Last year, the media conglomerate Pearson controlled a shade over 1 percent of the market for learning management systems (LMS) among traditional colleges, according to the Campus Computing Project.
This year, Pearson is taking aim at the other 99 percent.
In a move that could shake the e-learning industry, the company today unveiled a new learning management system that colleges will be able to use for free, without having to pay any of the licensing or maintenance costs normally associated with the technology.
Pearson’s new platform, called OpenClass, is only in beta phase; the company does not expect to take over the LMS market overnight. But by moving to turn the learning management platform into a free commodity — like campus e-mail has become for many institutions — Pearson is striking at the foundation of an industry that currently bills colleges for hundreds of millions per year.
“I think that the announcement really marks another, and important, nail in the coffin of the proprietary last-generation learning management system,” says Lev Gonick, CIO of Case Western Reserve University.
By providing complimentary customer support and cloud-based hosting, OpenClass purports to underprice even the nominally free open-source platforms that recently have been gaining ground  in the LMS market. Hundreds  of colleges have defected from Blackboard -- whose full-service, proprietary platform has ruled the market for more than a decade -- in favor of open-source alternatives that cost nothing to license. But while the source code for these systems is free, colleges have had to pay developers to modify the code and keep the system stable.
OpenClass can be used “absolutely for free,” says Adrian Sannier, senior vice president of product at Pearson. “No licensing costs, no costs for maintenance, and no costs for hosting. So this is a freer offer than Moodle is. It’s a freer offer than any other in the space.”
Outflanking the Market
Pearson, which sells a variety of higher-education products and services, including textbooks, e-tutoring software and online courseware, has had success  selling its own proprietary learning management system, LearningStudio (formerly known as eCollege), to for-profit colleges. But the company has made fewer inroads with the much larger nonprofit sector. With OpenClass, Sannier says Pearson is taking aim at “traditional institutions around the country where professors are the ones making the decisions about what’s happening in their classrooms” — a demographic that has long been Blackboard’s stronghold.
“Our intention is to serve every corner of that instructor-choice marketplace,” says Sannier.
Pearson says it is taking a strategic cue from Google, which offers its cloud-based e-mail and applications suite to colleges for free in an effort to secure “mind share” among the students and professors who use it. Like Google with its Apps for Education — with which Pearson has partnered for its beta launch — the media conglomerate is hoping to use OpenClass as a loss leader that points students and professors toward those products that the company’s higher ed division sees as the future of its bottom line: e-textbooks, e-tutoring software, and other “digital content” products.
“We believe our products are pretty strong in that area,” Sannier says. “…So we’re anxious for that shift to digital to happen, and we want to try to promote that.”
Pearson and its peers in the textbook publishing world have been waiting on the digital shift for a long time. While students and professors have thus far resisted abandoning print textbooks, all the major publishers have invested heavily in “smart” software designed to respond to students’ individual needs and shepherd them through each lesson. The companies generally agree that the future of textbook publishing lies in sophisticated course modules that combine traditional textbook content with interactive software designed to help students master concepts.
By freeing the LMS, Pearson seems to want to steer higher education dollars away from e-learning platforms and toward e-learning content, says Phil Hill, executive vice president of the Delta Initiative, an I.T. consulting firm.
The company “wants to change the perception of an LMS to [make colleges] say: ‘Hey, that’s a commodity, that’s a delivery system — and really education, and the education system, needs to be about the content itself and how students interact with that content,’” Hill says.
In doing so, Pearson is “potentially outflanking Blackboard,” because while Blackboard still relies heavily on revenues from its LMS licenses, Pearson has its “core business in digital content,” says Hill. Relegating the LMS to commodity status, while elevating content, plays to its strengths, he says.
Blackboard recently opened  a free, cloud-based version of its LMS, called CourseSites. But that was only designed to whet instructors' appetites and persuade them to advocate for a broader institutional adoption of the pay-to-play version, notes Hill. "Blackboard's business model needs to have a stable, profitable LMS product line,” he says. While the company has made efforts  to diversify its revenue streams, it has not demonstrated the ability to survive without relying on LMS revenue.
OpenClass might even allow Pearson to outflank the open-source movement. While there is a strong contingent of Moodle and Sakai clients who chose those platforms for philosophical reasons, there is a more recent contingent that chose them for financial reasons, says Hill. By offering free support, hosting and upgrades in addition to the service itself, Pearson might be able to peel away some of those institutions.
The View From Blackboard
Ray Henderson, president of Blackboard Learn, said via e-mail that the experience with CourseSites has been "positive" for Blackboard, "and we’re not surprised to see others pursuing similar strategies." He also noted that Blackboard has been working with publishers, including Pearson, to provide material "in a deeply integrated fashion."
He said that "we've taken a very deliberate and focused approach to openness that includes support for open education standards, eliminates vendor lock-in, and preserves the flexibility and choice that is a clear priority for so many institutions that are jointly served by Blackboard and its content partners."
Henderson suggested, however, that Blackboard believes that the company will continue to be strong by virtue of the investments it is also making in the LMS that has dominated the market.
"We’re working as hard as anyone to provide leadership in learning management and digital content in a variety of models, but we’re also investing heavily in all of the things that learning management connects to in an enterprise setting that our clients are deeply focused on, like collaboration and mobile technologies, analytics and outcome assessment, end user support and services," he said. "We believe that institutions need clear leadership and support in all of these areas – not just content and platform alone – to be successful."
The Challenge of Competitor Buy-In
Whether Pearson can pull off its end-run around the LMS market depends largely on whether it can convince its competitors in the publishing world to play nice with OpenClass, says Gonick, the Case Western CIO.
The “instructor choice” market that Pearson hopes to penetrate with OpenClass is characterized by the variegated tastes and loyalties of individual instructors, says Gonick. Some of them prefer McGraw-Hill’s textbooks and digital add-ons. Some trust Cengage for their course material. Some pledge allegiance to Wiley & Sons. Others are fierce advocates of open educational resources, and buy from Flat World Knowledge, or assemble textbooks a la carte through AcademicPub. To accommodate these different preferences, Blackboard and Desire2Learn, as well as companies that help support open-source platforms, have partnered with publishers to embed digital content in the LMS.
Pearson has pledged content neutrality, insisting that it has no interest in locking other publishers out of OpenClass. But that does not mean other publishers will not lock themselves out, says Gonick.
Integrating sophisticated digital content into a cloud-based LMS involves a lot of coordination between the platform provider and content provider, says Gonick. So Pearson might have to court its fellow publishers before it can guarantee to professors that OpenClass will support the content they want, he says. “I don’t think that’s a slam dunk,” says Gonick.
If the endgame of taking on the LMS market with OpenClass is to up-sell Pearson’s line digital content products, he says, “Why would any other publisher want to give that advantage to a competitor?” Pearson might be using Google as a model, but Google did not have to partner with Microsoft to get institutions to adopt its suite of education apps, he says.
“Certainly, we’re aware of this issue,” says Matt Leavy, CEO of Pearson’s eCollege, adding that “there’s probably a lot of negotiating and deal-making to come” with both publishers and distributors. But he said he does not think instructors will require OpenClass to support all types of digital content from other publishers as a prerequisite to signing up. “A lot of professors don’t have that expectation of deep integration,” Leavy says, “and shallow integrations” — i.e., embedding simple links inside the LMS — “are still available to them.”
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