Bad News for Blackboard, Good News for Moodle

The American Association of Community College’s Instructional Technology Council (ITC) has just published its 2007 Distance Education Survey Results, covering data from 154 U.S. community colleges. And there’s a lot of interesting stuff in it. Here are the headlines that I drew from it:

• Distance education continues to grow at a very healthy clip, particularly in this market segment.
• Blackboard is losing market share rapidly
• Moodle doubled it’s market share in the past 12 months and now has the highest market share after Blackboard/WebCT in this market segment.
• ANGEL and D2L also grew their market share.
• We have reason to expect more LMS churn in the near future, which is bad for Blackboard.
• The top 5 areas of likely distance learning-related service growth in this segment are (1) online student organization web site and services, (2) online counseling and advising, (3) online plagiarism evaluation, (4) audio/video streaming, and (5) online textbook sales.

As you can imagine, the LMS market share stuff is what interests me the most at the moment.

To begin with, it’s clear that community colleges represent a really important growth area for distance learning and, by extension, to LMS vendors. Survey respondants reported an 18% year-over-year growth in distance education courses, in contrast to the 9.7% growth rate that Sloan-C found in it’s broader cross-section of universities and the 2% growth in on-campus enrollments for the same year. That’s pretty impressive. Which is why it must be particularly worrying to Blackboard to read this paragraph in the report’s “Observations and Trends” section:

It seems that the recent merger of Blackboard-WebCt in February 2006 and a substantial increase in fees may have prompted a growing number of colleges to review their learning management system (LMS) commitments. Thirty-one percent of the respondents indicated they were considering switching from their current LMS. Although licensed LMS solutions prevail, Moodle, an open-source solution, reflected a doubling of its share in one year.

Blackboard lost 7% market share in this segment over the past year. Even worse for them, it looks like this trend is accelerating. Note that EDUCAUSE reported in 2005 (with a somewhat different survey population) that only 13% of surveyed institutions were considering changing their LMS in the next 3 years. If the two survey populations are behaving similarly, then the number of institutions that are shopping around has more than doubled since then. Under these circumstances, Blackboard could easily lose 20% market share over the next 3 years.

The degree to which this will impact their bottom line and stock price are complex questions. First of all, a lot will depend on how many Blackboard Enterprise customers they lose. Keep in mind that Blackboard has already lost close to a third of their “Basic” license customers in 2006 and 2007 (where the “Basic” category also includes WebCT Vista and CE) and they still performed pretty close to their guidance to Wall Street during that time. In order to keep this feat up, they need to grow their number of lucrative Enterprise license customers even as their total number of LMS customers shrinks. We’re in LMS buying season right now; watch to see how many Blackboard Enterprise customers announce that they’re leaving for other platforms versus how many new Enterprise wins they get. Blackboard is also trying to sell more stuff to the customers they already have. Notice that they’ve been on a bit of an acquisition spree lately, buying up everything from content management to emergency warning systems to video surveillence systems. They’re trying to diversify their way out of this problem. Still, even if Blackboard manages to continue its financial levitation act for the next few years, part of its stock valuation is based on the assumption that the company has a near-monopoly with all that implies. If it loses 20% market share then it will almost certainly lose market value regardless of its revenues because the “multiplier” that Wall Street applies will go down.

OK, but if Blackboard is the loser in this report, then who are the winners? Clearly, Moodle is a winner, having gone from less than 4% market share to more than 10% (in this segment) in a year’s time. Moodle is now the only non-Blackboard LMS with a double-digit market share in this segment. I have to wonder how much of that growth is due to one support vendor. From what I’ve been hearing, Moodlerooms has been tearing up the U.S. market with very aggressive pricing and good support plans. I have a feeling that a big portion of the shift in overall market share is WebCT CE customers going to Moodlerooms.

Another clear winner this year is ANGEL, which went from 5% to more than 9% market share. In this case, I have to wonder how much of this increase is due to SUNY. The SUNY Learning Network, which supports a couple of dozen community colleges in the SUNY system, is well along in the process of migrating from a home-grown LMS to ANGEL. If there was strong SUNY participation in this survey then a good chunk of ANGEL’s upswing could be attributable to them. Which just goes to show you how important these big system-wide wins can be for a platform. D2L also gained a bit more than 2% market share, while the rest were flat or slightly down.

There’s a lot more in this report–stuff about services, faculty- and student-reported needs, and other important topics. I highly recommend reading the whole thing.