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Blackboard – Selling from Strong or Weak Position?

Strong company entering new phase, or weak company losing core of its business?

In an earlier post on the Blackboard acquisition, I laid out the key facts and assumptions – what we know and what we think we know. In this post I’d like to offer a contrary opinion on a meme that I have seen in several articles and blogs on the subject. The argument put forth by Gartner, along with some other bloggers and analysts (and of course Providence and Blackboard) is that Blackboard is a strong, growing company, and that due to the potential buy-out it will enter a new era based on their strength of products and services.

Blackboard is the leader in the commercial learning management system space and continually reports strong growth not just in the LMS space but increasingly in multiple areas–collaboration, commerce, notification, and, most recently, services. “They were looking really attractive for this type of acquisition anyway,” she noted. [Gartner]

With all due respect – I disagree. What I see is a company that is rapidly losing its core business – the Learn product line – and trying to deal with this reality.

They have approached the problem by making a string of acquisitions that are trying to reposition the company as ‘hey, we’re not just LMS anymore’. From a position of weakness, it is helpful, for Blackboard to be acquired and taken private, as it is becoming very apparent that their Learn business is in significant decline.

Blackboard stopped disclosing the number of Learn licenses after Q4 2009, at the license peak, so it takes a little homework to understand some of the numbers. In this post I’ll explore whether they have any new growth, and in a future growth I’ll explore client losses.

Why should non-investors care? My point is not to trash the company – who knows, maybe it will pay off long term to privatize.  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 their overall corporate strategy works.

Virtually No New Client Wins

During Blackboard’s quarterly earnings calls, they mention key client wins for each product line – this is the time to show your best face to investors. If Blackboard has had new client wins for Learn – where they take a client away from the competition rather than just retaining a client – then surely Blackboard would want to publicize this win. In fact, there are only a handful of new client wins for Blackboard recently. You cannot grow a business if you cannot gain new clients.

It is important to understand that Blackboard is consolidating its LMS product lines, pushing everyone into Learn 9.x. This means that previous organic product lines (Blackboard basic or Blackboard Learning System) and acquired product lines (Angel, Vista and Campus Edition) are all going away in the next 2 – 3 years for all practical purposes. These customers all face a choice to upgrade or move to a competitor.

In the past year, looking at Q2 2010 through Q1 2011, Blackboard has directly referenced 27 clients as examples of their wins for the Learn product line in higher education, including for-profit schools.  It is telling that of these 28, only 3 clients are actual new clients taken away from competitors, 23 clients are retained clients expanding their relationship or upgrading to Bb 9.x, 1 client I cannot determine, and 1 is a client they actually are losing.

Quarter

Previous LMS

Type

Legacy

Butler Technology and CD Schools

Q1 2011

Blackboard (Angel)

Legacy

Capella University

Q1 2011

Blackboard (Vista)

Legacy

CUNY

Q1 2011

Bb Learning System

Legacy

Education Affiliates

Q1 2011

Bb Learning System

Legacy

Georgia Health Sciences University

Q1 2011

Blackboard (Vista)

Legacy

Globe University

Q1 2011

Bb Learning System

Legacy

Marine Corps University

Q1 2011

Bb Learning System

Legacy

Strayer University

Q1 2011

Bb Learning System

Legacy

University of Arkansas Little Rock

Q1 2011

Bb Learning System

Legacy

Washington University

Q1 2011

Bb Learning System

Legacy

Ivy Tech Community College

Q2 2010

Bb Learning System

Legacy

Ohio Board of Regents

Q2 2010

Blackboard (Vista)

Legacy

National University

Q2 2010

Bb Learning System

Legacy

Cornell University

Q3 2010

Bb Learning System

Legacy

Alta Colleges

Q3 2010

Bb Learning System

Legacy

Holy Family University

Q4 2010

Bb Learning System

Legacy

Northern Arizona University

Q4 2010

Blackboard (Vista)

Legacy

Villanova University

Q4 2010

Blackboard (Vista)

Legacy

Riverside Community College

Q4 2010

Blackboard (Campus Edition)

Legacy

University of Tennessee

Q4 2010

Bb Learning System

Legacy

Strayer University

Q4 2010

Bb Learning System

Legacy

Walden University

Q4 2010

Bb Learning System

Legacy

New client

Wilberforce University

Q1 2011

None

New client

Westwood College

Q2 2010

Pearson / eCollege

New client

Tarrant County College District

Q3 2010

CampusCruiser + Homegrown

New client

Unknown

Blue Mountain College

Q1 2011

Unknown

Unknown

Lost Client

Grand Canyon University

Q2 2010

Bb Learning System

Lost Client

Legacy 

For these 23 clients, there were already on Blackboard LMS solutions, either organically (Bb Learning System) or through acquisition (Angel, Vista or Campus Edition). Good for Blackboard for retaining these clients, particularly for a strong showing at CSU Chico under a thorough analysis. However, these “wins” do not tell a full picture.

New Clients

This is the important category, and there are only 3 clients mentioned in the past year – Wilberforce University, Westwood College and Tarrant County College District. No offense intended, but none of those are significant in terms of large installations, public and open evaluation process or power users of LMS technology.

Unknown

I just cannot find the information to confirm or understand Blue Mountain College.

Lost Client

This one is interesting, in that Blackboard mentioned Grand Canyon University as a win, but Grand Canyon is actually leaving Blackboard to go with LoudCloud as revealed on GCU’s earnings call recently. “I would like to say a few words about LoudCloud Systems, our new learning management system. We finished the first version early in the year. We are completing our internal pilot and have begun converting curriculum. We are excited to begin the release of this environment to our students later this summer. We’ll be migrating students by program through the end of the year.”

Blackboard Hints at Learn Decline

I think that Blackboard has been preparing the markets for these losses already. Consider the following:

  • When asked on the Q4 2010 earnings call about the Learn business prospects in 3 – 5 years, John Kinzer said that “I’ll look at the whole learn stack, and it’s somewhere around 55% to 60%. Over time, clearly the other products like Mobile and Collaborate and Analytics are growing much faster. So we will, we’d assume over a three year to five year horizon that percentage is going to be much lower than that, probably down into the 20% to 30% range, eventually.” Michael Chasen quickly jumped in to clarify or recast the answer as “while as a percent of our overall revenue, Blackboard Learn may end up decreasing, we actually continue to see it growing nicely over the next couple of years with Blackboard Learn and all of the add-ons to it.”
  • .  While the answer is not conclusive, I do think it sends a clear message that Blackboard is trying to calm expectations on the Learn product line.
  • “Ray Henderson, president of Blackboard Learn, predicted in an interview with The Chronicle on Friday [July 1] that going private will help the company bring back market share, although he argued that concerns about its hold on the market have been overstated.”  [emphasis mine]

Are these quotes conclusive? No. But I do think they provide hints that back up the data.


What’s Next?

I have not seen any credible argument that the Learn business is growing or strong without any evidence of new client wins. If Blackboard does have significant new client wins for Learn, they certainly are sharing them in public.

Next post: a look at client and market share losses for Blackboard.

You can follow me on Twitter at @PhilOnEdTech.