When a training company grows, the cost of its platform stops being a line item and becomes part of how the business performs. Most teams look at subscription fees or development budgets, but the real cost sits in how the platform behaves over five years: how it scales, how it limits revenue, and how much the business pays simply to keep moving.

Total Cost of Ownership (TCO) makes the gap between SaaS and owned platforms clearer. 

SaaS is usually cheaper in year one. It becomes more expensive—and less predictable—the moment you start adding customers. A custom platform requires a larger initial investment, but the cost base stays stable, even as usage grows. For companies with meaningful learner volume or enterprise contracts, that stability often matters more than the first-year price.

The Cost Curve Behind SaaS

SaaS pricing feels simple early on, but the cost curve hides several pressures.

Per-user pricing amplifies cost as you succeed

At $5 per user per month, 500 learners cost around $30,000 per year. A ten-thousand-learner enterprise win takes that to $600,000. Revenue grows, but margins collapse because the platform fee grows in step with the deal.

The industry is becoming more expensive

SaaS pricing rose by an average of 11.4 percent in 2025. Some vendors increased fees by more than 300 percent following acquisitions. These changes don’t reflect new value. They reflect an industry trying to shore up profitability. Even if your user count stays flat, your costs may not.

Unpredictable changes make planning harder

Per-user and tiered models force you to guess what your platform will cost next year. One client signing a larger contract or one vendor changing its billing rules can reshape your margin. Long-term agreements become harder to price, and forecasting loses precision.

Hidden fees accumulate

API overages, storage surcharges, paid add-ons, and forced upgrades rarely appear in the initial conversation. They show up later when you’re fully embedded.

None of this makes SaaS “bad.” It just means the economics reward early-stage teams more than established providers.

The Custom Cost Curve

A custom platform behaves differently. The upfront investment is higher—often around $150,000 depending on scope—but the cost stabilises afterwards.

Marginal cost approaches zero

Scaling from one thousand to ten thousand learners increases server load, not licensing fees. Hosting might grow from a few thousand dollars per year to six or seven thousand, but it doesn’t multiply with usage.

Maintenance stays flat

A standard maintenance agreement sits around $20,000 per year and doesn’t fluctuate with learner volume. That predictability matters when you’re planning multi-year contracts or budgeting for growth.

You avoid the “success tax”

Adding a major client doesn’t change your cost base. Your LMS becomes a lever for margin expansion rather than a constraint.

The five-year comparison becomes decisive

A typical five-year TCO comparison in your research shows:

• SaaS at 10,000 users: ~$1.6M

• Custom platform: ~$250k

The crossover point usually appears in year two or three. From that point on, growth becomes financially advantageous rather than punitive.

Cost Isn’t Only Dollar-Based

Direct expenses matter, but they’re not the whole TCO story.

Cost of inflexibility

If your platform can’t support a new pricing model, onboarding flow, or reporting requirement, you either lose the opportunity or stitch together a workaround. Both carry cost—even if it’s not visible on a balance sheet.

Cost of manual operations

When teams compensate for platform limitations, labour expands quietly. Manual enrolment, manual reporting, manual QA of data exports—these activities add up.

Cost of slow change

A vendor’s roadmap rarely matches your priorities. If your next revenue opportunity depends on a feature you can’t control, the delay has a measurable impact.

Cost of migration

If the platform stops serving you, switching becomes a multi-month effort. With SaaS, the migration cost is borne by you, not the vendor.

TCO brings these indirect costs into view because they affect how efficiently the business converts investment into revenue.

Why Predictability Matters More at Scale

For established providers, TCO isn’t about saving money in the abstract. It’s about creating a cost base that:

• stays stable as learner volume grows

• allows accurate forecasting of profit and cash flow

• avoids the surprises that affect board confidence

• protects margins during enterprise contract negotiation

• avoids dependency on vendor pricing strategies

When your platform behaves predictably, financial planning becomes simpler and growth doesn’t trigger a larger bill.

The Connection to Valuation

This isn’t an exit article (that’s here), but cost profiles do influence valuation. Buyers discount businesses with cost structures that expand unpredictably or depend on external pricing. A custom platform doesn’t guarantee a higher multiple, but it removes one of the major reasons companies stay in the three–five times EBITDA range. When the cost base is controlled, transferable, and stable, the platform becomes part of the value rather than a risk the buyer has to model.

A Practical Way Forward

If you’re evaluating TCO, the goal isn’t to choose the cheapest path. It’s to choose the path that aligns with how your business grows.

A pragmatic approach looks like this:

• Understand your projected learner volume over the next three to five years

• Model your SaaS costs at low, medium, and high-growth scenarios

• Identify the operational constraints that currently create hidden cost

• Map the investment required for a custom platform

• Compare not just year one, but cumulative cost and margin impact

When you look beyond the first year, the economic picture becomes clearer. The companies that outgrow SaaS aren’t doing it because they want more control in the abstract. They’re doing it because the economics reward ownership once scale is real.

Contact us

If you’re planning for growth and want a clearer picture of your long-term LMS costs, let’s explore what your next five years could look like. Contact us.