• Digital Tweed

    Digital Tweed® is the work of Kenneth C. Green, founding director of The Campus Computing Project. If successful, these posts will inform and entertain, and at times also annoy. A little dissonance can be a good thing.


Buying Blackboard

"Buying Blackboard" is often a topic of interesting campus conversations this time of year as colleges and universities move through the spring budget review and contract renewal cycle. However, this past week many of the more interesting “buying Blackboard” conversations shifted from campus to corporate offices.

April 26, 2011

"Buying Blackboard" is often a topic of interesting campus conversations this time of year as colleges and universities move through the spring budget review and contract renewal cycle. However, this past week many of the more interesting “buying Blackboard” conversations shifted from campus to corporate offices. That’s because on April 19th Blackboard announced that it had hired a financial advisor to help its senior executives review “unsolicited, non-binding proposals” to buy the educational technology and services firm.

The announcement was good news for many Blackboard investors, as the stock jumped 28 percent – about $10 – following the April 19th announcement. I say most investors because there is a sizable short position on Blackboard – institutional investors and others who believe that the stock will tumble over time, not rise. You’ll pardon the pun, but it is probably fair to say that the Blackboard shorts (i.e., short-sellers) took one in their shorts last week.

There’s lots of speculation on and off-campus about who might be bidding for Blackboard. A summary of analysts’ comments published by Forbes late last week wanders the landscape of content and technology providers. The prospective buyers are/might be/are not: Google, IBM, McGraw-Hill, Microsoft, News Corp., Pearson, Oracle, SAP, and SunGard. To date, however, there has been no public comment from Blackboard or the prospective bidders: the identity of the bidders – and bidders is the key term here, as in more than one according to the Blackboard press release – remains shrouded in secrecy.

As I scan the landscape, my hyperactive inference engine suggests that the probable bidders are investment firms rather than companies that currently play a major role as content or technology providers to the campus market. This tilt towards investment firms rules out college publishers such as Cengage, McGraw-Hill, and Pearson, and also large, multi-market technology companies such as Google and Microsoft.

Why investors rather than current providers? Several factors point in that direction. Admittedly, publishers might find the Blackboard LMS franchise interesting as another distribution platform for curricular content. But data from the 2010 Campus Computing Survey document the continuing decline of Blackboard’s hegemony in the campus LMS market. This decline seemed implicitly acknowledged in a conference call with corporate analysts some weeks ago when John Kinzer, the company’s chief financial officer, stated that he expected revenues from the company’s LMS franchise to decline from
55-60 percent of current total corporate revenue to 20-30 percent in the next three-to-five years. Kinzer’s unusually candid comments about Blackboard’s shifting revenue portfolio also reflect high expectations for strong growth among Blackboard’s other business units such as mobile and notification services as well as the newly acquired/launched Blackboard Analytics and Blackboard Student Services units.

Yet corporate expectations for growth notwithstanding, Blackboard confronts significant competitive pressures across most of its business units. As noted above, there has been continuing erosion in its LMS position in the higher ed market: more erosion seems inevitable as some 700 current LMS clients confront "up or out decisions" because Blackboard has announced plans to terminate support for the Angel Learning and WebCT platforms over the next two years. (The 2009 Angel acquisition accounted for 63 percent of the growth in Blackboard’s Enterprise LMS licenses between Q4-2006 and Q4-2009.) Some of the current Angel and WebCT client campuses will migrate to the Blackboard Learn Enterprise application (Learn 9.x). Concurrently, some current Blackboard LMS clients will move to Desire2Learn, Moodle, or Sakai, LMS applications
that have gained market share in recent years,. And still others may opt for one the newer LMS platforms such as Epsilon or Instructure that are beginning to gain attention and traction.

Although Blackboard was a "first mover" with mobile services two years ago, other LMS and ERP providers have since announced their mobile strategies, often at lower cost. The new Blackboard Analytics offering is late to the market and will have to compete the with business intelligence and analytic services offered by the established ERP/administrative systems providers that have long-term relationships with campus clients and also the "middleware" analytics firms such as Cognos and SAS that also have established market positions and campus relationships.

Another factor that points to investment firms as the likely bidders is that Blackboard businesses units such as Transact (the card business) and Connect (notification services) probably would not be easily integrated into or digested by content or technology providers. The card and notification businesses are, by the standard conventions of business school case studies, "mature" businesses as almost all potential clients have already acquired these technologies, either from Blackboard or a competitor. Google and Microsoft do not have a history of buying tech firms that work in individual markets (e.g., education); rather, they typically acquire tech firms for compelling technology or to expand a position in growing markets.

Finally, a key issue for Blackboard's current education clients is the issue of corporate debt. Since 2006, Blackboard has spent more than half a billion dollars to buy a number of companies including WebCT, Angel Learning, NTI (now Blackboard Connect), Illuminate and Wimba (now Blackboard Collaborate), and Presidium (now Blackboard Student Services). That's a lot of debt to pay down, and more debt seems inevitable following a sale. This suggests that the company's new owners will be looking for new revenue, which then suggests price increases – potentially significant price increases – across the range of Blackboard’s current product lines and services. An investment firm might be less sensitive to complaints about rising prices than a company that already has well-established business relationships in the higher ed market.

Admittedly, these are my best guesses. (What are yours?) Like everyone else, I'm waiting for the press release that provides more information about the bidder(s) or confirmation of the sale.

But as we wait for that next press release, we might ask ourselves some other questions: what does the higher ed community want and need from a learning management system and from LMS providers? What does the LMS currently do well – and what must it need to do better? What do the individual LMS providers do well – and what must they do better? These questions about the role of the LMS and LMS providers are all part of the larger conversation about our expectations and aspirations for the role technology in higher education.

Disclosure: Blackboard, Cengage, Google, Epsilen, IBM,McGraw-Hill, Microsoft, Pearson, Oracle, and SunGard are corporate sponsors of The Campus Computing Project.


Be the first to know.
Get our free daily newsletter.


Back to Top