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How to develop an LMS from scratch

Choosing the right LMS for your business is hard enough. What if none of them are the right fit? Many CEOs decide to develop their own custom LMS. Especially if they want to have an LMS without paying monthly fees. In this article I will cover the main reasons for building an LMS, give advice on the top features, and give you a good starting point for development.

Contents

Why Hire Belitsoft?

  • 15+ years of experience in making eLearning applications - LMS’, custom courses, and more.
  • Successfully delivered projects for startups and established enterprises from the USA, Western Europe, Israel, and other locations. 
  • Fixed Price, Time and Material, Dedicated Team, and hybrid pricing models available.
  • Lower rates thanks to lower taxes

Boxed LMS vs Custom LMS

A boxed (off-the-shelf, ready-made, etc.) LMS already exists as a product. It has a specific set of features and is designed to fit many different organizations. These systems have the following advantages:

  • Quicker to start working with;
  • Cheaper in the short term;
  • Tested many times by actual users;
  • Have a community of adopters for mutual support. 

Read more about choosing the right LMS.

Custom LMS

A custom (turnkey, bespoke) LMS is made with a specific customer’s requirements in mind. The client can then use the LMS in-house or turn it into a product and sell it to other organizations. Benefits:

Better long-term value. In the long run, a custom LMS is cheaper than its ready-made counterparts. You don’t have to pay the license fees no matter how many users you have.

Total control. As an owner, you can decide everything, from the feature set to the deployment model and, of course, content. No outside force will have an influence on your product, no company going bankrupt will cause support for it to cease, and no sudden update will make your working course crash on its users.

Better security. Everyone who uses the same system shares the same vulnerabilities. All it takes is for a malicious actor to hack one of the users to find a way to access all the others. Having a unique system negates that risk.

Improved valuation. A custom LMS is a unique piece of intellectual property. Should your company go public, it would dramatically increase its market worth.

As with everything, making a new learning management system has its flaws.

Higher upfront costs. It takes a certain initial investment to develop a new software product. This goes for both money and time: while you can buy a ready-made LMS and start using it pretty much right away, it takes a while to build something new.

No community support. Boxed systems tend to accumulate an audience that becomes a good resource for new members to look for advice. In a custom system, you can rely only on yourself and the developer who built the LMS for you.

Customized LMS. LMS Customization

Customized LMS is an off-the-shelf system that was changed at the client’s request. The changes can be minor (e.g. adding logos and company colors) or major (new features and modules). Some amount of customization happens in almost all cases.

This approach is somewhere in the middle between using a boxed LMS and building a new one from scratch. If the system doesn’t exactly fit your needs as it is, but would do so with a bit of extra work, you can ask the vendor to customize it for you. This can include something small like changing colors and branding, or more in-depth work (e.g. making entirely new features).

In the case of open-source LMS’, customization can be done by a third-party developer. This becomes a more viable option if the rates of the original developer are higher.

Do you need a custom LMS?

When should you develop a new LMS? There are two leading cases where making a system from scratch is justified.

The first one is launching a new product. Despite there being dozens of existing LMS’ on the market, it is still possible for another startup to carve out its slice of the market (not that it would be easy).

In this case, your system should differ from your competitors’ offerings. There are many ways to achieve this: unique features, innovative training, a new distribution model, or even a better price. The important thing is to make it look valuable enough for your target audience to make a purchase.

The second case for making a new LMS happens where a corporation isn’t satisfied with any of the existing systems on the market. This can happen for any number of reasons from lack of specific features, to desire for total control.

Let’s take a look at common situations and decide whether a custom LMS is the right choice.

1. Standard video-based courses

Most online courses are based upon the typical pattern of video lessons followed by quizzes. This format is supported by all the boxed LMSes, but there are so many of them that you get stuck and unable to make a choice. 

This isn’t the best case. Even though you will have certain requirements beyond hosting and playing courses (e.g. reporting and tracking), the higher upfront costs of a custom system make it a suboptimal choice.

To solve the problem of choice, you would be better off talking to us and getting a consultation on selecting the right LMS. We will make sure you pick the most cost-effective option that suits your needs.

2. Limited customization

The basic premise is the same as with the above situation: you still have a standard video-quiz course. However, now you also require certain features that aren’t part of any standard LMS. These can include integrations with specific third-party software (HR-management systems, ERPs, etc.), new gamification options, support for non-standard exercises, augmented and virtual reality, etc. 

Once again, a custom LMS would be overkill. The customization you require is relatively minor, so your budget would be better served by customizing an existing system.

This is something we can help with by choosing and adjusting an LMS so that the result would fit all your requirements.

3. Self-Guided Continuing Education

You have a variety of courses on different topics from welding to Excel and project management. And you want your employees to regularly access them and improve their knowledge in different areas so that they can work more effectively and so that they value their job higher. 

In this case, the best choice is a learning experience platform (LXP), either custom or off-the-shelf. It is the next step in the evolution of LMSes, using artificial intelligence to adapt to the learners’ needs. Suppose you have a new salesman. The LXP will use the information from the integrated systems (e.g. HRM and CRM) to suggest the best courses for a rookie: negotiations, working with your CRM, product lines, etc.

Ask us to choose the right LXP or develop one from scratch.

4. Unique instructional design

You have an idea for a course that would approach teaching and learning in a special way. After researching the off-the-shelf solutions, you realize that none of them can support the instructional design decisions that you envision. In addition, you would rather not pay someone else every month to keep your course online. 

This is the scenario that calls for a custom LMS more than anything else. Firstly, it can be made in a way that is perfect for your approach, unlike the boxed solutions that have to be created in a “one-size-fits-all” way. Secondly, you will be the owner of the system and won’t have to pay any licensing fees. Finally, you will be independent of any decisions that third parties might make. 

Ask us to build your own LMS. It is our forte and something we have a lot of experience in. In addition, we have a framework that contains many prebuilt features (e.g. reporting and eCommerce) which makes working with us more cost-efficient.

See examples of this approach below.

Extraas

Extraas is a game-based learning platform that teaches children math and Dutch. More specifically, it was designed as a replacement for expensive private tutors that help school students prepare for important exams.  

Pretty much all the learning in Extraas is done through various games. There is a great variety of those, from racing to a shark attack.

There were two main reasons for custom development in this case: 

  • Unique instructional design. No existing LMS supported 100% game-based learning programs at the moment of the development;
  • Business plan. The customer envisioned this system as a standalone SaaS project. As such, having to pay regular license fees to a third party was unreasonable;

To optimize expenses, we used our LMS framework with certain features already implemented:

  • Video playback;
  • Basic gamification;
  • eCommerce;
  • Reporting and analytics;

In addition, to make developing many learning games more cost-effective, we have created an in-house game engine. 

The resulting system turned out to be a hit with its audience, gathering thousands of users, and getting rated 9,7/10.

TET

The “Theorie Examen Trainer” is an online course that helps users prepare for the theoretical part of a driver’s exam. 

The training program was centered around mock tests that resembled real ones. If a user made a mistake, the system pointed out the right answer and explained why it is the correct one. 

As with Extraas, there were two reasons for this system to be custom-built:

  • Unique features. None of the existing LMSes could support the course that is entirely quiz-based. In addition, none of them had the gamification and statistics that the client required for this project.

  • Business vision. The project needed to be self-sufficient, so using a boxed system was out of the question. 

To make our customer’s budget more efficient, we used our LMS framework to avoid making certain features from scratch:

  • Video playback;
  • Basic gamification;
  • eCommerce;
  • Reporting and analytics.

TET is one of the most popular courses of its kind on the market. It has over 22.000 satisfied customers and an 8,3/10 rating. 

Ticken

Ticken is an innovative touch-typing course, one of the most time-efficient on the market. 

The training includes several video lessons on the right posture and finger positioning. However, most of it is based on practical exercises that have users type letter combinations (in the very beginning) and complete words. In addition, there were a few simple typing games to let learners relax and at the same time solidify their knowledge.

There were two arguments in favor of developing Ticken as a custom system:

  • Academic. No existing LMS could support the typing exercises which were crucial to the system.
  • Business. Making such a project dependent on other companies’ whims was seen as detrimental to the long-term perspective of Ticken.

To give our client more bang for his buck, we used our LMS framework with certain prebuilt features:

  • Video playback;
  • Basic gamification;
  • eCommerce;
  • Reporting and analytics.

 

As a result, Ticken allows learners to increase their touch-typing speed to 140 characters per minute. The system had over 100.000 satisfied customers and has a rating of 8/10. Moreover, the customer got an award worth €89634 for it.

Must-Have Features

These functions are absolutely necessary for any modern LMS worthy of the name.

Course management

A pretty self-explanatory one - a learning management system that can’t manage learning wouldn’t be very useful. The LMS should allow users to upload files and share them, plan learning paths (the order in which a learner completes lessons and assignments), and possibly edit the course within the system, without turning to 3rd party authoring tools.

Skill Assessment

This feature can include any kind of tests and quizzes, from the common “multiple choice” to game-based ones. A gradebook where the learners can see their results and potential areas of improvement also goes here.

Analytics

This feature is very important both for monitoring the learners’ success and the course’s efficiency. A properly tuned analytics can track more than just the time the users spend studying and the questions they have the most problems with - it can also see what motivates them and even what they study outside of the LMS (thanks to the technologies like xAPI).

Gamification

Gamification is using game-design elements in a non-game environment. These elements can include points, badges, levels, leaderboards, and more.

Gamification is used to improve learner motivation and engagement and has proven to be effective at this job. 

Mobile Learning

Given that the modern learner spends a lot of time on his/her smartphone or tablet, it makes sense to make your system mobile-friendly. This includes more than just responsive design - the whole system needs to be convenient to use on a smaller screen and with the touch instead of keyboard+mouse.

Payment Processor

You’ll need to integrate a payment processor. This will allow you to accept different kinds of payments and transfer them to your bank account.

The following parameters are the things to take into account according to your business needs and priorities.

  • Geographical Coverage. A certain gateway may or may not work in any given country or territory. If you operate in the United States or European Union and want to accept payments from these regions, there are more options available. Fewer, if you are in smaller countries. This also includes support for transfers in different currencies: almost any processor works with US dollars and Euros, while support for less popular money (e.g. Egyptian pound) is harder to find.
  • Commission. The industry standard seems to be 2.9% + 0.30 USD per transaction. However, some payment processors can have extra fees or a different commission that can include features like fraud protection.
  • Chargeback fee. If a customer doesn’t like the product they bought online, they might contact their bank and ask to revert the fee that they paid. If the request is ruled valid, the bank takes the money from the seller’s account and gives it back to the buyer. In addition, it charges the merchant a certain processing fee, known as the “chargeback fee”. This is a measure necessary to protect customers from fraud. However, it also makes the merchants vulnerable to false return claims.
  • Merchant account. This is a bank account that allows you to accept credit and debit card payments. Some payment processors can set you up with one. Others require you to obtain it yourself.
  • Hosted/integrated checkout. A hosted checkout means that to complete the payment the customer will be redirected from your website to a separate page that the gateway provides. This means that the processor handles all the information security matters and is typically better for beginners. However, certain customers would not complete their payments through these pages, and your bottom line will take a hit.

An integrated checkout page is built into your own website. It allows a more seamless transition to payment and shows better conversion rates than hosted ones. But it also means that you must ensure that the transfer is sufficiently secure (e.g. by using SSL/TLS certificate).

  • Integration. Some payment gateways are easier to connect to your website than the others. Finding out the details would require consultations with your elearning software developer unless you have the required technical knowledge and skills.
  • Extra features. A processor can provide additional useful features besides just transferring money from one account into another. These features can include fraud protection, detailed reporting, invoicing, and others. Some of them are included by default, others are paid additions.
  • Usability. This goes for both you, as a merchant, and your customers. Different gateways can process payments at different speeds, have different visuals and user flows, etc. 

Pre-Integrated payment gateways

Many learning management systems (LMSes) used as a foundation for custom LMS already have an inbuilt payment processor (or several). They tend to be easy to access and configure.

For example, JoomLMS that we base some of our turnkey projects on can work with Authorize.net, PayPal Standard, Offline Bank transfer, WorldPay Select Junior, PayMeNow, Dankort/PBS via ePay, eCheck.net, eWay, iKobo, iTransact, NoChex, PayMate, PaySbuy, Verisign PayFlow Pro, WorldPay, MerchantWarrior, Purchase Order, Cash On Delivery, and 2Checkout. 

In most cases, these would be enough for your needs, unless you have specific requirements. 

Open Banking APIs

Many banks allow third-party companies to access their API. This has many advantages for the banks themselves but for you, as a merchant, the most important thing is lower commission than with other processors

From our experience, working with such an API could be as simple as making a plugin for your LMS (e.g. JoomLMS supports this) or as hard as writing an extra module that requires an in-depth rework of the entire system. It all depends on your elearning software. 

All-in-all, this is beneficial if the bank that you work with has an open API, your system is flexible enough to accept new additions like that, and you have enough of a cash flow to warrant paying for extra development work to get long-term benefits.

External Payment Gateways

Sometimes, there are cases that warrant the use of a specific payment processor. 

For example, you might want to use affiliate marketing as your main user acquisition tool. In this case, you would need to either manually send the affiliates their cut, or automate the process to reduce the hassle. Unfortunately, only a few processors (e.g. PayPal Pro) support chained payments like that. 

Another thing you should be aware of is the difference between a gateway and a platform. The former is just a system that allows accepting payments. The latter, however, can have many more benefits:

  • One system for all kinds of payments (credit/debit card, PayPal, etc.);
  • Fraud protection. Blocking suspicious transactions to prevent scammers from getting free goods and services from you.
  • Conversion rate optimization tools.
  • Recurring billing.
  • Tax management.
  • etc.

Below see the list of the most popular gateways with the conditions they offer. However, including every feature they provide would take an unreasonable amount of time and space. So in addition to the listed parameters, take a look at the website of each gateway/platform to get the full story.

Some of the popular payment gateways are:

PayPal

PayPal has both the hosted (Standard) and integrated (Pro) versions. Both charge 2.9% + USD 0.30 per transaction, are available pretty much everywhere, and have a USD 20 chargeback fee. However, the Pro version offers extra features (e.g. an option to design a custom checkout page) and costs USD 30/month.

PayPal supports 25 currencies.

Authorize.net

Authorize.net is available in both hosted and integrated versions. The processing fee is 2.9% + USD 0.30 per transaction on the “All-in-one” plan and USD 0.10 per transaction plus USD 0.10 for all the transactions made every 24 hours (a “batch fee”) under “Payment gateway only”. The chargeback fee is USD 25. Authorize.net operates in the USA, Canada, Europe, the UK, and Australia, supporting 11 currencies.

2Checkout

2Checkout can be both hosted and integrated. It charges from 3.5% + USD 0.35 per transaction to 6% + USD 0.60 per transaction (depending on the plan) and the chargeback fee is USD 20. It is available in over 200 countries and 87 currencies.

Stripe

Stripe is available in both hosted and integrated versions. Every transaction costs 2.9% + USD 0.30 without any additional fees. Each chargeback will cost you USD 15. Stripe supports over 100 currencies and is available in 39 countries.

Braintree

Braintree has both hosted and integrated versions. It charges 2.9% + USD 0.30 per transaction and has a USD 15 chargeback fee. This processor supports over 130 currencies and is available in the USA, Canada, Australia, Europe, Singapore, Hong Kong, China, Malaysia, and New Zealand.

WePay

WePay is a hosted payment processor that charges 2.9% + USD 0.30 for a credit card transaction and 1% + USD 0.30 for a bank transfer. The chargeback fee is USD 15. WePay only works in the USA and supports payments in US dollars.

Dwolla

Dwolla only has a hosted version. It charges 0.5% (from USD 0.01 up to USD 5) for sending money and the same amount for receiving it. The chargeback fee is USD 15. Dwolla only processes payments in US dollars and is available in 162 countries.

Square

Square is only available in a hosted version. Online card payments through this gateway carry a charge of 2.9%+USD 0.30 and there are no chargeback fees. Square works with US dollars only and is available in the USA, Canada, Japan, Australia, and the UK.

The most straightforward way to earn with a custom platform would be to sell the unique courses you’ve created. After all, support for unusual instructional design decisions is the main reason why people invest in creating a turnkey system. Ads or affiliate promotions risk annoying the visitors.

Choosing the Contractor

If you are reading this article, your company probably needs someone else to build the LMS for you, as software development is not its core area of expertise. Here’s what you should pay attention to.

Communication

The company that you hire needs to demonstrate that communicating with them would be easy. This covers the ability to understand your needs and requirements, knowledge of the domain your company works in, and even cross-cultural communication (if you hire an overseas development company).

Otherwise, you risk getting a different product than the one you envisioned and learning about it when the work is already done and the costs are sunk.

Experience

The company that has already delivered LMS’ is already aware of the potential pitfalls they can face and know how to avoid or mitigate associated risks. They have already built features similar to the ones you need, which will shorten the development time and thus save you money.

Note that experience in software development for the domain isn’t quite the experience in the domain itself. For example, as an insurance company executive, you will be much more knowledgeable about the industry than your development company. However, their strength would be to understand the knowledge you impart upon them and use it to create a better product for you.

Pricing

This refers to both the cost and the pricing model. The right company would give you a good amount of “bang for your buck” and be flexible enough to agree on the most fitting way the payment is arranged. The three most common pricing models are Fixed Price (a specific scope of work for a specific sum), Time and Material (you pay for the time actually spent building your product), and Dedicated Team (you rent a team, pay for them monthly, and manage them as you see fit).

There are also hybrid pricing models that combine two of the above when it is the most cost-efficient.

Post-launch Support

Unless you have a strong internal IT-department, you’ll need to hire a contractor that can maintain the LMS after it has gone live. This can be 24/7 dedicated support or just fixing the problems as per written request, depending on your needs.

Where to Start

Once you know what you need and have found a solid development company to bring your idea to life, what should you do?

Start With an MVP

A Minimum Viable Product (MVP) is a technique that helps risk less money and start getting results faster. It boils down to developing the core features (including the ones that make your product different from the competitors’) first and launching them as soon as possible. Yes, it carries the risk of technical debt and the need for refactoring later, but the benefits far outweigh them.

Choosing the necessary features, though, can be harder than it seems. See our article on MVP for advice on how to approach it best.

Plan the Implementation

This part concerns both the enterprises that are getting a custom LMS and the startups that might need to help their future customers.

Building an LMS is one thing, using it in practice is another. So it is vital that all the concerned parties know what is going on, how to work with the system, and what benefits will it bring. You should also keep in mind the need for training, data transfer, trial run, and many other things. See our detailed article on implementation for more.

Prepare For a Trial Run

Before the system goes live, it is advisable to conduct user acceptance testing - try it out on a group of people who would use it in the future. This will be as close to the “real-life” conditions as possible and will help assess the readiness of both the systems and the staff.

The test group should consist of people from every position that would utilize it. This way you’ll be able to learn whether it fits the need of everyone involved. For more information on user acceptance testing see our article on implementation.

Examples of Custom LMSs

JoomLMS

As the name suggests, this LMS was created based on the popular Joomla! content management system. It has been on the market for over 14 years, and has gained more than 1000 customers in 30+ countries.

JoomlaLMS

JoomLMS

Features:

  • Course builder. The system allows creation of media-rich learning content, including lessons with audio, video, PDF and other materials. This LMS is also compatible with SCORM, AICC, and LTI learning standards
  • Advanced quiz manager. JoomLMS can create quizzes with 14 different types of questions and gathers extensive statistics to help admins improve the learning process.
  • Communication tools. This includes a lot of functions that help learners communicate with the teachers and each other - chats, forums, announcements, and more. 
  • Mobile app. The JoomLMS mobile app makes it convenient to use on every platform. 

Analytics. The system is able to track many aspects of learning and the reports can be adjusted and exported in many different ways.

LMS 365

This system used to be known as SharePoint LMS, as it is based on the popular Microsoft corporate software suite. Now it is compatible with Office 365 and can be deployed in the cloud, as well as on premises.

LMS 365

LMS 365

Features:

  • Course management. LMS 365 can play premade SCORM-compliant courses, or let the users create their own using a robust in-built tool. 
  • Blended learning/Webinar support. The LMS can be used both for digital-only teaching and mixed formats.
  • Certification. LMS 365 allows standard operating procedures to be published automatically, tracks continuing education units, and can issue certificates to the learners.
  • Mobile learning. The LMS has mobile apps for both iOS and Android that include offline mode, allowing learners to study even when they have no internet connection.

Starbucks

The world-famous coffee shop chain has chosen to develop a custom LMS to train its baristas. The system contains information on the drink recipes and the equipment used to make them.

Features:

  • Courses. The training system is pretty straightforward, with video lessons followed by a quiz. The learner needs to answer at least 80% of questions correctly to pass and be allowed to move on to the next lesson.
  • Mobile learning. The design of the LMS makes it convenient to use on any device, from a tabletop PC to a smartphone.
  • Gamification. To increase the learner motivation, the LMS has a robust gamification system with badges and leaderboards. The results can also be shared on social networks.
  • Social learning. A learner can create a personal profile, connect to others, and see their coworkers’ achievements and results through the activity feed and a number of leaderboards.
  • Local groups. The baristas and their managers can find coworkers in their neighborhood. And the administrators can segment the data from the LMS by location.
  • Analytics. The LMS gathers the data on employee training efficiency and visualizes it with Google Charts.
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