Analysis of public license data indicates loss of at least 150 LMS clients per year
In part 1 of my posts on the Blackboard acquisition, I laid out the key facts and assumptions – what we know and what we think we know. In part 2, I argued that Blackboard is picking up only a negligible amount of new Learn clients. In this post, I present the case that Blackboard is losing hundreds of LMS customers each year based on publicly-available license data and third-party analysis.
As a reminder, Blackboard stopped disclosing the number of Learn licenses after Q4 2009, at their peak, so it takes a little homework to understand some of the numbers.
As stated in post 2, my point is not to trash the company, but rather to understand the market implications. “The reason for focusing on these subjects is that what Blackboard’s prospects are having and will have a major impact on the overall LMS and educational technology market, affecting educational customers as well as technology vendors and their investors. If you misread Blackboard’s strategic direction, you might misread the upcoming changes in the educational technology market.
For that reason, I think it is important to get a clear picture of Blackboard’s decline in its core market, regardless of whether other corporate strategies work.”
NOTE – Due to Blackboard’s acquisition of WebCT in early 2006 and Angel in May 2009, we must combine licenses. For this post, all data from Q1 2009 and prior assumes Blackboard Learning System, WebCT Campus Edition and WebCT Vista in the category Blackboard Enterprise LMS licenses. From Q2 2009 on, this category also includes Angel clients.
3 reasons to believe Blackboard is losing at least 150 clients per year, and probably much higher
Despite the arguments of several analysts and Blackboard’s public pronouncements, it is quite clear that Blackboard’s core market of LMS peaked around 2006, or potentially in 2009 with the acquisition of Angel.
Since the May 2009 acquisition, Blackboard has been shedding customers at an increasing pace. I can point to 3 different sources that show the current decline is between 150 – 400 clients per year.
1. Let’s first focus on just on north american higher ed clients (which constitute ~50% of the Learn business). Based on Campus Computing surveys, as well as ITC surveys and Tambellini group surveys, Blackboard is losing 5 – 10% of their clients each year, and all competitors are benefitting – not just Moodle.
Desire2Learn has picked up 2 statewide systems from Blackboard – Pennsylvania (PASSHE) and Georgia (USG) – in the past year. Instructure has picked up the Utah Education Network and Auburn University from Blackboard. Pearson Learning Studio has picked up Arizona State University Online and Columbia University Online. Sakai has picked up Miami University of Ohio from Blackboard. LoudCloud has picked up Grand Canon University from Blackboard.
And yes, Moodle has picked up the most, including large parts of the UNC system and the CalState system, as well as many others.
In just these examples alone, Blackboard has lost close to 1 million students, and the losses are to all competitors, in all sectors.
If we use assume that the Campus Computing data is based on a total population of ~3000 institutions (the survey does not count for-profit institutions), then Blackboard is losing between 150 – 300 LMS licenses per year.
2. Blackboard themselves report ~92% client retention rates, but they will not break this apart for their different product lines. However, this data does fit very well with Campus Computing data and with the publicly-available license data presented above. 92% retention of ~2839 licenses (the last time Bb showed enterprise LMS license data) equates to losing ~227 clients per year.
3. All WebCT and Angel licenses are going away by either 2013 or 2014 respectively, and by most recent estimates there were approximately 875 of these licenses in the Fall of 2010. Given that there were 1480 WebCT licenses as of Oct 2005, and 429 Angel licenses as of May 2009, you can estimate the following as WebCT licenses drop to near 0 by 2013 and Angel licenses drop to near 0 by 2014. The total loss of WebCT and Angel licenses, whether or not these clients move to Blackboard Learn v9, is at combined rate of ~340 clients per year. Current estimates, as described by Casey Green, is that there remain ~700 of these legacy clients facing a change over the next 2 years.
Furthermore, Blackboard basic LMS licenses are also reducing at a rate of ~249 per year, in a very consistent pattern based on Blackboard public data. While Blackboard has strategically been moving away from Basic licenses and towards all enterprise licenses, this number is still important in understanding how many total clients are using Blackboard as their LMS. [see chart above].
Between these two categories, there are ~580 LMS licenses per year that are expiring. Obviously Blackboard’s strategy is to move the vast majority of these customers to Blackboard Learn v9.
Blackboard Learn 9.x would need to increase at a rate of ~580 clients per year just to keep pace with the loss of Blackboard Basic, WebCT and Angel LMS expiration. What is the reality? Blackboard Learn v9 was released in January 2009, and they achieved 1000 clients by October 2010. This equates to a gain of ~562 clients per year on Learn v9. Since October 2010, Blackboard achieved the milestone of 1400 clients sometime in June 2011. Again, this equates to Blackboard Learn 9.x acquiring ~560 clients per year. Without even considering the migration of Enterprise Learning System v8 and prior to Learn 9.x, Blackboard is losing LMS clients.
Let’s now look at this other category – Blackboard Enterprise Learning System v8 and prior (which I’ll call Enterprise LS). How many of these clients are moving off of this platform, either moving to Learn v9 or moving to a separate LMS? The problem is, we do not know – Blackboard stopped reporting this data after Q4 2009, but I do think we can bound the problem. Because of the above assumptions, the number of Enterprise LS licenses expiring each year should roughly equal the net loss of LMS clients per year by Blackboard.
Lower Bound - This category hit a peak of around 1693 licenses in Q1 2009, just before the Learn 9.x introduction and Angel acquisitions, and many of these will be gone by 2014. We don’t know just how many, but it would be safe to assume that fewer than half of these licenses will still be on Enterprise LS by 2014. Conservatively, that is a rate of 169 per year. I would say that this is the lower bound – the best case scenario for Blackboard.
Upper Bound - If you assume that all Enterprise LS customers will be migrated off, not just by 2014, but even by 2013, then the upper bound is 420 per year.
Using a more realistic scenario, we can see that of the announced Blackboard Learn v9 client wins, either in Blackboard press releases or earnings calls, approximately 2/3 of the client wins are moving off of Blackboard Enterprise LS. Thus, there is a reasonable argument that ~924 Enterprise LS clients have moved to Learn v9 over a 2.5 year period. This points to 370 clients moving off of Enterprise LS per year, which falls between the lower and upper bounds.
While I admit that there are some real assumptions in this data, is it realistic to assume that 924 out of 1693, or 55% of Enterprise LS customers have changed platforms since Jan 2009? Can we assume that 45% or less of Enterprise LS customers have not either upgraded to Learn v9 or selected a different LMS? Based on my observations of the market, I would say yes.
Depending on whether you want to measure just enterprise LMS customers or all LMS customers, Blackboard is losing approximately 150 – 400 clients per year.
Looking at the 3 different sets of public data, the conclusion I have is that Blackboard is losing more than 150 total LMS clients per year, and probably closer to 250. This decline in market share is significant enough to affect the overall LMS and educational technology market – it is driving many competitors into a land grab mentality to acquire as many of these ex-Blackboard clients as possible. Furthermore, the decline of the Blackboard business model in terms of LMS market share is allowing new LMS models to emerge. All of these conclusions hold even if Blackboard has been able to achieve stable or increasing profits from their LMS customers.
I do not see any credible argument that the Learn business is growing or strong based on the apparent reduction in number of LMS clients. Without a growing, or at least stable, core business of Learn, the whole strategy starts to fall apart.
Next post: what changes should we expect from the broader LMS or educational technology market?