LMS Contracts – What U Must Have, Need 2 Know

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Ahh, you have found your vendor, everything in the world is at peace. You love the company, it is perfect, they have pitched you a price – you have verbally accepted – and now it is time for them to finalize the deal, put together the contract, sign and move on… But Wait!

Important info below (before we get to the contract info. stuff):

There are some very detailed information in regards to LMS contracts and this blog is not a legal representation of contracts, rather it is based on personal experience with LMS vendors.

Legal Departments at your Company or Legal Representation:

If you have a legal department at your company or a legal representative associated with your firm, always have them review the contract prior to you signing off on it. If they make changes to the contract, send it back to the vendor and have the vendor make those changes in the contract before they send it back to you. Again, even after everything is ready to be signed and delivered, have your legal department or representative review the contract and “green light” it before you sign off on it and send it.

If you do not have a legal department, nor have legal representation, please read everything very carefully and make sure that everything is accurate, fair, and correct. Make sure that you are not handing them – the vendors – unfettered rights to your stuff – your proprietary courses/content, right to use your name without your permission, etc.. and more importantly, they are not ripping you off.

Now, without further adieu:


  1. You Want everything itemized. That’s right everything. How many seats are you getting and what is the price of those seats? What about that e-commerce module you decided to buy? Or that additional talent development module?  What about the cost of customer service (more on that in a second)?  What about discounts?
  2. Reason: It is simple, if you went into a car dealership, and looked at all the cars, test drove one and said okay, I want it.. the car person makes a pitch, you say okay and then here comes the paperwork. Do you just sign it without looking? Do you look for breakouts? Do you ever see extra costs hidden in there and say to them, uh what is this? What if they tell you they will give you an extra $500 off, wouldn’t you look to see if it is in the contract? And want to see it spelled out? Of course you would.

  3. Out clause or Exit clause. One note: This is under the assumption you are signing a multi-year contract for your system. Out clause: At the end of each year, it will auto renew, unless you give them 30 days notice prior to the end date of the contract (for that year), at which point you have exercised your right to exit the contract, without penalty, or occur any additional charges. (Something along these lines or choose your own terminology). Avoid them saying 60 days.. you will already be pulling out sooner than that, in terms of changes on your side, but what if something happens with your new LMS partner and you need some extra time… the 30 days gives you leeway.  In a future article, I’ll talk about leaving your new BFF and switching to your newest BFF at the end of a contract or mid split..and taking care of worse case scenarios.. : )
  4. Your Content. Everything that is yours, remains yours. It is as simple as that. If it is proprietary (which means, you created it, you own it – i.e. ur company), then it is yours forever. So, if you leave or whenever, all content remains yours. Including any materials you upload into their LMS, files, ebooks, mp3’s, media, etc.
  5. Your Company name, logo – your rightsThey cannot use it without your permission. That includes a facsimile of it.  If you need to be specific you can, but again, your legal department can help you out here.   Most contracts already have it in place, but always check .
  6. Total Costs and Discount BreakoutsClearly the total cost is obvious. That said, you want to see the discount % breakouts for each year (again, assuming you did a multi-year contract).  You should see total cost, then discount break %, then the final total cost.  Not, total cost and they tell you the discount is in there. Example:  Total costs:  Year 1: $25,000 Discount: 15%  Final Cost: X,  Year 2:  $24,500  Discount: 15% Final Cost: X,  Year 3: $25,000 Discount: 20%, Final Cost:X

What YOU Will NOT Pay ONE CENT FOR (Repeat after me..I am not going to pay for this..I am not going to pay for this..)

Customer Service

  • Telephone and E-Mail. It is Free. Why pay to have someone help you with something that is wrong with their system?  I am not talking about training here. Just customer service. This is for your administrator of your system or yourself – not for your employees/customers.
  • Key: Find out what are their customer service hours and what is their turnaround to respond.  Are they on the east coast, west coast? Answer on the weekends? What about on holidays?  What if it is an emergency?  Again..have it listed in that itemized part of your contract, and of course..next to it..it says “FREE” or no charge.  – if it is not listed, then you have real no idea if you are paying for it or not, regardless of what they are saying.

Tech Support

If it is your system and I’m buying it (in reality leasing it), and it stops working and has a bug or issue, why do I have to pay you more money to find the problem and fix it? Isn’t that included in my contract? Oh, wait, I never asked for it and had it included..oops.. – Again, only for your administrator of your system or yourself..not for your employees/customers..

Training – Free? Yeah, right.

I would love to tell you that 100% of all vendors provide training for free for you and your administrator, but then I will have to tell you that my dog Diego is helping me write this. (uh, he isn’t).   Here is how it often works (again, not with all vendors):

  • Some will train one person (you pick) for free – via a webinar or a series of them and you will get training materials (in the form of a pdf or if you really want it as a hard copy).
  • If you want your administrator as well, many vendors will charge extra. Some won’t.  Which of course begs the question, if it is a webinar and I’m viewing it, how will they know? They won’t unless you have a web cam as well and they can see you (but I didn’t say that out loud).
  • If you want a “live” person to come out and train you or whomever – it will cost $$, plus you pay for travel expenses on top of that.  You go there, it costs $$$.

What a lot of them love to do is – have the “webinar” angle, either taped ones for you to view on your own when you have a problem, or live ones to view (sometimes listed as a “live conference event”)- which you are with other clients as well (again, a negotiation component – to have your own without others on the call), pdf materials to download and many have a FAQ to view.

Oh, and you pay for this wonderful training service as part of your contract.  My take, for the above super package here — it is free.  Plus, I want a couple of webinars only with me in it and no other clients – heck, you are paying serious money here – so why do you want to listen to joe at widget world ask a question about something in the LMS you arent using anyway and don’t care about?

Training Packages

  • They will offer the above or some pieces of the above (in the previous segment), sometimes instead of the “webinar” true component..i.e. you see the person on the computer and they go through the solution with you and you hear them via the computer, they do a “walkthrough” through the phone and your system, while you see it online.. so its the webinar, sans the web conferencing angle.  They list the packages – with it as sessions. The like to use colors, “gold”, “silver”, etc.   Always negotiate on these.
  • Many vendors, love to toss in their customer service support with their training, so watch out. It is a package deal!  Negotiate at that point.

IMO, a lot of LMS vendors need better training for their trainers. Wow, you will be shocked on how horrible it is.  In some cases, the people training you or your administrator is the salesperson or a previous salesperson, who isn’t really a training person, and it shows.

Contract Addendum

These are items that you may consider down the road, but you want an idea on what the costs will be upfront.  Pricing is always better now, then later – especially since you are in the negotiation phase.  You have the leverage..always remember that.  You can always walk, and trust me your salesperson does not want that.

So, here are some things you may want to have listed in an addendum (and by the way, this is just suggestions, not requirements, it is all dependent on what you are seeking, needing for your future growth and expansion):

  • Have them identify what would the extra costs be for additional seats in buckets (i.e. packages of seats, rather than per seat). So, let’s say you buy 500 seats to start with, and in six months you need another 500 seats, you want a price identified now in your contract – TRY TO AVOID THE INFAMOUS PER SEATS PRICE — Since you never can buy just one seat, it is bogus.  Give me a bucket or package – depending on your vernacular –  and a good price deal.  Honestly, the price per seat is arbitrary IMO.
  • Future modules: Talent Development – i.e. onboarding, succession planning, content development – if one does not exist in your system already (some LMS companies have an extra charge for it), e-commerce, future tech, whatever  – breakout the costs and what you get

All Done..Everything is Green Lighted by Legal, etc. and You have Signed..Now…

After you sign the contract – even if they ask you to fax it back to them – go ahead – but have them – sign it – fax/scan and email back (many companies sign it, scan the copy and email you the scanned file) back the copy ASAP and also send you a hard copy of the contract – with their signature on it. Some may ask for your signature too and then you send a copy back..that is okay.. Bottom line.. you want two copies..and definitely want a hard copy and not just a faxed or the emailed copy.

Final Thoughts

During the final phase of negotiations, you never want to be so nasty that it becomes some massive battle to get things done. At the same time, if they start to become nasty towards you – think to yourself — is this the company I want to have as a partner for the next three years?  You can be a “bulldog” in negotiations and be fair and polite at the same time – and still have a great relationship with your LMS partner.  But before you sign on that line, remember you have some leverage, so utilize it.

Coming Feb. 3rd 2010 – Here Data, Data, Data – LMS Reports!

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  1. Hi

    Can anyone help me with below questions

    1) How much man hour you need to develop one module in any LMS if i want to add custom module specific to my requirement (ex. Plateau, sumtotal, saba)?
    2) What is the effort required?
    3) What is the skill set required?

    Your answers will be very helpful.

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