Not surprisingly, one of the most common questions I get from people who are interested in using massive open online courses (MOOCs) for training is: “How much do they cost?”

This is a simple question, but the answer is complex. I could say, “A MOOC equivalent to five days of instructor-led training (ILT) costs roughly $160,000, or a bit more than $30,000 a day to create.” But without any context, it’s difficult to determine what that number means. And anyway, what most people want to know isn’t what MOOCs cost in absolute terms, but what they cost compared to ILT. And that’s where things start to get complicated.

The problem isn’t on the MOOC side, where the costs are straightforward, but on the ILT side, where far to many of the true costs are hidden. MOOCs are infinitely scalable–the 5-day course would cost about $160,000, whether it was delivered to 50 people or 500 or 5,000 (slightly more). Not only is this not true of ILT, but the cost of an ILT course itself isn’t the full cost of running the training. In fact, it doesn’t come anywhere close.

Previously, I wrote that “MOOCs deliver 90% of the value of the live experience, while also overcoming many of the known ILT issues. To top it all off, they can do this on a budget approaching one-fifth of that required for high-quality instructor-led training.” In this article, I’ll break down the various costs associated with the different types of training to give some more context to that statement.

Cost comparison: MOOCs versus ILT

ILT is known to be the most expensive type of training, but exactly how expensive is it?

Suppose you have a 5-day course that you need to deliver to 500 staff members. A common class size for ILT is 25 people, in which case you would need to run the course 20 times for everyone to receive the training.

The basic costs of this course would look something like this:

• Vendor day rate: $4,500 (could be as high as $7,500)
• Number of days: 100 (5 days x 20 sessions)
• Total cost: $450,000

At this rate, the $160,000 MOOC delivery would save you nearly $300,000 over ILT, a savings of 65%. If you had 525 staff members to train and had to run the ILT course again, it would cost you an extra $22,500. In contrast you could add another 25 (or 50 or 100) people to the MOOC at a nominal additional cost.

These numbers are impressive enough, but they don’t accurately represent the true costs of ILT. For example, they don’t factor in venue costs or travel and accommodations. They don’t account for the time your staff are spending away from their desks, which in terms of lost productivity is equivalent to five personal or vacation days. The also don’t take into account the administrative costs, such as costs associated with signing people up and preparing course materials. And what do you do if someone doesn’t show up to a mandatory training session? Schedule a make-up class? These costs are extremely difficult to measure, which is why they are so often ignored. But they can significantly increase the true cost of ILT.

For simplicity’s sake, let’s assume that no travel is required, that you can use a room in your building so there are no venue costs, and that you assign all of the administrative work to an unpaid intern. There is still the lost productivity due to staff being away from their desks, and thus not engaged in revenue-generating activity.

Suppose the average salary of your trainees is $80,000, which means they each earn $400 per day. The cost to the company of paying those employees for five training days is:

• 500 staff x $2,000 ($400 per day x 5 days) = $1,000,000

Which brings the total real cost of the ILT course to:

• $450,000 + $1,000,000 = $1,450,000

The MOOC? Still about $160,000, representing savings of close to 90%, or, in real terms, $1,300,000. That’s right: a MOOC can result in savings of more than $1 million for a single 5-day training course. Now imagine your course is 10 days, or you need to train 1,000 people, or the average employee salary is $100,000. In these cases, moving the course to a MOOC could decrease the cost of the training by 95%. Aside from abolishing your training efforts altogether, there is nothing else you could do that would have this kind of positive effect on your training budget.

And remember, we still aren’t taking into account all of the costs associated with ILT. Travel, accommodations, venue costs, administrative costs–these items are present more often than not, and they are by no means insignificant.

Despite the huge potential savings, many companies are still hesitant to try a MOOC, mostly for reasons I discussed in a series of articles to kick off the year, including the idea that MOOCs are risky and the fact that many organizations suffer from “We’ve always done it this way” syndrome. Over the course of the next few articles, I’ll explore more deeply the question of why 65%, or even 95%, savings isn’t enough to get more companies on board, and then make some recommendations for how to assess the value of  implementing MOOCs in your organization using the principles of A/B testing.

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