Present is Prologue

Category: Ed Tech

The “Ed Tech” category includes posts about educational technology products themselves, including LMSs and other learning platforms, adaptive learning and other digital curricular materials products, learning analytics, and educational apps of all types. It also includes technical aspects of ed tech products, especially interoperability.

Instructure: Plans to expand beyond Canvas LMS into machine learning and AI

It’s common knowledge that Instructure has shifted its focus to place more emphasis on its growth in corporate learning markets than in the educational markets that have fueled the company growth to date. We covered the initial news about their introduction of the corporate learning LMS, Bridge, four years ago.

While Instructure has excelled on maintaining product focus and simplicity of user experience, this move outside of education raises the question about whether they can maintain company focus. The corporate market is very different than the education market – different product needs, fragmented vendor market, different buying patterns. Many companies have tried to cross over between education and corporate learning, but most have failed. Blackboard, D2L and Moodle have made a footprint in the corporate space using one product for both markets. Instructure’s approach is different.

As noted, the other Big Four LMS vendors are also targeting corporate learning (or professional ed, or workplace, pick your name). D2L and Blackboard are using the same platforms in both markets (Brightspace for D2L, Learn and Open LMS for Blackboard), while Moodle released Workplace, a set of plugins on top of core Moodle. Instructure, however, has different products for educational and corporate markets.

That is old news. What is more interesting is to understand Instructure’s emerging strategy given the new executive team. Thanks to the nature of Instructure being a publicly-traded company, we are getting more insight that should set expectations for educational customers. As CEO Dan Goldsmith said during an investor conference a week ago:

We really changed the company, as I came in nine months ago and then took over as CEO January 1st of this year. We’re initiating the second chapter in the journey of Instructure.

I should first note that the audience for these calls is the investment community, so naturally Instructure executives focused more on financial performance and projections that they would in academic meetings. But there is a lot to learn here.

In some ways, the changes to operations of Instructure are welcome and are already helping them manage corporate finances. In other ways, however, that second chapter reads a lot like Blackboard. Moving beyond the LMS, willing to bet on corporate acquisition, expecting big focus on data and analytics, and continuing challenges in completing products.

Operational Improvements

One of the ongoing criticisms of Instructure, particularly by their competitors, is that they continue to lose money and are buying growth. While these observations are accurate, as long as Instructure keeps growing, they have never been at risk of running out of money or having their losses significantly impact their operations. Under the new leadership, Instructure has been much more aggressive in managing expenses, with a big milestone described on the conference call by CFO Steve Kaminsky [emphasis added].

Turning to the expense side. With our focus on operational excellence during the second half of 2018, we’ve changed the mindset of our leadership team and the entire organization about how we approach the business and fund investment. We focused on disciplined investments for balancing profitable growth has been put in place and is reflected in the outlook we provided today. On the cash side, we have a strong cash position to support our important strategic objectives for both Canvas and Bridge. And looking forward to 2019, we anticipate being approximately free cash flow neutral for the full year.

Beyond simple finances, we have seen some operational changes for international operations as well. The global regions (EMEA, Latin America, APAC) all have more autonomy now, including control over country-specific marketing and product management. The non-US operations have moved beyond being regional sales and support offices into more aggressive engines of growth. In Europe and other regions, the management team has more autonomy is deciding which countries are worth investment for expanding markets, and when. From the Feb 25th investor presentation:

With the improving operations, Instructure has reduced their operating losses from 57% of revenue to 10% of revenue in the past three years.

Moving Beyond the LMS

On the same day as Instructure’s earnings call and release of FY2018 financial results, the company announced the acquisition of Portfolium for $43 million, a small startup focusing on “ePortfolio network, student-centered assessment, job matching capabilities, and academic and co-curricular pathways”. We interviewed Instructure staff the same day as the earnings call and noted a different message. In our initial call, the Portfolium acquisition was positioned primarily as a way to improve how Instructure can handle structured assessments in the education market – think CBE, mastery learning, with ePortfolios not as the goal but as the necessary infrastructure. During the earnings call, however, the positioning was more about bridging educational and corporate markets and expanding total addressable market (TAM).

Today, we’ve taken a great stride towards enabling that transition with our expected acquisition of Portfolium, a successful long time Canvas partner. Portfolium vision is to help each person realize their full potential by connecting learning with opportunity, through e-portfolios, program and course level assessments, career pathways and by matching students to job opportunities. Portfolium will join Instructure with a wealth of shared customers, such as Virginia Tech, Santa Clara University and Swinburne University in Australia. This acquisition is a great match in vision and culture and represents our first major step into the Student Success market. And while Portfolium’s current offerings provide an excellent solution, more importantly, they establish the first Bridge between academia and the corporate world that aligns precisely with Instructure’s vision.

Instructure now views itself as a company with a suite of products, and they are much more open to using corporate M&A to build this portfolio.

Emphasis on Data & Analytics

The second initiative announced on the earnings call was DIG, a strategic move with data and analytics.

I am also pleased to share with you an early insight into our second growth initiative focused on analytics, data science and artificial intelligence. The code name for this initiative is DIG. And this technology platform combined with the most comprehensive SaaS database on the educational experience uniquely positions us to deliver meaningful value to our customers. And from a growth perspective, DIG has the potential to double our TAM in education.

Instructure started ramping up their data and analytics efforts (again) about a year ago, although the focus was described at the time as being about internal analytics – that is, making Canvas a better and more valuable LMS product. From what I have heard the product validation for DIG are consistent with this message – dashboards, surfacing useful data within a workflow, etc. But that was not how DIG is being sold during the conference call [emphasis added].

We’ve been working on the scaffolding for [DIG] for well over a year now. I mentioned in our remarks that we already have product validation towards out there in the market. We have instructors and students consuming output from some of the initial experiments with DIG. And we anticipate later this year obviously to make more announcements around specific products and offerings and how we bring them into the market. DIG ultimately is a platform first and foremost based upon machine learning and artificial intelligence. I believe that any multi tenant SaaS company born in the cloud has the opportunity once they hit a certain market share. And in fact, it may even be incumbent upon those organizations to partner with the industry and evolve that industry with new insights and predictive modeling using AI and ML. That’s what DIG is at its heart.

This is brand new behavior for Instructure as a company. Previously the company was reticent to talk much about non-released products, but now they are talking not just about a new initiative, they are touting buzzwordy machine learning and artificial intelligence and predictive modeling well before any of those capabilities exist or are in customer hands. Goldsmith further clarified the DIG plans during the investor conference discussion [starting at 9:00, emphasis added].

We already have analytical capabilities in our Canvas platform. I want to be really clear and delineate the difference between an analytics and reporting capability, and a machine learning and AI platform. [snip]

We have the most comprehensive database on the educational experience in the globe. So given that information that we have, no one else has those data assets at their fingertips to be able to develop those algorithms and predictive models.

Goldsmith then described an example of predicting a student’s expected performance in a class and how that prediction reliability goes up over time. Then we get the vision.

What’s even more interesting and compelling is that we can take that information, correlate it across all sorts of universities, curricula, etc, and we can start making recommendations and suggestions to the student or instructor in how they can be more successful. Watch this video, read this passage, do problems 17-34 in this textbook, spend an extra two hours on this or that. When we drive student success, we impact things like retention, we impact the productivity of the teachers, and it’s a huge opportunity. That’s just one small example.

Our DIG initiative, it is first and foremost a platform for ML and AI, and we will deliver and monetize it by offering different functional domains of predictive algorithms and insights. Maybe things like student success, retention, coaching and advising, career pathing, as well as a number of the other metrics that will help improve the value of an institution or connectivity across institutions. [snip]

We’ve gone through enough cycles thus far to have demonstrable results around improving outcomes with students and improving student success. [snip] I hope to have something at least in beta by the end of this year.

Wow. Robot tutor in the sky – meet the new kid on the block.

The most generous interpretation I have is that they are being sloppy in their terminology and casually throwing out machine learning and AI to eager investors, while the reality could be more mundane but useful sharing of useful data to help instructors or administrators.

If I had to guess, however, I would suggest that Instructure has its sights set on additional corporate acquisitions over the next year or two to try and back up these expectations. I hope they realize they are not the first company to believe that AI on top of their best-in-world data will deliver success for all.

The message is also clear that Portfolium and DIG are intended to increase TAM. This means separate product categories with separate pricing in addition to Canvas. Either that or offering Canvas at different pricing levels to include add-on product bundles.

Challenges in Completing Products

We noted the modernization efforts behind Quizzes.Next, the next generation quizzing and test engine for Canvas, as well as the big schedule miss. In short, Quizzes.Next was announced at InstructureCon 2016 as being available within a few months. 12 months later at InstructureCon 2017 it entered limited beta, and at InstructureCon 2018 it entered general availability. But the story is not over. Quizzes.Next is still not at feature parity with the original quiz engine, as noted by Indiana University.

Instructure has released a new quizzing tool for Canvas called Quizzes.Next. Quizzes.Next offers several new features and question types, but is missing many features from the current Quizzes tool on which many instructors depend. Both tools will continue to be available until Quizzes.Next has achieved feature parity with Canvas Quizzes. The original Canvas Quizzes tool will eventually be retired, but Instructure has not yet announced the timeline.

If you read the Canvas Community page comparing features, it is clear that feature parity is not imminent. The transparency is impressive, however, and from what we are hearing customers are still giving Instructure some leeway because of trust. But Quizzes.Next and its delivery is a continuing problem, not least of which is the reduction in R&D spending growth for Canvas, described by CFO Steve Kaminsky on the call.

Regarding the R&D investment, we don’t really break that out. But what we can tell you qualitatively is while we are doing some incremental investments on the Canvas side and DIG is a good example of that, the lion share of the growth in R&D is going into Bridge.

What to Expect

Instructure is at a crossroads. While they continue to grow, especially in education markets, and while they report improving financial performance, Instructure is entering uncharted territory (for them) in this second chapter. It is remarkable that they have not lost a major educational LMS customer in the 8+ years since Canvas was first selected by the Utah Education Network, but there are some warning signs that should not be ignored and some risky expectations being set.

March 11, 2019
I’m Giving a Live-streamed Talk on Thursday at SUNY

I’ll be giving a talk at the OpenSUNY conference tomorrow (Thursday) at 4:00 PM. The title of the talk is “Everything Old is New Again: What You Taught the OPM Companies.” But it’s about a lot more than that. SUNY was my first gig in higher education, after doing stints in K12 and corporate e-Learning, so it’s going to be a bit of a homecoming for me. I’ll be sharing some lessons learned over the intervening 14 years—for me and for them.

The streaming URL is at http://opensunysummit2019.edublogs.org/mediasite/. I believe the video will also be available afterward for those who can’t catch the talk live.

March 6, 2019
Moodle Workplace: A new product and change in open source deployment
Moodle unveiled its new product, Moodle Workplace, at the the Learning Technologies conference in London three weeks ago. While the open source Moodle LMS has been used by companies and organizations for employee training for years (approximately 40% of Moodle implementations worldwide according to this 2015 interview), Workplace represents a new approach for Moodle’s usage of open source deployment.

Based on an email interview with Moodle Pty Ltd (aka Moodle HQ) CEO and founder Martin Dougiamas, Moodle Workplace is a “a series of well-written plugins that sit cleanly on top of the standard core distribution” and is being released under an open source GPL license. The plugins add functionality to:
- Create training paths;
- Create departmental structures and reporting;
- Automate enrollment, certificates and other back end processes; and
- Customize reporting and report delivery.
From first reading, the Workplace functionality is a subset of the features available in other products, notably Totara Learning. That solution is also based on Moodle core, although Totara forked its code base more than three years ago. ((At the time of the fork, Totara management also predicted Moodle was planning to offer the market ‘Moodle for Workplace’.)) Workplace appears to be a solid, if somewhat unremarkable platform for organizational training delivery which can provide compliance tracking, learning pathways, and other business-focused features. For organizations looking to add training features to existing stock Moodle, Workplace should offer an easier migration path than Totara.

The bigger news is the change in the distribution and business model as described by Dougiamas.

We are restricting distribution to Moodle Partners for now so that we can give more value back to our Moodle Partners who invested time and money into it.

Similar to Totara’s business model, there are limitations put on the Moodle Partners to prevent modification or distribution of the code. By providing Workplace only as a SaaS solution, Moodle is using the same distribution loophole in the GPL. ((For those unfamiliar with the peculiarities of open source licensing, Moodle and Workplace are released under the General Public License (GPL). The GPL requirement to release the source code ONLY applies if you are providing someone a copy of the binary. Providing software as a service does not constitute “distribution” under the GPL. This is how Google, Amazon, Facebook and all the other major internet players can build on open source, but not release their source code.)) The upshot is that if a company or organization wants to use Moodle Workplace, they have to work through a Moodle Partner and cannot download and install the software for free.

The business model around Moodle Workplace is clearly a departure from the norm for Moodle, where the core GPL code is available to anyone, anytime, for free. But it is not clear whether this change in model for Workplace is a limited play or has broader applications that may impact education markets. In our interview, Dougiamas directly addressed our question on whether we should expect similar changes to Moodle core:

No, we remain intensely committed to developing and improving Moodle core as a GPL product with the same license, open source practices and active community as now.

He further stated:

Our team developing Workplace have been contributing features (the more general ones) into core at the same time, and the plan is that any Workplace features that also supports sectors like Higher Ed or schools will always be migrated into core this way.

So, what are educational institutions to make of the new business model around Moodle Workplace? We’re not entirely sure at this point. At a minimum, it would appear to be an attempt to better monetize the large installed base – a move to satisfy investors and to replace the Blackboard revenue after cancellation of their Moodle Partner agreement. At a more strategic level, it could be an attempt to stay competitive with peers, particularly SumTotal and Totara, who are going after the corporate learning space.

If Workplace is successful, it will create a new revenue stream for Moodle HQ, potentially accelerating the development of the core educational product. A Moodle Partner we interviewed for this piece claimed they were already seeing increased lead generation from the announcement. The small and medium business (SMB) market is larger and generally has faster sales cycles than the education market, which could drive partner revenue and cash flows. The partners who are able to create sales momentum in both spaces and find their product / market niche are likely to see some accelerated growth. If this is successful, Moodle HQ should capture additional revenue and accelerate the product and service roadmap. This move directly addresses the issue Michael raised in the Fall about the termination of the Blackboard contract and revenue stream.

For Moodle, everything rides on their ability to grow alternative sources of revenue. The company has been touting newer offerings such as MoodleCloud, MoodleNet, LearnMoodle, and MoodleServices. Since we don’t have any external evidence that these are material sources of revenue for the company, and since the company itself has not shared numbers that we can independently evaluate, it’s very hard to tell what their chances are. Moodle has a huge installed base, which gives the project a lot of momentum. But the company that drives most of the core platform development has a business model that has not aged well and is in the process of diversifying into business models that are as yet unproven. I remember enough physics to know that momentum and acceleration are not the same thing. I think the risks are probably greater for Moodle Pty. than they are for Blackboard. But both sides of the equation bear watching.

Moodle Workplace as a monetization strategy seems to be a stronger bet than the previous offerings.

The risk for education institutions, however, is that the Workplace development roadmap pulls resources from making investments in core Moodle necessary to keep pace with better-funded rivals. At worst case, Workplace fails to find a market niche and position itself in a crowded field. The opportunity cost of investing in Workplace vs other potential investments in the core education product and cloud services could end up having larger knock on effects downstream.

What we have observed over the past 6 – 9 months is an increased customer focus by Moodle HQ, acknowledging the importance of market messaging (e.g. first-time presence at EDUCAUSE, announcing Workplace at London conference) and better understanding and satisfying business needs of revenue-generating Moodle Partners. The jury is still out on how these changes will impact financial sustainability and competitiveness of Moodle in education markets, but there is little doubt that there are changes in behavior.

In the end, this is another example of corporate financial health issues having an outsized impact on the LMS market in 2018 – 2019. And one that bears watching, coming from the LMS provider with the world’s largest installed base.

Update 3/6: Changed naming throughout to Moodle HQ instead of Moodle Pty to reflect more accurate and common usage. Also edited footnote about ‘Moodle for Workplace’ prediction to remove the implication of Moodle Workplace being a copy of Totara code.
March 5, 2019
D2L: Continuing emphasis on services and completion of move to SaaS model
In last week’s post on Blackboard, I shared the roughly linear progression of migration of the Learn LMS to a software-as-a-service (SaaS) model – a move that we believe is more important than is the Learn Ultra user experience. If you take into account percentages of total Learn deployments, you see that Blackboard has roughly 25% of Learn clients on SaaS after starting in late Fall 2016, increasing by approximately 10% per year. ((Each point is taken from Blackboard public release of information either directly to us at e-Literate or in press releases.))

Blackboard is not the only LMS company migrating to the cloud, however, and D2L ((Disclosure: D2L and Blackboard and Instructure are all subscribers to our LMS Market Analysis service.)) has taken a more aggressive bet on SaaS for their Brightspace LMS platform (also based on AWS), as described in Summer 2018.
While we heard grumblings from multiple clients during the transition – especially through early 2017 – D2L clearly made some hard choices and and is aggressively moving to the cloud, not just as an option, but as their primary delivery model. According to David Koehn, VP of Product Management at D2L:
- All new Brightspace implementations are on AWS cloud;
- Virtually all current Brightspace implementations use Continuous Delivery; and
- Approximately 50% of current customers are already on the AWS version of cloud deployment; and
- By the end of 2018, a large majority of customers will be on cloud deployment.
Last Fall I spent time at D2L’s Kitchener, Ontario headquarters getting an update on the company’s progress on a number of initiatives. D2L executives described that all but roughly a dozen Brightspace clients are now on SaaS deployment, and by the end of 2019 they should be fully a SaaS platform company.

Why is percentage of total deployments important? Two reasons are that the move to 100% SaaS deployment enables the movement to a single version of code, dramatically simplifying regression testing and enabling more rapid development of new designs, while also taking advantage of modern technology stacks. As described in the Summer 2018 post:

David Koehn also pointed out that the real driver for the AWS cloud move by D2L is to enable a redesign of the user experience [branded Daylight] and to provide improved scalability and reliability. In other words, the cloud deployment is a means to the Daylight end.

The downside, of course, is that pure SaaS deployments largely leads to a reduction in customization capabilities. Companies like D2L and Blackboard that are moving from an enterprise model to a cloud model are betting that they can build in appropriate configuration options (rather than customized code) and leverage third-party integrations to overcome this challenge. But to get the full advantage of SaaS, a company needs to do the entire move.

I further spent some time in London and had the opportunity to talk with D2L’s London-based leadership team that covers EMEA and Latin America regions. D2L leaders in London presented a transparent and honest appraisal of the company’s current market position in Europe and Latin America, and where they see the biggest opportunities. For starters, D2L acknowledged that Instructure’s system-wide wins for the Canvas LMS in the Nordic countries had largely blocked opportunities for expansion in that region. Other areas, however, have been much more promising. They are doing well particularly in the Benelux countries (Belgium, Netherlands and Luxembourg) with Ghent University in Belgium being an example of a recent, large (45,000 student) implementation. There have been important wins in the UK and Ireland, and activity in Spain seems to be picking up some momentum. Germany continues to be a challenging place to get a foothold partially due to university funding that favors in-house staff maintaining open source systems.

In Latin America, D2L was open about cutting back investment in the region in 2017, particularly in Brazil, largely due to economic uncertainties and limited growth opportunities. They now see activity picking up in the region and have been investing to take advantage of the market potential.

In both Europe and Latin America, the provision of professional services beyond the LMS platform, as well as willingness to add requested features, appears to be a differentiator for D2L, especially in comparison to Instructure. D2L has shown a much greater willingness to roll up their sleeves and collaborate on instructional design, course building, and online pedagogy using internal staff, almost in an Online Program Enablement model. It surprised me during my Fall HQ visit to see just how well-established is the content creation team that helps schools redesign courses and even design front-end web sites for online programs. We have heard similar messages from D2L customers and even from a consulting firm that works directly with Canvas and Brightspace customers.

To a degree, none of this post is different from our Summer 2018 coverage other than updating on progress, so why has D2L not made more of a market share increase in the past year? I suspect there are three reasons. One is that D2L has done a better job updating their product line and introducing new services than they have done in fixing issues with current customers, particularly around data and analytics. During my Fall HQ meetings, when the D2L team was describing their new data and analytics approach called the Brightspace Data Platform, I pointed out that while this appears to be an improved approach, it does not acknowledge that D2L has been touting its data and analytics capabilities for years. There are leftover frustrations from customers based on previous attempts that did not match client expectations.

The second reason is Instructure. While D2L is in a solid second place for new implementations worldwide (schools migrating from one LMS to another), they have also lost a number of clients in North America – almost all to the Canvas LMS. In our recent LMS Market Analysis report, we showed a transition graphic with higher ed LMS migrations from 2017 – 2018.

The third reason is that it is very difficult to be a third competitor in terms of customer mindshare. The academic LMS market has tended to have a narrative of a major competitor and an upstart. Blackboard and WebCT in the early and mid 2000s, Blackboard and Moodle in the late 2000s, and Blackboard and Canvas through much of the 2010s. It is difficult for a company like D2L to break through this narrative and be top of mind for institutions from day one of an evaluation.

While D2L has challenges in market position and introduction of a new data and analytics approach, they are completing the transition to a SaaS platform company and focusing on flexibility and services.
March 3, 2019
Blackboard Updates: Learn SaaS progress and LMS market news
Blackboard had a lot of news to share two weeks ago when we spoke with CEO Bill Ballhaus and senior teaching and learning executives. The updates addressed efforts to streamline the business, customer retention, and customer acquisition. Blackboard ((Disclosure: Blackboard is a subscriber to our LMS Market Analysis service.)) was upbeat about their current position and prospects going forward, but we see a mixed picture.

Ballhaus said that Blackboard’s efforts to simplify the business were paying off and leading to greater focus on their core teaching and learning businesses. While the company was built as an enterprise software amalgamation based on 20+ corporate acquisitions, Ballhaus described how management is looking forward to becoming a Software as a Service (SaaS) business with a simpler focus. While the executives declined to comment on current M&A activity, Blackboard appears to be trying to sell its CashNet and Transact products that are part of the same business line focused on campus ID and payment processing, for up to $800 million and $720 million respectively ((Although it is possible that both of these reports are referring to the same combined transaction – CashNet and Transact together. This explanation makes more sense to me.)). Remembering that Blackboard reportedly tried but failed to sell the entire company for ~$3 billion in 2015, there is no guarantee that they will actually sell either unit or get the desired prices. [Update 3/7: Blackboard did end up selling entire Transact business unit , including CashNet, to PE firm Reverence Capital for a reported $720m.] But if they do succeed, the profits from either sale will help the company pay down and manage its debt. And it will back up the claims of focusing the company on core teaching and learning business.

The claim of the company looking forward to being a pure-SaaS business is largely based on their ability to migrate the flagship Learn LMS client base over to the AWS-enabled Learn SaaS offering. Blackboard leadership believes that the ongoing migrating effort has been a critical factor in improving their customer retention numbers, an argument that we made last summer.

The third issue, which is related to the first two, is that we believe that the migration to Learn SaaS might be a better indicator – at least in the short run – than Ultra adoption of whether a school plans to stick with Blackboard. Whether or not the school enables Ultra base navigation or any courses in the Ultra Experience.

When a school moves to Learn SaaS, they tend to sign contract extensions for 1 – 3 years to cover the new services. And the migration to Learn SaaS does not suffer from the vague terminology issues – a school either uses Learn deployed on SaaS (through AWS) or they don’t.

Ballhaus went so far as to say that Blackboard’s improvements in client retention was the primary factor in the overall market slowdown last year. While we certainly feel that Blackboard has benefited from the slowdown and has improved client retention lately, we are not convinced on the cause and effect dynamics. By tracking the public proclamations of Learn SaaS adoptions, we see an interesting linear trend leading to the current ~25% of Learn clients being on SaaS.

Blackboard continued to present the importance of their broad product portfolio combined with their experience. Ballhaus stressed that the LMS is necessary but not sufficient as a strategy for the company. Blackboard management sees Blackboard at an inflection point in 2019 in a good way, and they stressed that their big focus will now be on data and analytics offerings. Remember this paragraph when we get to the Instructure update post.

Early in February Blackboard announced what could be their biggest LMS win since we broke the news of University of Phoenix selecting Blackboard Learn Ultra in late 2015 (a migration that is scheduled to be complete by this summer). From the press release about Galileo Global and their 100,000+ student system:

Blackboard today announced that Galileo Global Education, a leading international provider of higher education and Europe’s largest higher education group, will roll out Blackboard Learn with the Ultra experience as the common Learning Management System (LMS) for its network of 37 schools with 80 campuses across 10 countries. Blackboard Learn Ultra was selected over other cloud-based solutions for the ease of use, the powerful features, and the unparalleled level of support provided by Blackboard.

On the surface, this is a big win for Blackboard, but the story comes with a caveat regarding its relevance to the LMS market. What was not shared during our call with Blackboard executives is that they share their private equity owner (Providence) with Galileo as described in late 2017.

Laureate Education, Inc. (NASDAQ:LAUR), the world’s largest global network of higher education institutions, and Galileo Global Education, a company under the umbrella of Providence Equity, a leading global asset management firm, have signed an agreement for the sale of Laureate’s institutions in Italy and Cyprus for a total transaction value of Euro 225 million (USD 263 million at the current exchange rate).

Two or three schools within Galileo were already on Blackboard Learn, a few on Moodle, and the majority on Homegrown or not really using an LMS previously. Unless we can get independent confirmation about the nature of the selection (was it truly competitive or was it earmarked for Blackboard as long as they met minimum requirements), I would not extrapolate this news to show broader movements in the market.

Blackboard also presented some data around roughly 200 new LMS customer acquisitions in 2018 (“new logos”) for both Open LMS (the rebranded Moodlerooms) and Learn.
- The majority of the reported wins, roughly 120 based on interview, are for Open LMS, showing continued growth for this under-the-radar Blackboard product. These numbers are impressive, but we note that last year the company reported 223 Moodlerooms “new logos” in 2017. It will be interesting to track over time if this deceleration is primarily driven by the general market slowdown vs. fallout from the cancelled Moodle Partner agreement.
- For the Learn LMS, Blackboard is reporting ~80 new logos in 2018, of which 52% are in higher education. If accurate, this would be a significant turnaround for the company; however, our data do not show this level of new wins for Blackboard unless you include Galileo as roughly 30 “new logos”. We asked Blackboard to back up that number with specifics such as sample listings to see if we have holes in our data, but Blackboard declined to provide further information due to “privacy reasons”. During the same time period, according to our data, Blackboard has lost more than 100 institutions, more than three fourths moving to Canvas and the remainder moving to D2L Brightspace.
In the end, Blackboard is making steady progress with Learn SaaS deployments and contract extensions, benefiting from the LMS market slowdown, and winning their biggest new LMS account since 2015. We are not convinced that Blackboard is causing the slowdown or that their new Learn momentum goes beyond Galileo Global, but there are signs of progress worth sharing.

Update 2/27: Fixed description of CashNet and Transact, which are part of the same business line, and added footnote.
February 26, 2019
Is Microsoft or Google your next LMS? The view from BETT
The following is a guest post from Jason Cole, a longtime colleague and freelance consultant who recently moved back to London. Previously, Jason was Vice Chancellor for IT at the Peralta Community College District, and before that was CEO and Board Chair at Remote-Learner. [ed]

I recently spent a day at BETT (formerly known as the British Educational Training and Technology show), the UK’s largest educational technology show. The show tends to skew towards the primary and further education market (k-12 and community college in the US), but there is also significant higher education presence. If you are looking for a US equivalent, its more akin to ISTE than EDUCAUSE.

For those who haven’t been to BETT, it can be a bit overwhelming. There are over 34,000 attendees and 900 exhibitors from 138 countries. The massive show floor hosts everyone from national trade organizations from Denmark, Spain, UAE and Egypt to little ed tech startups that will probably evaporate in a few years.

Everything is in one giant exhibition hall, with auditoriums scattered amongst the vendor booths. You can hear the noise of the conference space everywhere, even in the main event auditorium.

For all of the activity, what was noticeable was the absence of the major LMS vendors besides Instructure Canvas. The company sponsored talks and roundtable lunches, but it didn’t have a traditional marketing booth. Their presence and sponsorship, however, meant they were the only LMS vendor anyone was talking about. D2L, Moodle, the UK Moodle partners, and Blackboard had no discernible presence. WebAnywhere is now focused on the SchoolJotter product and corporate Totara market. Synergy had small table in the back with one small Moodle Partner badge. Why – is BETT just a bad bet for lead generation and branding for the LMS providers? The large schools presence may mean less traffic for the higher ed (HE) focused LMS providers. But there are HE attendees, and Moodle had a strong schools presence. Some might argue the limitations of GDPR make lead generation difficult in European shows, but the presence of 900 exhibitors seems to imply there is some return on investment.

On the other side of the spectrum, Google and Microsoft had large crowds in their large multi-plot booths. Each company had case study talks by users, how-to’s for teachers, and partner ecosystem mini-booths. Most of the hands-on presentations by these two tech giants were near capacity when I checked in throughout the day, as were most of the case study discussions.

Every presentation in the Microsoft booth had real-time captioning displayed directly above the slides, and every presentation had real-time translation into multiple languages. Microsoft is obviously confident in both services, and from what I could see these services were remarkably accurate.

It may have been the (AI-recommended) Microsoft Kool-aid ((Somehow an AI tied to a screen with a camera judged my reactions to three pictures, and estimated my age and gender and then labelled me an “Empowerer”. It’s recommendation was a rather refreshing apple cucumber drink with Spirulina distributed for free by two attendants. I have no idea why empowerers need cucumber, nor was there any falsifiable alternatives to getting a different flavour. Would the Innovator beverage make me more creative? Ah, the joys of inscrutable machine logic!)), but it appears Google and Microsoft are edging their way into the LMS space. Their presence at a K-12 focused show suggests they are finding traction at the younger grades. But as their education offerings grow in sophistication, and their ecosystem advantages start to accelerate, I believe a more concerted push in the higher ed space is inevitable.

When Microsoft makes their push, the learning system won’t look like an LMS, but it will look like Teams. Teams is Microsoft’s central communication application for business, rolling in Skype and other business lines. There is an education version for teachers. Students with courses in Teams access their materials, communicate with the instructor and each other, and collaborate using Office and other tools online.

The early indicator of Microsoft’s intent is their recently released Assignments for Teams for Education. Assignments gives teachers an easy to use tool to create either quizzes (using Forms) or submissions (using the Office suite). The student work can be graded using either a straight score or a rubric. Students see the results in their Teams, and teachers can download the grades for all the Assignments to Excel. It’s an interesting feature that signals a definite intent from Microsoft to meet the needs of teachers in the education version.

Teams is not ready to replace or compete with the LMS yet, but it isn’t terribly far away. The Teams interface for classrooms needs some reorganization, it needs a centralized grade book that isn’t reliant on export to Excel, and it needs a slightly better authoring experience to combine the features together in learning modules. Teams and Sharepoint would also need a clear content strategy enable integration with publisher tools and content. But none of these challenges are impossible, and some Microsoft partners already have pieces of the solution.

The ecosystem around Teams and Office will give Microsoft an increasingly interesting story. Microsoft is rapidly integrating service platforms for email, calendar, business logic, business intelligence, AI, device management, and cloud services into the Teams platform. There is enormous potential for educational organizations to leverage these capabilities to deliver a unified student experience. The “learning management” features move into the background, while students interact with a single application and message flow.

While the potential is there, there are a few hurdles on the way. Moving into the learning and teaching side of the HE market requires a different channel strategy than the current focus on the productivity and infrastructure side of the house. Microsoft relies on a combination of direct account management and partner sales in a complex selling process. The Microsoft partners who would need to engage in the sales process and own customer relationship tend not to have academic sales experience, nor do they have the brand recognition of Canvas, Moodle, D2L and Blackboard among faculty. Given the sales costs and margins, a higher education focused Microsoft partner would have difficulty achieving scale. I would watch for more bottoms up adoption, pressure from students coming to HE from Google and Microsoft schools, and adoption outside of the traditional HE context as early indicators of a market shift.

Other observations:
- By sheer number of vendors, apparently every school in the EU is going to have a robotics lab and a maker space in the next few years. Lots of Arduino, 3D printers, and so… many… robots.
- A few VR and AR vendors were making a splash (and inducing large scale motion sickness) with headsets and learning simulations.
- Newton Rooms, modular, pre-packaged hands on science learning rooms, designed in Norway are one of my new favourite things.
February 6, 2019
State of Higher Ed LMS Market for US and Canada: 2018 Year-End Edition
This is the eleventh year I have shared the LMS market share graphic, commonly known as the squid graphic, for US and Canadian higher education. This past year we at e-Literate shifted our LMS Market Analysis reports from Spring / Fall to Mid-Year / End-of-Year to better allow analysis of entire years. With the release of our end-of-2018 report last week to subscribers, it’s time for us to look at updates on the institutional LMS market for North America (US and Canada) higher education. Note that our coverage for the market analysis includes Europe, Latin America, Oceania (Australia, New Zealand, and surrounding island countries) as well as emerging coverage of the Middle East.

We present the following data “by institutions”, with market share as a percentage of the total number of institutions using each LMS as a primary system, and “by enrollments”, where we scale the institutions by its total enrollment. The latter better captures the business of the LMS market, since most licensing deals are based the number of students.

But first, let’s look at an updated LMS market share graphic, commonly known as the squid graphic, for US and Canadian higher education. The original idea remains – to give a picture of the LMS market in one page, highlighting the story of the market over time. The key to the graphic is that the width of each band represents the percentage of institutions using a particular LMS as its primary system.

This year there are two inter-related trends that deserve a broader explanation -the LMS market slowed down with less activity overall, and Canvas and Blackboard continue to be neck-and-neck in the top spot of this market.

We recently described the overall market activity slowdown in that there are fewer LMS formal evaluations taking place since mid 2018, with initial data pointing to a 20 – 25% drop from a year earlier. This slowdown seems to be a type of plateau rather than a continuing trend, and we are watching to see if it is temporary or not.

Last summer we shared the symbolic passing of the torch where Canvas surpassed Blackboard in US market share, which was the first time Blackboard was not the top system since the market emerged two decades ago. What is interesting is that half a year later, the two systems are still neck-and-neck. In the US Canvas is still slightly ahead, and in North America (adding in Canada), Blackboard remains in the top spot by 0.4% (26.8% to 26.4%). Why is Canvas not continuing to extend its lead? Looking at the underlying data, there seems to be three reasons to consider:
- The overall market slowdown means that there are fewer deals for Canvas to win lately.
- Blackboard continues its University of Phoenix implementation, which still includes dozens of campuses despite its enrollment drop.
- The shutdown in December of the for-profit Education Corporation of America (Virginia College and Brightwood College systems) meant that Canvas lost several dozen campuses.
The latter two points should fully play out in the next three months, possibly making this a one-time change in trends, but it is important to call this situation out.

Some other notes:
- The market continues to consolidate around the Big Four – Blackboard, Canvas, D2L Brightspace, and Moodle.
- The Homegrown option for LMS usage is going away, at least in a statistical sense. Only a handful of schools even consider this option.
- D2L shares the challenge of having picked up several large for-profit systems that are closing campuses and therefore hurting market share. In D2L’s case, the biggest one is the former EDMC schools – the Art Institutes, Argosy University, and South University – that were sold out of bankruptcy to a non-profit entity and have closed dozens of campuses over the past year. These losses offset many of D2L’s wins in 2018.
- Moodle had a few new wins in North America.
Sticking with North America, we can also show LMS market share scaled by the enrollment of each institution, giving a different measure worth considering.

We’ll share more information on other global regions in the coming months.
February 5, 2019