The Long (and Open?) View on Blackboard
Here we go again: another round of “Inside Blackboard,” another long (2800 word) blog. Last week’s announcements were big and bold. Let’s break it down into manageable parts.
Blackboard’s four-part announcement on March 26 – launching an Open Source services unit, acquiring Moodle service firms Moodlerooms and Australian-based NetSpot, extending the life of the Angel LMS, and hiring Sakai architect Charles Severance - was both big and bold. As my fellow Inside Higher Ed blogger Joshua Kim and others elsewhere noted in their morning after commentaries, last week’s announcements confirm a transition that was already underway as Blackboard (a) continues to evolve from product (software) company highly dependent on revenue from its core LMS application into a (tech) services firm with a more diversified portfolio of products and services and (b) continues to expand a portfolio of often complementary offerings that place the firm at the nexus point of eLearning products and support services.
This transition was confirmed in February 2011 when, in a rare moment of public candor, Blackboard’s CFO John Kinser told analysts in a public, year-end conference call that Blackboard’s management expected the company’s LMS billings to decline from about half of the company’s 2010 revenues to about a quarter of the rising total revenue over the next three-five years. “Over time, clearly the other products like mobile and collaborate and analytics are growing much faster,” Kinzer said. “So we’d assume that over a three- to five-year horizon that [the LMS] percentage is going to be much lower than that, probably down into the 20- to 30-percent range.”
Yet for those who believe that Open Source LMS applications are essential alternatives to what Blackboard antagonists describe as the “Blackboard borg” (“resistance is futile”), last week’s announcements will be seen as a major betrayal on the part of individuals and firms that, until March 26th, were widely viewed as Open Source champions and also mission and market critical competitors to Blackboard.
Reaching for a Freudian metaphor, the Blackboard announcements also represent what some might describe as the “return of the repressed.” Almost every college and university that migrated to Angel, Moodle, or Sakai over the past eight years was, at one time, a Blackboard LMS client: these campuses either licensed Blackboard’s LMS application, or became a Blackboard client when the company bought Prometheus (2002), WebCT (2006), or Angel Learning (2009). These former Blackboard clients made active, affirmative decisions to go elsewhere for a different LMS, to do business with a firm other than Blackboard. However, many of these Open Source LMS campuses, like the Angel Learning clients before them, confront a future in which Blackboard will now play a prominent role in their campus LMS strategy, certainly in the area of services and support, and perhaps even in the realm of LMS code, features, and functions.
Blackboard’s March 26th announcements involve many moving parts. Let’s break them down.
BUILDING BLACKBOARD. Blackboard has always been aggressive about acquisitions; the company has spent more than $500 million on acquisitions since 2006. Indeed, acquisitions have proven to be a relatively quick and effective way for Blackboard buy a product line, enter a market, acquire expertise, expand revenues, and gain market share. Save for the company’s original LMS product (CourseInfo), Blackboard’s entry into other businesses – Analytics, Collaborate, Connect (notification), Mobile, Student Services (help desk and call center services), and Transact (campus card services) – were all launched by acquisition. The one major effort to create a new product center based on in-house development, Blackboard Outcomes, never gained significant traction in the higher education market.
Although Blackboard has announced plans to create an Open Source business services unit in which Moodleroom executives and former Sakai chief architect Charles Severance will play prominent roles, the real initial value of the Moodlerooms and Netspot acquisitions are that they complement a services strategy launched when Blackboard bought Presidium Learning, a tech support and call center services firm, at the close of 2010. Moodlerooms and NetSpot will bring Blackboard some 700 school and campus clients, including many former Blackboard LMS licensees. Blackboard will not own the Sakai or the Moodle code, but will it acquire current contracts to support a large number of Moodle installations in the US and in other countries.
TENSIONS WITH THE OPEN SOURCE COMMUNITY. Blackboard has always had a difficult relationship with the Open Source Community. Consequently, the Moodlerooms and NetSpot acquisitions, plus the hiring of Charles Severance as the company’s Sakai strategist, closes a chapter on Blackboard’s long quest to be recognized as a legitimate participant in the Open Source LMS conversation. Unable to earn at seat at the Open Source table, Blackboard ultimately bought several chairs. If respect could not be earned, Blackboard officials can now argue that attention must be paid.
The tensions with Open Source began in 2004. Following the announcement of the Mellon Foundation grant that helped to launch Sakai, Blackboard made repeated but unsuccessful attempts to sign on as a Sakai corporate affiliate. Seen as a competitor, the Sakai leadership refused to let Blackboard join the affiliates program.
Tensions with the Open Source LMS community were elevated by the patent lawsuits Blackboard filed against Desire2Learn in summer 2006. The Sakai Foundation described the Blackboard patent lawsuits as “a threat to the effective and open development of software for higher education and the values underlying such open activities.” Charles Severence, executive director of the Sakai Foundation (and now the lead Sakai strategist for Blackboard’s Open Source initiatives) characterized Blackboard’s patent litigation as an “offensive” effort intended to give Blackboard control over critical instructional technologies essential to colleges and universities.
Escalating tensions over Blackboard’s patent lawsuit during summer and fall 2006 subsequently led EDUCAUSE President Brian Hawkins to send a hand-delivered letter to Blackboard CEO Michael Chasen. The Hawkins letter cited “the depth of the consternation [the patent litigation] has caused for key members of [the higher education] community.... we have seen this intensity of anger only a few times before.” On the behalf of EDUCAUSE, and by extension on behalf of the larger higher education community, Hawkins urged Blackboard’s leadership to “"disclaim the rights established under your recently-awarded patent, placing the patent in the public domain and withdrawing the claim of infringement against Desire2Learn." Following several months of intense criticism, Blackboard issued a “patent pledge” in February 2007, promising not to sue Open Source projects for patent infringement. Although Blackboard’s patent claims were ultimately denied on appeal through the civil courts by summer 2009, the initial lawsuit was a source of great tension for many higher education IT leaders.
And for many Open Source advocates and Blackboard antagonists, the memory of and the tension fostered by the patent litigation remain. Blackboard ‘s March 26th “Open Letter to the Education Community” states that “Moodlerooms and NetSpot will continue to operate independently,” even as these two newly acquired firms will “form the foundation for Blackboard’s Open Source Services business.” Blackboard has also pledged that “there will be no big change to the experience for current Moodlerooms and NetSpot clients, who will be supported by the same leadership groups and the same teams providing support, services and hosting. . . day-to-day operations and pricing practices of both companies will remain as they are today.”
My guess is that senior tech leaders at many Moodlerooms client campuses (and campuses thinking of migrating to Moodle) will read these promises with cautionary concern: again, many were previously Blackboard clients who made active, affirmative decisions to leave Blackboard. Unlike market share, trust cannot be bought; it will have to be earned.
ANGEL LIVES. Blackboard’s decision to reverse course and to extend the life of the Angel LMS, previously scheduled to “sunset” in 2014, is very interesting. Prior to last week’s announcement, Blackboard seemed focused on migrating all its LMS legacy clients – campuses, schools, and organizations using older versions of Blackboard (below 9x), WebCT, and Prometheus – up to Blackboard Learn 9x. The company has been proudly proclaiming migration numbers over the past year to document strong client support for the newest version of the firm’s signature LMS product.
The 2009 Angel Learning acquisition brought Blackboard some 435 new LMS client campuses and schools – many of whom were, as noted above, former Blackboard LMS clients. A quick analysis of Blackboard’s public numbers reveal that the Angel acquisition accounted roughly two-thirds of the growth in the company’s “enterprise” LMS licenses between December 31, 2006 and December 31, 2009. According to the March 26th “Open Letter,” some 400 clients (primarily but not exclusively colleges and universities) remain on Angel. Confronting an “up or out” deadline in 2014, many if not most of these campuses have begun (or will soon begin) a LMS review (“bake off”) which could lead to a decision to migrate from Angel to Blackboard Learn or to another LMS application such as Desire to Learn, eCollege, Jenzabar, Moodle, or Sakai, or to newcomer Instructure, which has gained an interesting and impressive list of clients over the past two years.
Interestingly, Blackboard issued a software update for Angel in September 2011, months after announcing plans to terminate support for the product. Given the institutional demography of Angel clients (13 percent of community colleges and 10 percent of private four-year colleges, according to the 2009 Campus Computing Survey), and perhaps sensing resistance among many Angel client campuses to upgrade to Blackboard Learn, the easy and expedient option to retain these campuses and renew their contracts might well have been to extend the life of Angel.
By extending Angel, Blackboard remains officially “engaged” in four widely deployed campus LMS applications for the coming academic year (2012-13): Angel, Blackboard Learn, Moodle, and Sakai.
MONEY MATTERS. Why would Blackboard want to buy Moodlerooms and NetSpot? And why would Moodlerooms and NetSpot sell themselves to the firm that was, for many company employees and campus clients, viewed as their key competitor?
Make no mistake, Blackboard’s decision to buy Moodlerooms and NetSpot is all about the money: new revenues from new clients (including many former clients) for the new Open Source service business. As for Moodlerooms and NetSpot, the decision to sell to Blackboard might best be explained by venture backed investment. Although Moodlerooms and NetSpot executives may have a philosophical commitment to Open Source and the notion of an Open Source Community, both firms also had financial commitments to investors – in essence, to the company's owners – the individuals and firms that provided the initial funds to start and sustain these companies. And to paraphrase that great phrase from The Godfather, Blackboard’s executives probably made the investors “a financial offer that they could not refuse,” accompanied by (a) a commitment “to work in a way that supports and honors the values of the community we serve," and (b) a promise that “there will be no big change to the experience for current Moodlerooms and NetSpot clients, who will be supported by the same leadership groups and the same teams [that currently provide] support, services, and hosting.”
Downstream, one of the most interesting "money matters" questions involves market timing: when will Providence Equity Partners decide to cash in on its $1.64 billion Blackboard investment to relaunch Blackboard as a public firm? Three years? Five years? That was the question that emerged in a conversation with a thoughtful observer who watches the tech provider landscape carefully. The issue here is probably not if Providence decides to take Blackboard public, but rather when.
THE CHANGING LANDSCAPE OF THE LMS MARKET. So as noted above, Blackboard is now directly “engaged” with four of the seven most widely used LMS applications in the campus market: Angel Learning, Blackboard Learn, Moodle, and Sakai. Moreover, four other Blackboard business units – Collaborate, Connect, Mobile, and Student Services – offer products or services that complement or supplement LMS features and functions.
Although Blackboard has reversed course on the decision to terminate support for Angel Leaning, there remain a large number of WebCT client campuses that confront up-or-out decisions as Blackboard has announced plans to “sunset” all legacy WebCT LMS applications in 2014.
Desire2Learn, eCollege, Instructure, and Jenzabar continue to offer competitive LMS options of interest to many colleges and schools. Desire2Learn has won some significant “bake-offs” over the past two years, including the LMS contract for the 35 campus University System of Georgia and also the 14 campus Pennsylvania State System of Higher Education (PASSE). Instructure has built on a big win involving public institutions in Utah in 2010 to expand its client list from 20 to 150 campuses in just 15 months. eCollege’s fall 2011 Open Class launch has prompted many institutions to give the eCollege LMS a second look. And Jenzabar, better known for its administrative software systems, also offers a LMS that is used by many colleges.
Also (and again!), Blackboard has not acquired Moodle or Sakai. Many of the US campuses that have current contracts with Moodlerooms will, no doubt, renew their expiring contracts with Blackboard’s Open Source Service unit. Other firms will continue to offer support services for both Open Source LMS applications. For example, prior to their recent merger as Ellucian, Datatel and SunGard Higher Education had each announced “special relationships” with LMS applications – Datatel with Moodle (and Moodlerooms) and SunGard with Sakai (and rSmart). The depth and direction of these relationships now remains uncertain given the Datatel and SunGard merger, and also Blackboard’s plans to offer Open Source support services. However, it is not unreasonable to think that Ellucian could also enter into the Open Source support business, becoming a direct competitor to Blackboard. Too, other independent firms such as Longsight and Perceptis will continue to offer support for Moodle and Sakai. And although the support services market may now seem cluttered with options from existing brands and providers, is not unreasonable to think that new firms might also enter the campus market for Open Source LMS support.
THE MORNING AFTER COMMENTS. The Blackboard announcements were a catalyst for lots of commentary and blog posts. One of the more surprising comments on the Blackboard announcements came from Indiana University CIO and Open Source advocate/evangelist Brad Wheeler, who has often been publically antagonistic towards Blackboard’s LMS strategy and also its corporate behavior. Wheeler was quoted by Inside Higher Ed as saying that “Blackboard now has an excellent opportunity to demonstrate its new values in openness in licensing and community.” That’s a most polite assessment given Wheeler’s past criticism, even as he added a “time will tell” caveat to his comments.
Interestingly, what has been missing from the morning after commentary I’ve tracked over the past week has been any reference to Kuali, the Open Source administrative software initiative. The collaborative Kuali Project is developing a number of mission critical campus administrative applications (finance, student information systems, grants management, personnel management, library management, etc.) that campuses now license from a number of companies, including Campus Cruiser, Campus Management, Ellucian (formerly Datatel and SunGard Higher Education), Jenzabar, and Oracle, among others. Although Sakai and Kuali operate as separate organizations, both projects received seed funding from the Mellon Foundation. They also appear to operate in parallel universes: for many Open Source advocates, Sakai and Kuali are joined (at least metaphorically) at the hip: Sakai is just the first wave of mission critical Open Source applications for higher education.
Blackboard’s accelerated movement into Open Source support raises some interesting questions about the company’s plans for Kuali – and potential competition with Campus Management, Elucian, Jenzabar, and Oracle, the four major providers of administrative software systems to the higher education market. It’s hard to imagine that Blackboard officials were not looking beyond the Moodle and Sakai LMS platforms in their internal conversations about the business opportunities to be found in Open Source development and support. Should Blackboard now plan to “participate” (claim a place at the table) in the Kuali conversations, the company would become an active participant in the higher education market for administrative software and services.
The Kauli question is one of those “time will tell” issues: give it a year?
LOOKING FORWARD. So, dear reader, what do you think? Does the higher ed tech services market become less competitive in the wake of yet another round of Blackboard acquisitions?
I suspect not. Past history – Blackboard’s past history – suggests that lots of acquisitions notwithstanding, the higher education market segments Blackboard has entered by acquisition have remained competitive after Blackboard rebranded the newly purchased firms with a Blackboard logo. Although the terrain continues to shift, campus IT officials have options across all Blackboard’s product and service lines. If Blackboard fails to please and perform, the neural network that operates among students, faculty, and IT officers will document those failures. (Alas, the higher ed community is more willing to complain than to compliment. We typically hear more about IT problems with tech providers than we hear about IT successes.)
The history of the LMS market over the past decade confirms that colleges and universities really can take their IT product and service contracts to new providers. Competition for campus clients and contracts is a good thing for Blackboard, and for the educational clients that Blackboard seeks to serve.
Related DigitalTweed posts:
- After The Sale (19 July 2011)
- Buying Blackboard (26 Apr 2011)
- Ten Questions to Ask about LMS Migrations (12 Oct 2011)
Disclosure: Blackboard, Campus Management, Ellucian, Instructure, Jenzabar, Moodlerooms, Oracle, and Perceptis are corporate sponsors of The Campus Computing Project. I am a member of the corporate board of Perceptis.
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