Pearson, after spending hundreds of millions of dollars on learning management systems, is leaving the market as the company seeks to restructure itself and boost its profits.
The company, whose operations touch nearly every segment of K-12 and higher education, last fall said it will stop supporting OpenClass, one of its learning management systems, on Jan. 1, 2018. Recently the company told colleges using LearningStudio that it, too, will meet the same fate, leaving Pearson without a traditional learning management system in its portfolio. The news was first reported by the blog e-Literate.
“While the LMS will endure as an important piece of academic infrastructure, we believe our learning applications and services are truly ‘where the learning happens,’” the OpenClass website reads. “In short, withdrawing from the crowded LMS market allows us to concentrate on areas where we can make the biggest measurable impact on student learning outcomes.”
The news follows an announcement last month that Pearson would cut 4,000 jobs worldwide in an effort to simplify what the company does, but Curtiss Barnes, managing director for higher education technology products, said the plan to leave the market predates the restructuring.
“We realized that we need to make some specific decisions around what we want to attach our brand to, where we can create value for customers and where we can compete effectively,” Barnes said in an interview. That means Pearson is less interested in administrative software, he said, and more likely to pour resources into course materials and other products that have a “direct impact” on students and faculty members. Courseware is also the product category where Pearson generates most of its revenue, Barnes said.
Pearson’s restructuring efforts so far show the company divesting itself of products unrelated to education. Last fall, it sold the media company that owns the Financial Times and its stake in The Economist, worth about $2 billion in total.
In higher education, Pearson will likely find savings by eliminating redundancies. The company’s operations are a patchwork of products and services that -- because of previous acquisitions -- in some cases overlap.
Take LearningStudio, for example. The platform, which launched in 2009, is a product of two acquisitions, eCollege (acquired in 2007 for $477 million) and Fronter. But eCollege also powers OpenClass, the platform Pearson unveiled two years later. To further complicate matters, eCollege originally launched to help colleges take their programs online. Pearson in 2012 then spent $650 million to acquire another company, EmbanetCompass, for that purpose.
Barnes described the eCollege acquisition as a success, but said “over time it’s become increasingly difficult to compete in the market.” Compared to companies that focus on learning management systems, Pearson “just felt like we couldn’t maintain the level of customer satisfaction,” he said.
Kenneth C. Green, who tracks learning management system trends as part of the Campus Computing Project, said Pearson never successfully pivoted eCollege from selling a service to selling an application. The company, formerly known as Real Education, began with a simple sales pitch to colleges: given $60,000 and 60 days, it would take 20 face-to-face courses online.
“They were successful with that,” Green said in an interview. “They were never able to capture where the big market was, which was essentially selling the app.”
OpenClass and its promise of a free learning management system generated a great deal of buzz in 2011, but nearly five years later, data show Pearson has failed to gain traction in the market.
According to data gathered by the learning management system blog Edutechnica, Pearson is the choice of only about 5 percent of colleges with more than 700 full-time students (though some of those colleges may be for-profit institutions with several campuses). Pearson also controls about 9 percent of the market of colleges with 500 to 700 full-time students.
The numbers mean Pearson is lumped into Edutechnica’s “Other” category, well behind more popular systems offered by Blackboard, D2L, Instructure and Moodle.
The learning management system market has not stood still since LearningStudio and OpenClass joined the fray, however. Among other developments, Blackboard has lost market share in the U.S., while Instructure, which was founded in 2008, has captured between 15 and 20 percent of the market.
George Kroner, who runs Edutechnica, said he was not surprised by Pearson’s decision to get out of the market.
“When you consider that a fair number of Pearson LearningStudio customers are large for-profit institutions (who are shrinking rapidly or going out of business altogether) or smaller colleges who just needed an ‘online program in a box’ style solution, they are being squeezed financially on both ends,” Kroner, an enterprise solutions architect at the University of Maryland University College, said in an email.
In light of those reasons, as well as Pearson’s declining revenue, the decision to phase out LearningStudio and OpenClass “makes sense,” but Kroner added that it also puts the company at a disadvantage. As both a textbook publisher and a learning management system provider, Pearson could use its platforms to push students, teachers and faculty members toward its own titles. Now, the company has to ensure its course materials are compatible and easy to use with its former competitors’ systems.
“It puts them completely at the mercy of the LMS vendors with whom they will need to play nicer,” Kroner wrote. “They really are in a pickle, and I don't think that they can afford to just buy [Blackboard] to get out of their situation.” (Blackboard is reportedly up for sale.)
Pearson will help LearningStudio and OpenClass customers transition to other learning management systems, but the company is not endorsing a specific product, Barnes said. He declined to say if phasing out the systems will lead to job cuts.