The Blackboard/Moodle FOIA Requests

Vicki Tambellini is reporting that a number of colleges who moved from Blackboard to Moodle are getting hit with Freedom of Information Act requests:

Last week a number of institutions received FOIA requests from a law firm in Columbia, South Carolina.  The firm requests everything related to individual LMS procurements from the RFP process through the implementation.According to the letter I read,  Schmidt Copeland wants information that includes everything from procurement notes and evaluation materials to RFP responses in procurements where Blackboard was replaced by Moodle solutions.  The firm leaves no request unmentioned:  communications with vendors, consultants and recordings.  They want post-selection operating information including staffing, budgets and communications including trouble tickets.

The request includes system loss, performance and up-time data requests.  Oh, and they’d like it in 10 days, please.  And in a less than subtle statement, the firm reminds the institution that if they don’t comply, it’s a misdemeanor, punishable by a fine of up to $750!

I can confirm that at least one school in my area has received such a request.

So what is this about?

Let me say up front that I don’t have any inside knowledge. All I have is inference and speculation. That said, I’m relatively confident about one thing that it probably isn’t. It probably isn’t the first move by Blackboard in an effort to somehow attack those schools that have left. Even during the height of the patent fight, Blackboard was extremely careful not to be perceived as targeting schools. I simply do not believe that they would make that kind of mistake. I don’t think the schools receiving the FOIA requests need to fear that they are being targeted for any kind of legal action. It’s much more likely that this is a fishing expedition for competitive market information.

Vicky speculates in the article that this may be a Blackboard competitor. On the one hand, there would be a gold mine of competitive information in the results of these FOIA requests. Anybody who wants to know why Blackboard is losing customers to Moodle and how selection decisions are made would find the documents useful. On the other hand, players who are already in this market have other means of obtaining a lot of this information that are both less expensive (since they don’t require lawyers) and less likely to scare the bejeesus out of potential customers. So it’s possible that this is competitor, but that doesn’t feel like the right explanation. No, this smells to me like the actions of a company that is not in the educational technology business but is trying to get a better sense of the landscape. In particular, it strikes me as the kind of move that a financial services firm would make.

Why would a financial services firm be interested in this information–interested enough to hire those lawyers? A couple of possibilities leap to mind. First, if the anonymous potential buyer of Blackboard is a private equity company, then they will want to understand why Blackboard is losing market share in its core business and what their chances are of turning that around. (By the way, for a good overview of the drama around the anonymous suitor, see Casey Green’s piece in Inside Higher Ed.) They don’t necessarily have good connections in schools (or time to utilize them even if they did), so this is one way to get data in a hurry.

Let me take a little detour here and comment briefly on the possibility of Blackboard being acquired by a private equity company. Joshua Kim has publicly lamented about a potential acquisition of Blackboard by private equity as being bad for education. It is important to keep in mind that this would not be an entirely new phenomenon in the world of educational technology. SunGard, Datatel, and Cengage (my employer) are all owned by private equity companies. In general, there are two types of approaches that private equity takes to companies that they acquire. One possibility is that they milk the company for cash as much as they can and then sell off the parts. That’s the kind of approach that became infamous during the big leveraged buyout boom of the 1980s. But often private equity will buy a company because, for whatever reason, they think that company is under-performing and that they can turn it around relatively quickly. In that case, their goal is to build up the company and sell it at a profit, either to another private investor or through an offering on the stock market. It’s a bit like flipping a house. I make no judgment here about what the likely impact of private equity purchasing Blackboard might be. My point is simply that there is no particular reason to believe they would automatically do a worse job for customers than, for example, Google might simply because they are a financial services company.

Anyway, a private equity suitor for Blackboard is one possible culprit for the FOIA requests. But another is a hedge fund considering or re-evaluating a short position. Blackboard is the eighth most shorted stock on the Nasdaq. Somebody interested in shorting Blackboard would want to have a strong understanding of the erosion of Blackboard’s core business as well, since they would essentially be betting that the contraction of the company’s LMS business will be faster than the growth of its other businesses over the next 24 to 36 months.

It’s hard to say. But it is certainly interesting.