Now that you’ve made it through the organizational analysis and vendor selection process, you’re still not quite ready to begin what most people think of as the implementation of the LMS. Before you start rolling it out in your company, you need to finalize the LMS contract, and this is where many companies let important considerations slip through the cracks. Get a free consultation on how to implement a learning management system.

A Long-Term View

When it comes to negotiating and finalizing an LMS contract, my single most important piece of advice is to treat it like a long-term relationship. In a world where many companies are highly focused on short-term results and profits, taking a longer-term view of things requires conscious effort. Whether you think you’re in it for the long haul or not with the particular LMS vendor you’ve selected, treat the contract process as if it is a multi-year agreement, and I mean as in at least three years, preferable five years or more. That’s the kind of long-term commitment you need to have in mind to cover all your bases when finalizing an LMS contract.

Due Diligence

In a perfect world, the contract the LMS vendor sends to you for signing would be an accurate reflection of everything you’ve come to understand about what the vendor will provide your company. In that perfect world, you could just sign the contract and get your implementation started. As you know, however, this is not a perfect world. In fact, more often than not it is a painfully imperfect world, which is why you must engage in thorough due diligence when it comes to the LMS contract.

If your company has a legal department or dedicated legal counsel, you will want them to carefully review the contract before signing it. This is just standard operating protocol, but here’s the thing: If your legal people weren’t involved in the selection process, then you still need to thoroughly review the contract as well. The people who were involved in the LMS selection process are the ones who know best what ought to be included in the contract based on the business needs case that was developed earlier. The contract could conceivably be as long as twenty pages or even more, full of legalese and jargon, so take your time and understand everything it’s saying. If you don’t have dedicated legal resources, consider finding a contract specialist (preferably one with an IT background) to help you thoroughly review the contract. You want to get this right!

If you’ve gone through all the steps I outlined in earlier articles in this series, you’ve got plenty of documentation around why you selected this particular LMS, so make sure you have that documentation available to compare it with what the contract says is included. You want to make sure the vendor is verifying all the functionality you need, as well as your company’s general specifications for setup. Again, you don’t want anything important to slip through cracks or be inaccurate, which is a very common occurrence in the contract process.

On-Premise Solutions

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Many companies will be opting for cloud-based LMS solutions that don’t require you to do anything around updates, but some will still be opting for on-premise solutions, and there are important things to keep in mind for those contracts, especially when it comes to new releases.

As you probably know, many software vendors make both “point” releases and “version” releases. You need to be sure that you’ve negotiated the price of all types of future releases for the duration of the contract and what those releases will include. If you don’t do this, you’re leaving yourself vulnerable to undefined costs down the road, and you can bet they won’t be cheap. A version release typically has a whole number associated with it (1, 2, 3, etc.) while a point release is an update within a version (1.1, 1.2, 1.3, etc.). Examine your contract to see if point releases are included for a specific time period after the purchase. What happens if a point release is delayed and winds up happening outside the specified time period? Rest assured you will be charged for it. And what about a version release? You may find that point releases are included but not a version release, and if the vendor decides to jump to a version release, that can come with hefty price tag – sometimes as much if not more than the original contract, so be very precise with all these considerations.

Then there’s the service and training related to new releases. There’s nothing standard about “service” in the realm of software vendors, so you need to make sure this also carefully negotiated. The last thing you need is to have a major new version release hit you, have no idea how to use the new feature and functionalities, and then have to pay exorbitant fees for training to use the new version. Think of service as including installing upgrades, fixes for bugs and glitches encountered, and resolving any integration issues with other systems. Also make sure the how and when of service provision is clearly spelled out. After all, you need service when you need it, not weeks down the road. And what recourse do you have if the vendor doesn’t seem to be living up to their end of the service provision?


Make sure the contract is detailed about what training is offered and its cost. In a perfect world training would be free, but you already know it’s not a perfect world, right? What about refresher trainings? New release trainings? New employee trainings? Is the training on-site and is it quality? What about online training and its quality? And what about the software documentation quality and availability? Who is the training for – rank-and-file users? System administrators? Managers? These are things you want to know clearly before signing the contract.

Entering into an LMS contract is tricky, and the emphasis should be on the long-term. Don’t make the typical one-year contract mistakes, such as negotiating the price down or getting them to “throw in” an extra day of training. You can be sure the difference will be made up in subsequent years. Why? The real investment your company makes is not in the LMS, but in the number of courses created and the integration into your company’s systems.

Protecting Your Company

If you give some software vendors an inch, they’ll take a mile, so be sure to carefully review the parts of the contract that serve to protect your company. You want to be sure you’re not inadvertently granting the vendor total access to your company. The vendor must not be allowed to use your company’s name or logo without your written permission to do so. Also include all your proprietary courses and learning content (courseware, PDFs, eBooks, MP3s, photos, etc.) as well – you want to make sure that everything belonging to you continues to belong to you, even after uploading it into the LMS system or switching to another vendor.

When Changes are Needed

What happens when your company experiences changes and needs to add in new functionality? How will the costs of such changes be handled? The vendor may want to charge consulting fees, development fees, or customization fees – some of which may be charged by the hour. This is when you might want to go back to other customers who have used those services and find out how it went for them, both in terms of how the work went (quality and timeliness) and cost. If you find you need custom reports created, what will that cost? What if problems are encountered in the initial setup and implementation? How will those be handled? You want to be sure to identify all the different areas where you could get nickel-and-dimed to death.

Miscellaneous Considerations

Many LMS vendors have a library of courses available to customers. That’s great, and can be especially helpful for trainings that don’t need to be customized to your company. Is there a cost associated with using the vendor’s course library?

If you determine that changes are needed to the contract, make those changes and send it back to the vendor, keeping a copy of the changes. When the revised contract comes back from the vendor, make sure all the changes have been included.

If you’re creating a multi-year contract, which I think is smart, make sure there’s an exit clause in there somewhere. If things go sour, you want to be able to end the contract. You should only be required to give 30-days notice at the end of a year of your intention to end the contract (some vendors try to push 60-days notice, but don’t accept that).

As you can see from the above, I’m recommending that you basically itemize everything. Sounds like a pain, but it’s the only way to avoid hidden fees down the road. Keep in mind that you want to maintain a good working relationship with your vendor – the contract review/negotiation process should not become a knock-down drag-out fight to the death. If it starts to feel that way, you may want to reconsider your choice of vendor. Polite but firm is the name of this game.

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