How to calculate the total cost of language vendor ownership
In a recent post, we talked at length about how to launch a language cost audit, and how you can see big savings in the process. As a quick refresher, in that post, we outlined three critical steps for unlocking major savings with a language cost audit:
- Review your language vendor expenses within your own procurement team and region.
- Audit your language expenses at the departmental level.
- Zero in on language-specific language costs.
By going through this process, we have seen our own customers uncover major spending inefficiencies across a wide range of face-to-face and online language training solutions. In fact, in many cases, Enterprise-level organizations find that language overspending is the rule, not the exception.
But uncovering the initial language vendor expense is just the tip of the iceberg. In order to get the most out of your language cost audit, you need a complete cost picture.
In this post, we want to help you do just that by taking a closer look at one particular element of auditing your language costs: How to calculate the Total Cost of Ownership (TCO) of your language vendors.
Total Cost of Ownership and the financial impact of your language solutions
As any seasoned procurement manager will tell you, vendor expenses do not start and end at the point of purchase. There is a whole cost lifecycle to take into account. This is why understanding the impact of language costs from a cost of ownership perspective is so essential.
When it comes to managing your Learning and Development (L&D) costs across your entire organization, calculating Total Cost of Ownership means gaining ground-level insight into how the lifecycle of your vendor costs impacts your organization financially. This means measuring the initial purchase cost against the impact of using a mix of one or many online and in-person language vendors across your organization.
Four ways to calculate language vendor TCO
1. Review all external language vendor expenses
We covered this in detail in our last blog post, but this is where you conduct an internal review of just how many language vendors you are sourcing as an organization, and how much you currently spend with each vendor. This is where you ask questions of your own department heads, and other leaders across the organization.
Is there a forecasted budget for learning and development programs for the year? How much of that is spent on language training? How many vendors does this include? What types of vendors? Does this include in-person or online language training? Are you using blended solutions? If so, what is the cost breakdown of each vendor?
Getting the right expense data means asking the right questions at the departmental level.
2. Evaluate operational impact
A huge part of calculating language TCO is understanding the operational impact of managing multiple language vendors. For instance, you will need to meet with your Human Resources leadership to understand how language training is currently being planned and rolled out to various departments. Who is administering language training programs? How does administration differ from department-to-department? How are you managing success and language learning engagement? All of these aspects require time from people within your organization. Understanding gaps in how language training is operationalized will help you better forecast language TCO across the organization.
3. Understand language training time
Another piece of the TCO puzzle is gaining a clear picture of how your employees are engaging with language training. In other words, are they both learning a language and putting it to use at work and in their personal lives? In most cases, this information is easily accessible within your Learning Management System.
Understanding the impact of employee language engagement, you need answers to the following questions:
- How many employees attend in-person language training regularly?
- Was this training delivered by an outside vendor?
- Who were those suppliers, and what were the costs associated with each?
- Were these sessions run on- or off-site?
- What did training cost per employee, per training session? ?
4. Uncover additional hidden costs
Managing multiple language vendors is a complex process that often includes less-than-obvious expenses. For instance, in-person training often requires that you pay for travel, facility maintenance, producing printed/digital materials, food, refreshments, and daily per diems for employees travelling long-distance for training.
A 2018 training industry report uncovered that global organizations spent more than $87 billion on in-person training initiatives:
- $11 billion on outside training vendors
- Nearly $30 billion on travel, facilities maintenance, and equipment
- $47 billion on payroll for internal, contractors, partners, and third-party vendors
The same report indicated that certain in-person training programs can cost upwards of $30,000 per day.
Language vendor consolidation can unlock critical L&D expenses
By allocating your language budget toward a single online solution, you can give your employees full control over how and when they learn—all while eliminating the need for long-term in-person training expenses.