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Blackboard's Challenge
November 14, 2012 - 9:00pm

Blackboard is at a critical point in the company's development. No longer in LMS or product acquisition mode. No longer public. No longer led by one of its founders. No longer able to buy up its competition and grow market share by acquisition. No longer a single flagship LMS provider. No longer a predominantly platform company.  

Blackboard's newly reconfigured leadership team will face a number of difficult challenges in the next 24 months. It is both important to the company and the postsecondary community that Blackboard correctly identify these challenges, as going after the wrong goals is as bad as executing poorly on the correct objectives.  

A healthy Blackboard is important to our higher ed community because the presence of Blackboard drives competition and innovation in the LMS market, and because many schools will continue to be Blackboard clients in the foreseeable future. (Note: Anyone who thinks that the LMS market is monolithic did not spend time on the EDUCAUSE vendor floor - we have options when it comes to choosing our learning management system).

I would argue that the 2 biggest challenges facing Blackboard are:

1. The Need to Transition the Flagship LMS to a Single Cloud Instance:  

The argument that the future of the LMS is software as a service (SaaS) is not an argument that Blackboard wants to hear. The company has a huge installed base of locally hosted Blackboard instances and Blackboard hosted clients running dedicated applications. The transition to a single instance (multi-tenant) in which every client is on the same application, same version, will be a difficult but necessary transition if Blackboard's LMS is to be viable going forward.  Native cloud applications have the dual advantage of being able to evolve quickly while avoiding most of the change management headaches of large stepwise version updates. Nobody complains about how Google Docs or Gmail changes, even though the platform has hugely evolved over the years.  

Getting rid of version numbers allows all research and development resources to be devoted to the latest product. Getting rid of the need to support legacy applications on a variety of local server infrastructures means that these support resources can re-deployed to product development and client care. Going to a native cloud architecture will allow Blackboard to design first for mobile.  Blackboard needs to develop a clear roadmap and a firm communications plan to migrating both its technology and customers to the cloud.  Doing anything less will severely limit the long term prospects of the company.

2. The Need to Move up the Postsecondary Value Chain via Services and Partnerships:  

Here Blackboard is better positioned than most of the competition, with the possible exception of Pearson (particularly with the publisher's purchase of EmbanetCompass). Blackboard has been growing its services division, and has made some very impressive hires. A strategy of investing in organic growth rather than making a large acquisition of an education services company may actually be a smart choice.  Services runs on brains, and Blackboard can hire a large number of really smart people for what they would need to pay for an established company.   

The services that I'm thinking of are those in which revenues are based on client success rather than a pre-negotiated contract. For instance, Backboard works with a non-profit partner stand up a new online program, or to decrease attrition or increase enrollment in an existing residential or blended program. Payment is based on metrics around client revenue generation or cost savings. Blackboard lowers the risks for partners by either providing up-front investments, or holding off on receiving payment until after the partner revenues or cost savings have been achieved. Blackboard is in a good position to aggressively move into this non-profit / for-profit partnership services business because the company can offer a full suite of e-learning platforms, and do so at lower costs as the revenues will come from the services. Blackboard's large installed base is an advantage in this instance, as the company has relationships with many decision makers in our industry.  

Mastering these twin challenges will require brave leadership, disciplined execution, and the patience of the money people at Providence Equity Partners. Following this roadmap will require a short term sacrifice of revenues and a big investment upfront dollars. This is all about near and medium term pain for long term viability and growth. Blackboard's path will not be an easy one.


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