, one of the big decisions you make about e-learning will be whether to build your own (make) or get it from someone else (buy). Alternately, you can also build some of the solution and buy other portions of the solution ready-made. How you handle this make/buy decision will affect your costs.

You can certainly make everything yourself for your e-learning system. Or you can buy some or all of the parts as indicated below:

E-Learning

Make/Buy Option

Courseware

There is a great deal of "off the shelf" courseware that you can license for your employees. You probably don't always have to create a course on learning to use MS Word because someone else has already developed that and will be very willing to license it to you.

Or, you can send your employees to any number of existing Learning Portals on the Internet to get training on "standard" topics.

Learning management system (LMS)

In brief, an LMS handles the administration and delivery of e-learning courses.

- You can buy your own LMS and set it up within your company.

- Or, you can use one of the application service providers (ASPs) to set up a view into one of their existing LMSs on the Internet.

Instructors

If you use instructor-led e-learning courses, you have the choice of using your own employees as instructors (make) or getting contract instructors to do the job (buy).

Hosting (where your e-learning system resides)

You can put your e-learning system within your own company, or you can use public e-learning sites, or you can use an ASP. (See Chapter 10 for a full description of these alternatives.)

-7. What do e-learning "solution providers" cost?

- Costs for an e-learning solution provider will vary depending on the complexity of your problem and the quality you demand in the final solution.

- It also depends on when you're reading this book since costs of almost everything dealing with computers tend to fall over time.

- This is not much different than asking what it will cost to roof your house. Answer: "It depends."

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If you don't build all the parts of your e-learning system, then you are going to buy some or all of it from e-learning solution providers (sometimes called "vendors"). For example, IBM's Mindspan organization is an e-learning solution provider that develops e-learning courseware, sells the Lotus LearningSpace product (an LMS), and constructs complete e-learning solutions for e-learning clients. IBM Mindspan has a number of competitors in the industry—you have a wide range of vendor choices.

Dealing with e-learning solution providers is a lot like dealing with anyone else selling you a product or service.

1. You figure out what you need.

2. You ask one or more solution providers what they would charge to provide it.

So what will it cost you? That's a reasonable question. But of course, I can't give you an exact price since so much depends on what you're really asking for. Plus it depends on when you're reading this book. Costs of things in the computer industry tend to fluctuate a lot as they trend down over time. By the time you read any price I'd quote, it would have changed several times already.

After you talk to a couple of potential solution providers, however, you'll have a good idea of what the current costs are. In the same way, once you talk to a couple of roofing contractors you know that the costs will range from $1,500 to $3,500—and will depend on the type of shingles you choose and the quality of workmanship that the roofing contractor promises.

Summary

- The costs for e-learning can range widely, just as the costs of buying a car range widely.

- You could spend hundreds, or you could spend multi-millions.

- The cost components for e-learning include the courseware, the course delivery expenses (including instructors), marketing/promotional communications with the students, and administration and support expenses.

- The biggest thing influencing your e-learning costs is the size and complexity of your training problem.

- There are only a handful of other factors that account for the dimensions of a training problem.

- You can't avoid risk. But doing a return on investment (ROI) analysis lets you quantify the risk.

- There are two types of ROI analysis you can do for e-learning:

- Cost analysis: How it saves money (if you already have existing training you're spending on).

- Value analysis: How it improves value (lets you do things you couldn't do before).

- An ROI is an analysis tool. You use it as input to your business decisions.

- Think of an ROI as a speedometer on your car—it doesn't control how you drive but gives you one measurement that will influence how you drive.

- Costs for an e-learning solution provider will vary depending on the complexity of your problem and the quality you demand in the final solution.

- It also depends on when you're reading this book since costs of almost everything dealing with computers tends to fall over time.

- This is not much different than asking what it will cost to roof your house. Answer: "It depends."

 
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