Author Phil Hill Archives - Page 2 of 3

The Century Foundation on Online Education and OPMs: Position paper masquerading as a study

The Century Foundation (TCF), a public policy advocacy organization, released a new ‘study’ today about online education and the usage of for-profit service providers such as Online Program Management (OPM) companies. “Dear Colleges: Take Control of Your Online Courses” follows up from the 2017 report loosely based on public records requests for contracts from public colleges and universities. Its intent is clear from the title, as it is hardly a study but more of a position paper against the OPM market in general and tuition revenue-sharing agreements in particular.

As public and nonprofit colleges have sought to expand their online course offerings, a major industry has developed to help them with that task. These private, for-profit developers—including divisions of big publishers, like Wiley and Pearson, and firms like 2U, Academic Partnerships, and Bisk—are known as online program managers (OPMs). They operate on a contract basis, and on terms that endow them with enormous, and, at times, comprehensive control over the services offered in the contracting college’s name. There are downsides to handing over responsibilities to external, for-profit operators—downsides that make the convenience schools receive in return seem a bad bargain indeed.

The Positives

It is valuable that TCF did the legwork to obtain and share 79 new contracts between providers and public institutions, and you can follow links in the report to see a broad range of contracts. OPM, Online Program Enablement (OPE), ¹OPM is for bundled service providers including marketing and enrollment services, course and curriculum design, student support, and tech / data infrastructure. OPE is a broader category of enablers that may do a subset of those jobs, often unbundled, but are still directly helping a school develop an online program.LMS, courseware, MOOCs, Continuing Education or Professional Development, and general EdTech – they have them all.

It is also valuable to see TCF’s positions laid out in five warnings to colleges and universities.

1. Don’t Buy Bundled Services
2. Don’t Bypass Your Own Faculty
3. Don’t Sign Lengthy, Unbreakable Contracts
4. Don’t “Share” Your Tuition Revenue
5. Don’t Facilitate Aggressive Recruiting

While items 1, 3, and 4 really just reword the title argument against the revenue-sharing OPM model, items 2 and 5 are worth reading. From item 5:

On average, the universities from whom we’ve acquired contracts share half of their tuition dollars with the partnering OPM, and when that OPM is a for-profit company, as most are, and is also tasked with recruiting, it is incentivized to get as many enrollments as possible. This scenario leads to the same predatory and aggressive recruiting tactics long used by for-profit colleges, but this time under the very different guise of a nonprofit or public university.25

The Negatives

It’s well and good for an advocacy organization to take a position, but for TCF to describe this report as a study is disingenuous. I’m fairly confident that the main points were written ahead of time and are consistent with plenty of TCF advocacy efforts. The data analysis is just there to backup their main arguments and to lend weight to the report and make it feel like an actual study. TCF’s Bob Shireman helped draft the California bills I described a few days ago, where one goal of the bills were to cripple revenue-sharing agreements. He has been a frequent critic of bundled OPM services, long-term contracts, and revenue-sharing. We get it. ²To be clear, I have no problem with his work in this area. I do have a problem when his advocacy leads to harm for the very students the bills are meant to protect and when TCF presents its positions as a study.

If you look at the contracts in the new batch of records released by the report, they are all over the map as described above and often are not directly related to online programs. The LMS category may be a necessary part of the infrastructure for online programs, but at most schools the larger mission is to support traditional face-to-face offerings. The same is true with courseware offerings. And several of the Continuing Education contracts listed have strong face-to-face components. It would have been far better to keep this report focused on the subject – OPMs, OPEs, and perhaps MOOCs and CE / PD companies. Those are the ones that could be argued are relevant to controlling a school’s online courses.

Furthermore, there is a misunderstanding of traditional per-student fixed fees that have long been used by courseware companies, many EdTech companies, and LMS companies (although they tend to use enrollment bands). Tuition revenue-sharing is different, basing itself directly on the revenue brought in by the school with a percentage basis going to the provider.

The TCF report has Blackboard’s contract with Eastern Kentucky University listed as revenue-sharing, but the contract is a standard LMS model. Fixed fees per year based on estimated enrollment bands. The TCF also has courseware contracts with Cengage, MindEdge, Red Shelf, and The College Network listed as revenue-sharing when they are standard courseware versions – fixed fees per student. Two OPE contracts – Smart Sparrow and 352 – are likewise fixed fee per student and not true revenue-sharing. I suspect there are even more cases of false revenue-sharing positives, but I have only have had time for spot checking on this point.

To their credit, the report attempts to focus on those product categories tied to online offerings.

As of August 2019, we received seventy-nine contracts, and of these, forty-one are directly relevant to the management of online courses. These forty-one do not include contracts that only address access to software like learning management systems. Of the relevant contracts, over half (53 percent) entitle the provider to a share of the school’s tuition.

There are two problems here.

One is that TCF does not list in their summary spreadsheet which contracts they consider “directly relevant to the management of online courses”. By my hand-coding, I get 14 OPMs, 10 OPEs, 2 MOOCs (and these are not the more-recent MOOC-as-OPM version), and 17 CE / PD, for a total of 43. I’m guessing that my list is fairly close, but who knows.
More importantly, these data points are mostly arbitrary, depending on which schools they asked and how successful they were in obtaining public records. Yes, they claim to have targeted schools with large online enrollments, but the data are mixed up between face-to-face and online programs, degree-based and non-degree based programs and courses, and contract years from 2002 to 2019. As a public listing this approach is fine. But to make constant percentage-based claims (53% of contracts, 68% of contracts, etc) implies statistical relevance and is misleading.

There is also a misreading of other reporting, particularly with the story of USC and its School of Social Work. The TCF report states:

Since USC had given over so much control to 2U, it had little control over how the program recruited, or who it enrolled: as revealed by the Los Angeles Times earlier this year, the online social work program admitted students that it was not prepared to provide with a quality education, charging them more than $100,000 for their degree in the process. All the while, USC reportedly lost money on the program, because so much of the tuition went to 2U.

This story is problematic for USC, but the argument made by TCF that the loss of money was “because so much of the tuition went to 2U” is not supported by the source LA Times article.

The university, which has contracted with the company through 2030, said the factors that led to the school’s budget crunch were “much broader” than its relationship with 2U.
“Generally, this partner relationship has been positive,” the university said in a statement. [snip]

There is much to the USC story that deserves further scrutiny, but this claim by TCF is inaccurate or at least unsupported.

Online education and OPM relationships should have greater accountability and transparency, and it is good that TCF has done the legwork to bring contracts into the public view. But it is a mistake to treat this report as anything other than a position paper from an advocacy organization, and a rather poor one at that.

California Taking a Break in Online Education Dance of Elephants

Back in July I wrote a mini-rant Twitter thread ³Read the terms, I believe you are are required to rant on Twitter, or at least to join a virtual mob. triggered by tens of thousands of California residents losing access to federal financial aid for their online education studies at out-of-state schools. My basic argument was that we were witnessing the consequences of a dance of elephants – triggered by activists who were targeting for-profit institutions, nonprofit conversion institutions, and Online Program Management (OPM) companies – with students caught in the middle.

The issues arose from three legislative actions:

California is the only state that has not joined the State Authorization Reciprocity Agreement (SARA) that seeks a common framework for student complaint handling and registration for institutions offering online education to students across the country.
Due to a lawsuit from consumer advocacy groups, the US Department of Education was forced to implement 2016-era rules requiring consumer complaint handling in order for students to receive financial aid, despite new rules that resolve the issue as of July 1, 2020.
A package of seven bills was introduced in the past year in California increasing regulation and oversight of for-profit institutions as well as online education programs.

The first and second actions led to the July loss of financial aid for students, although under intense pressure, California regulators quickly implemented needed changes to solve the initial problem. Ironically, after California rejected joining SARA due to “this lack of consumer protection for distance education students in California”, yet the entire issue this summer was based on California not having basic consumer protections handling student complaint handling. Tens of thousands of mice not enjoying the dance.

The big news of the past week is on the third legislative action, as the three bills with the most far-reaching implications for online education were put on hold, at least for the remainder of the year. As CooleyED described five days ago:

After returning from recess on August 12, the California Senate Appropriations Committee took up the package of six remaining higher education bills intended to address concerns about private postsecondary education providers in the state, sending three forward for floor action and holding three bills under submission in committee, meaning they will not be considered for further action in 2019. [snip]
Three bills were held under submission, meaning they will not proceed to a floor session or further voting in 2019. Further, unless these bills are placed into “two year” status by the Senate Appropriations Committee, the bills will not be considered in their current form for the remainder of the legislative session, which runs through 2020, requiring them to be introduced anew after the end of this year.

The three bills held under submission:

AB 1341, which would have enabled the California Attorney General “discretion to determine that an institution is not a nonprofit entity for California education regulatory purposes, even if it is recognized by the Internal Revenue Service as such”.
AB 1342, which would have required California AG review of certain transactions (e.g. sale of college, change of material responsibilities or governance) between nonprofit colleges and for-profit or mutual benefit corporations. This was mostly targeted at recent nonprofit conversions such as Purdue Global, Grand Canyon University, or (if approved) Ashford University.
AB 1345, which would have prevented schools from using incentive compensation agreements with for-profit corporations. This one would have had a big impact on OPM companies or any others with tuition revenue-sharing agreements.

In all cases, the scope is based on the Bureau of Private Postsecondary Education (BPPE), which governs both nonprofit and for-profit institutions operating in California, although there are many (changing) exemptions for nonprofit schools to take them out of scope.

The remaining bills going to a house vote deal with gainful employment, expansion of registration requirements for out-of-state institutions, and broadening the scope of student financial relief beyond tuition payments (think Corinthian Colleges and what those students can recoup).

What I’d like to believe happened is that state legislators realized the mistake in outsourcing the bills to activists primarily targeting for-profits and OPMs, rather than focusing primarily on students. In other words, hopefully the financial aid snafu this summer is leading legislators to better understand the stakes involved. The legislative process at work.

The question is not whether to regulate for-profits, nonprofit conversions, or OPM agreements. The question is how to do so – at the state or national level – and whether such regulation can avoid conflicting rules that further complicate the options for institutions with online education programs. And more importantly, whether the regulation helps rather than hurts students. What changed last week is that the state of California backed off from their approach to set de facto national policy, at least for the current legislative session.

By far, the best coverage on these issues comes from the CooleyED blog. I recommend reading their recent post in full for those wanting more details.

Addressing the Decline of Open Source LMS for #altc Discussion

Author Phil Hill, Blog September 4, 2019/11 Comments/by Phil Hill

There is an interesting discussion on Twitter #altc that is worth addressing, regarding the decline of open source solutions in EdTech, with LMS as a key example.

Q: @Czernie Why are open source solutions on the decline and what can we do about this? #altc
— ALT – alt.ac.uk (@A_L_T) September 4, 2019

Laura Czerniewicz posted in reply:

Based on the work of @PhilOnEdTech who tracks the LMS landscape- see for eg https://t.co/3R1yGiWniD, "Moodle is fourth and has been dropping in recent years", @PhilOnEdTech can you provide further details?
— Laura Czerniewicz (@Czernie) September 4, 2019

Michael Feldstein and I have dealt with this subject at e-Literate and on this blog, as Laura references, but it might be worthwhile to update the data. I do not plan on address the “why” and “what can be done” questions in this post, instead focusing on hopefully more useful information as input to the discussion.

First a note on the data for context. Our data set and analysis behind our LMS Market Analysis service for higher education is in partnership with LISTedTECH. The data are very school or institution-centric. We do not look at how many implementations are claimed by LMS providers, rather we look at institutions and check which LMSs are their primary or secondary systems. We use the public data from LMS providers as quality checks on our data, not as the source. We have data on over 11,000 institutions worldwide, with roughly 4,500 in the US and Canada. The primary regions we cover are North America, Europe, Latin America, and Oceania (Australia and New Zealand). We also have data for the Middle East, Africa, and various sub-regions of Asia, although we do not officially cover those in our market analysis. There is new data we plan to release soon on more than 3,000 K-12 institutions in the US and Canada.

In our Summer 2019 report, we showed the installed base in different global regions, based on number of institutions.

Regarding open source LMS:

Moodle is dominant, both as an open source LMS solution and globally as the most-implemented LMS solution.
The adoption of Moodle in the North America (25%) is different and much lower than other global regions (67 – 76%).
As seen in our previous post, if you scale by enrollment in North America, Moodle has even lower (12%) market share in North America.

The question in the #altc discussion, however, seems to be more about the historical trends, not the installed base. And the question also seems to focus on the markets outside of North America. Laura referenced this post which shows the clear decline of Moodle and Sakai in North America, but what about other regions? The following chart shows LMS market share by institution for all of our higher education data outside of North America (including areas in the Middle East, Africa, and Asia that we do not officially cover yet).

Some notes:

The data set is more complete in recent years, and open source implementations at smaller schools are difficult to find. Therefore there is likely a bias with more Moodle schools in recent years. In other words, there may be somewhat more of a decline that the data initially shows.
The majority of “open source” usage is from Moodle, but this category also includes Sakai, Blackboard OpenLMS, and other open source solutions. This category does not include Canvas.
Outside of North America there is a slight decline in open source LMS since 2015, or at least a plateau.
I don’t have time this morning to create a separate chart, but in general open source LMS tends to drop off for more mature markets (in terms of higher LMS adoption within a region). One way to read this is that open source LMS markets are shifting over time towards developing regions.

I look forward to the continued #altc discussion, but hopefully this data will help with context.

State of Higher Ed LMS Market for US and Canada: 2019 Mid-Year Edition

Author Phil Hill, Blog August 15, 2019/12 Comments/by Phil Hill

It has been nearly a dozen years of sharing the LMS Market share graphic, commonly known as the squid diagram. This past year we at MindWires 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 mid-year 2019 report this 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 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.

In the past five years, the LMS Market for North American higher education has become increasingly dominated by “the Big Four” (Instructure Canvas, Blackboard Learn, D2L Brightspace, Moodle) ⁴Disclosure: Instructure, Blackboard, D2L, Moodle, and Schoology are all subscribers to our LMS Market Analysis service. for institution-wide adoptions; the aggregate market share of year’s top four systems moving from 80% to 95% in past five years. Beyond North America, we are seeing the same trends in Europe, Latin America, and Australia / New Zealand.

We recently described the overall market activity slowdown in that there are fewer LMS formal evaluations taking place since mid 2018, with 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. We have seen some increased activity this summer, but we are not ready yet to say if the trend has reversed.

In addition, 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. Despite several counter-forces (the market slowdown, University of Phoenix finishing its Learn Ultra implementation, and closure of for-profit chain and dozens of campuses using Canvas), Canvas has extended its North American lead – 28% vs. 27% based on count of institutions, and 35% vs. 31% in terms of student enrollments at those schools.

While D2L’s market share with Brightspace actually decreased slightly largely due to the closure of for-profit clients, they have picked up some impressive wins lately, including Purdue University, the University of the Sciences, University of Rhode Island, and nearly a dozen others (not all of which are publicly announced yet).

Moodle declined slightly – less than 1% in terms of institutions – over the past year. We have added Jenzabar to our main graphic, based on its somewhat persistent market share.

We have a broader set of data as part of our LMS Market Analysis service, and we will share more information on regions outside of North America this fall.

Update 8/16: Adding Disclosure – Instructure, Blackboard, D2L, Moodle, and Schoology are all subscribers to our LMS Market Analysis service.

BbWorld 2019: Multiple signs of progress but questionable results

Author Phil Hill, Blog August 12, 2019/by Phil Hill

Ignoring cause and effect, if there is one LMS company that has improved its market trends more than any other during the current market slowdown, that company is Blackboard. They are losing fewer customers, they won a big international account with dozens of schools, they finally have Learn Ultra truly in production at the course level, and their corporate financials improved significantly with the sale of the Transact business unit. As a result, this year’s BbWorld users conference had a much more positive tone than last year’s conference, both in company presentations and from customer sentiment. ⁵Disclosure: Blackboard is a subscriber to our LMS Market Analysis service.

The question is whether these improvements matter or not, and so far the market results are questionable. Better than before, but I do not see a turnaround yet.

Company Postion

From a corporate perspective, Blackboard emphasized its broad portfolio of teaching and learning products (Learn, Collaborate, Ally as the core) and more importantly the simplification of the company. According to executives, with the Transact sale and changes in product lines, Blackboard “has its most complex days behind it”, a point referencing the corporate financial challenges of the past year as well as the removal of non teaching and learning product lines. During an executive analyst session, CEO Bill Ballhaus was even more clear that this simplification trend shows them moving in the opposite direction of Instructure.

I found the BbWorld message quite consistent with what I described back in February at e-Literate.

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 respectively2. 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.

Learn SaaS and Learn Ultra

From an LMS perspective, Blackboard continues to push Learn SaaS (the cloud deployment of Learn, both Original and Ultra, on AWS) and Learn Ultra (the new user experience design only available on SaaS). The company’s Learn SaaS deployment continues in its remarkably linear fashion.

As for Ultra news, I covered that situation before the conference:

Wait – didn’t Blackboard ¹ make BbWorld18 largely about Learn Ultra and claim dozens of implementations? Yes, but they were playing word games as described last year. Learn Ultra was always planned to include changes down to the Course View, and last year we heard about institution-wide deployments of Base Navigation, with only pilots or partial implementations of the Course View. Put bluntly, I didn’t believe Blackboard’s claims in 2016 or even 2018.
But this year is different for a few reasons:
– IESB in Brazil completed its migration in March 2019.
– The University of Phoenix has completed its migration – as of April 2019 – from its Homegrown Classroom system to Learn Ultra.
– Several schools, including Northumbria University and Merrimack College, are completing their full migrations such that Learn Ultra (navigation and course view) will be the primary system as of Fall 2019.

Conversations at BbWorld confirmed my understanding with a few details added in. What I did not hear this year with any consistency is the past concern of “Ultra is just not ready yet”. Schools that want Ultra and see the value in its user design are moving that direction, although not in droves. Of the approximately 173 Learn Ultra clients as of the beginning of BbWorld19, roughly half are just using Base Navigation, one quarter are using a mix of Original View and Ultra View at the course level, and one quarter are fully moving to Learn Ultra at the course level.⁶Please read this post to understand terminology for Blackboard Learn. This latter number is somewhat aspirational, as several clients listed as full Ultra are starting institution-wide Ultra usage this fall or at the end of the calendar year, but the point remains that Ultra is fully in production.

One of those clients going full Learn Ultra is Galileo Global Education, as described in my February 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. [snip]
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.

Galileo continues to represent a big victory for Blackboard, but I did not pick up signs at the conference that it is the beginning of a new set of new-client wins.

Blackboard Data

The biggest product development is Blackboard Data, despite a keynote announcement that felt like a timeshare pitch. We’ve got a really exciting free visit for you . . . which we’ll describe in a few minutes. No, really. Just a few more minutes. Oh, look, the keynote is almost over – Rachel, come on out and describe what they get. Looking under the hood, however, the Canonical Data Model and user interface access of the underlying Data Dictionary is significant and impressive. This data model is abstracted out of the LMS, and using Blackboard’s various SaaS products, presents a T&L suite data approach, with agnostic models for the LMS, video conferencing, student information system, and other tools. It also appears that this Canonical Data Model is designed to improve the notoriously weak signal-to-noise ratio of EdTech data analytics.

Eventually, the in-line data analytics – those presented in the LMS workflow (their word, not mine) – will also come from the Blackboard Data infrastructure. The first release of Blackboard Data stack will be Reporting, with no additional charge to customers. The Blackboard Data release to date appears to be a first step in a solid design, which is different than a productized suite. For example, the UI doesn’t connect the data dictionary to actual data extraction, leaving it as a live set of documentation. Like Instructure’s Dig initiative, this one deserves further analysis in a future post.

Does it matter?

Given these improvements, it is worth asking if there are signs that the market is buying what Blackboard is selling. At one level the answer is yes. The company’s losses are slowing and they picked up a big system in Galileo. At another level, however, it is clear that Blackboard has a long road ahead of it in a market with a long memory. Two examples help to clarify the disconnect between company / product improvements and market results.

The first example came during the executive listening session at the end of the conference, where it was obvious that Blackboard as a company really wants its customers to move to Learn SaaS and Learn Ultra of their own accord. There is no better way to further simplify the company than to move to one code base and one deployment option, in other words to start reaping more of the promised benefits of cloud computing. But they just can’t say that customers need to move. The closest the executives got at the conference was to say that they’ll know a lot more by next year on how long non-SaaS and non-Ultra will be available, but that customers will have plenty of time to migrate. They did not say that non-SaaS and non-Ultra will be available indefinitely, and this quite honestly makes sense.

The first audience question, however, led to a very long discussion about long-term self-hosted customers who just don’t have the resources to migrate. They might buy the idea of SaaS and Ultra, but that doesn’t mean they are ready to move. One challenge Blackboard faces is that with their market losses over the years, this conservative type is a greater and greater percentage of their remaining customer base. By the way, kudos to the Blackboard executive team for taking the time to discuss this problem so openly at the conference.

The second example came after the conference when yet another long-term client announced their decision to migrate away from Blackboard. Purdue University – including Purdue Global (the artist formerly known as Kaplan) and all Purdue campuses – was a key customer for Blackboard. They were a long-term WebCT client, even using WebCT Vista, and they could rightly be called a power user university. Purdue chose to move to D2L Brightspace, choosing that LMS over Blackboard Learn and Instructure Canvas. This is a big loss for Blackboard, and it comes in spite of all of the improvements listed above.

In the end, there are definitely improvements happening at Blackboard, but a lot of their big challenges remain in terms of market results.

Disclosure: Blackboard is a subscriber to our LMS Market Analysis service.

Postscript on 2U Earnings Call Story

Author Phil Hill, Blog August 1, 2019/1 Comment/by Phil Hill

My live-tweeting and blog post two days ago about 2U’s earnings call seems to triggered a bit of news coverage and commentary. I stand by that post, but I have noticed one area that may have been (inadvertently or not) mischaracterized. The following description was too brief and could use some clarification:

2U announced a new “institutional suite” product based on their recent RFP win with UNC for a university-wide support (exclusive provider) for 10 graduate programs. This institutional suite is not the same thing as their traditional full-service revenue-sharing OPM model, however. Importantly, it includes fee-for-service offerings.

My understanding is that the new institutional suite, and more importantly the fee-for-service model, is additive and not a replacement. In other words, 2U is expanding their offerings so that traditional OPM clients (i.e. schools already signed up with revenue sharing programs) can extend 2U services into other programs where fee-for-service is the model. I do not believe that 2U is moving away from revenue sharing.

Now that I re-read the post (which I have updated), the second reference is likely a source of some of this confusion.

2U is not the same company as they were even two years ago. They now offer fee-for-service as well as revenue-sharing models (as do most of the other large OPMs) [Note: These fee-for-service offerings are in addition to traditional revenue sharing models for 2U], and their growth assumptions appear to be as much around bootcamps and short courses and they are around traditional graduate degree programs.

What is important to understand is that the issues mentioned in the earnings call as drivers of the changes (market dynamics and increased competition) are more about online education as a market itself, not specifically about other OPM vendors. It is online programs that are having much greater competition from other institutions – a competition for students – with one result being smaller cohort sizes in many cases.

2U appears to be reacting to these changes in the overall market and the resultant changes in business outlook, by broadening their portfolio. One 2U method – that we have seen starting in 2017 – is the addition of short courses and boot camps by corporate acquisition (GetSmarter and Trilogy). Another method – that we first heard about two days ago – is the addition of more services for partner schools outside of the initial program. The latter is the genesis for the institutional suite.

The changes 2U is going through, in their offerings and outlook and even stock price, are significant by themselves. But I do not think they are moving away from revenue sharing.

July 30, 2019: The day the OPM market changed

Author Phil Hill, Blog July 30, 2019/1 Comment/by Phil Hill

Well that was quite an earnings call. 2U ($TWOU) shared their second quarter 2019 results and answered investment analyst questions this afternoon, and the implications of the call go well beyond 2U’s stock (down 25% in after hours trading by end of call). 2U is changing their entire outlook for graduate programs (i.e. their traditional Online Program Management, or OPM, model) as well as their short-course model (i.e. non-degree coursework based on the company’s GetSmarter acquisition).

corporate learning / skills, short courses (non-degree). Yes, they started most of these before, but now business is redefined around full suite. Major changes to expectations on grad program OPM business. 2/
— Phil Hill (@PhilOnEdTech) July 30, 2019

Click here to read full thread on Twitter

Feel free to head over to Twitter for the full thread and discussions, but I’ll recap the main points below and add why I think this is an inflection point for the OPM market.

While 2U executives described material changes in their top online programs (e.g. USC social work, UNC MBA) last quarter, this time they are changing their overall guidance and not just planning to “operate their way out of the problem”. Today’s call was 2U recognizing that the markets around online education have changed in fundamental ways.
The primary change 2U sees is for online education overall and not just for OPM-based programs – there are many more online offerings available in just the past few years, leading to a much more competitive, regional market. Students more and more are looking for online programs from schools near them. One effect is that it is much harder to scale programs to several hundred students.
As a result, 2U is changing their outlook, cutting down expected new graduate program starts by at least half over the next year or two, and cutting back on marketing spend per program as the last 50 students to recruit are the toughest ones (paraphrase). And they are cutting expectations for enrollment per cohort across their portfolio.
2U mentioned many times during the call that it is their scale and suite of offerings that will be their competitive advantage. In addition, 2U executives believe they are seeing these structural changes first due to scale, but other OPM providers will see them soon, and the smaller ones are already having problems.
The recent Department of Education guidance around financial aid for California students in out-of-state programs from nonprofit providers (including many of 2U’s clients) is also having an impact on guidance. 2U expects the issue to be resolved soon, but they needed to account for the uncertainty in today’s earnings and projections.
2U announced a new “institutional suite” product based on their recent RFP win with UNC for a university-wide support (exclusive provider) for 10 graduate programs. This institutional suite is not the same thing as their traditional full-service revenue-sharing OPM model, however. Importantly, it includes fee-for-service offerings.
2U is seeing similar-in-scope changes to their short courses segment that is based on the company’s acquisition of GetSmarter.
As a company, 2U is redefining itself by its scale and suite of offerings – traditional OPM for grad programs, short course / non-degree offerings from GetSmarter, bootcamps based on the company’s acquisition of Trilogy, and the new institutional suite with fee-for-service models.

Why This is Important

While MindWires has investment companies as clients with our consulting and market analysis, we do not provide investment analysis. I tend to write about stock market issues only as it directly affects company offerings for education. And yes, this news is worth following in that regard – we’ll have to see how analysts cover the earnings call news and how it impacts 2U’s operations. Put another way, I don’t know the impact on 2U the company, but it is worth watching.

More broadly, I think the impact will be much broader in nature. Last year I wrote about the OPM market and how it is chaotic and dangerous, despite overall market growth.

The picture one gets is of a chaotic market that is not for the faint of heart, and one that will likely see further consolidations and category changes. 2U, for its part, has been successful partially due to a niche strategy where they go after elite master’s programs and mostly avoid direct competition or engagement with the rest of the market. And recently we have started to see the MOOC providers become OPM providers – where the primary revenue for Coursera and FutureLearn are based on revenue sharing with online programs, albeit with lower sharing rates and with very different marketing approaches. In other words, there seems to be several efforts to enter into the same OPM race, but if possible to avoid being in the mainline rev-share OPM market. The Toecutter would feel right at home.

Over the past year 2U is no longer staying on the outside of this chaos – they are caught up in the dynamics, and today’s call acknowledged the messy, changing market while changing the company plans. Beyond 2U the company, I agree that other OPM companies will be affected by the same market forces. The market is getting even messier.

In short, I agree with the 2U description that online education markets are changing and should lead institutions and support companies to adjust or revamp their plans accordingly.

Higher education often has a herd mentality, and online education is one of the most active herds. It seems that every time you talk to an institution considering a new or revised online strategy, there is some positioning against 2U programs. Either they want to emulate USC and UNC and Syracuse, or they want to deliberately take a different path. 2U as an idea has great currency, but those assumptions about what the idea is are changing. 2U is not the same company as they were even two years ago. They now offer fee-for-service as well as revenue-sharing models (as do most of the other large OPMs) [Note: These fee-for-service offerings are in addition to traditional revenue sharing models for 2U], and their growth assumptions appear to be as much around bootcamps and short courses and they are around traditional graduate degree programs.

It is worth mentioning what 2U did not describe during the call (if they did, I missed it) – the effect of campaigns pushing back against revenue-sharing models and OPMs in general. I suspect that when we pull back the covers on the UNC-based institutional suite offerings we will see these effects indirectly, but they did not directly mention this situation directly.

There is a lot going on in the world of online education for higher education, with the California ruling and 2U revised plans coming out in just the past eight days. There are big implications to consider, and we’ll cover the ongoing changes as we learn more, but mark today’s date as a major change in the OPM market.

Note: I wrote this post fairly soon after the call. If I misread anything in my analysis, I’ll update this post accordingly.

Update 8/1: Added note clarifying fee-for-service as additive model.

Postscript on D2L Fusion and LMS Market Slowdown

Author Phil Hill, Blog July 29, 2019/by Phil Hill

In O’Neal’s post yesterday he noted that despite D2L’s continuing improvements in its Brightspace LMS and its consistent market approach, we are just not seeing significant market changes.

Our view has not changed. D2L has some good wins lately (including several we expect to be announced in the next two months), but their overall market share is not improving in the core North American higher ed market. Phil will address this point in a separate post.

In interviews at the D2L Fusion conference, company executives essentially stated that their sales pipeline is strong, and they’re not seeing any sign of a market slowdown. These points could use clarifications for those following the LMS market.

Sales Pipeline vs Market Share

For its part, D2L has some recent wins in North American higher education this summer, winning new clients over Canvas and Blackboard and Moodle ⁷Disclosure: D2L, Instructure, Blackboard, and Moodle HQ are all subscribers to our LMS Market Analysis service. in competitive bids. These wins include the University of Rhode Island (moving from Sakai), Northeastern Technical College (moving from Moodle), and the Nebraska Methodist College of Nursing and Allied Health (moving from Jenzabar). In addition, we are aware of two large system wins (30,000+ students each) moving to D2L that we should be able to confirm within a month of two. I could see an argument of strong sales pipeline based on these wins and potential news ones this fall.

D2L is interesting, however, in that they are both winning and losing clients. Canvas in higher ed has only been winning new clients. Until the recent win with the Galileo Global Education, Blackboard had primarily been losing clients, where the primary question has been how fast these losses occur. Moodle is mostly losing schools or seeing them shift from self-hosting or mom-and-pop hosting to more professional cloud hosting. To get a sense of D2L’s market market wins and losses, consider the following two charts from our January 2019 LMS Market Analysis report show the migration of schools from one system to another during 2017-18.

Note that D2L is the second biggest winner of new LMS implementations for both North America (primarily from Blackboard and Pearson) and the combined three international regions we currently cover (primarily from Blackboard and Moodle). But in North America, D2L also had a number of losses – takeaways where schools moved (mostly to Canvas). This year is different in that D2L has stemmed from losing clients to another system. We are finishing our mid-year report and will have more data in August to share.

D2L’s bigger “loss”, however, is the case of campus closures largely due to their wins in the for-profit sector and the Pearson LearningStudio end-of-life. The largest example is the closure of the former EDMC institutions (renamed as the Dream Center after converting to nonprofit status), a 2017 win. The net effect of both types of losses is that D2L is not gaining market share in the global LMS market based on our data, despite being the second-most-selected system for new LMS implementations. We’ll have to watch to see if their recent wins and sales pipeline changes this dynamic.

Market Slowdown

Despite D2L’s statements during Fusion interviews, we stand by our position that there is indeed a general slowdown for academic LMS market, starting last summer and continuing today. We have performed additional analysis for our premium subscribers showing that the slowdown applies beyond North America (it includes Europe, Latin America, and Oceania, with the exception of Blackboard’s recent win with Galileo), and it applies at small, medium, and large enrollment bands of institutions.

Brian Peterson from Raymond James recently downgraded Instructure’s stock based on his company’s data – independent of ours but coming to the same conclusions.

Proprietary checks indicate a meaningful deceleration in large deal activity in the North American higher-ed learning management system (LMS) market in 2018, with a double-digit decline in the number of full-year students, Peterson said in the Monday downgrade note.
Despite this slowdown, Infrastructure’s Canvas LMS recorded an improvement in win rates in 2018, bagging the majority of large deals in the forth quarter, the analyst said.
A resurgence in higher ed deals in 2019 seems unlikely given the modest year-on-year deceleration in the deal activity pipeline, Peterson said.

Combined, the two issues of wins offset by losses and the market slowdown clarify the challenges that D2L faces in turning its product improvements and recents wins into meaningful improvements in market share.

Disclosure: D2L, Instructure, Blackboard, and Moodle HQ are all subscribers to our LMS Market Analysis service.

InstructureCon 2019: A study in contrasts

Author Phil Hill, Blog July 22, 2019/3 Comments/by Phil Hill

This year’s InstructureCon LMS users conference was a difficult one to cover, largely due to contrasting messages that I heard – whether from interviews with company executives before the conference or from staff presentations during, whether from large established clients or from smaller or newer clients. On one hand, I was surprised the extent to which I heard about a company on edge, not understanding or knowing how to deal with recent pushback from clients and analysts. On the other hand, I heard from clients who were very happy (if not giddy) about being on Canvas and enjoying the community. ⁸Disclosure: Instructure is a subscriber to our LMS Market Analysis service.

Overlaying these contrasting views was the presence of investor pressure on the company, best exemplified by activist Praesidium Investment Management, whose public thesis is that Instructure stock would be more valuable if they shed their corporate learning business built around the Bridge LMS and instead focus on their strength in academic markets built around the Canvas LMS.

A lot has changed since last year’s InstructureCon. Dan Goldsmith replaced Josh Coates as CEO, with a mostly new executive team surrounding him (some of these changes pre-dated Goldsmith’s appointment). Canvas overtook Blackboard last summer as the top academic LMS in North America both in terms of institutional adoptions and number of student users, while remaining the fastest growing in much of the rest of the world – they are now more of a market leader than a scrappy upstart. Instructure outgrew the Keystone conference facilities and had to move to a traditional conference center for the first time, and they also moved the Bridge portion of the conference to a separate event in June. There had to be differences in the tone of the conference. The issue is discerning which changes and contrasting messages matter in terms of future company performance.

Product “News”

I put news in scare quotes as Instructure went out of their way to minimize expectations on product announcements and even on roadmap. The company went so far as to cram the main product keynote into the same slot shared by one of the external speakers, leading to a rushed but useful discussion and demo from SVP of Product Mitch Benson and colleagues. I personally could have used more information and less inspiration.

Benson described a redesigned Rich Content Editor (RCE) that includes drag-and-drop capabilities and more intuitive menu items, and they also shared more of their platform vision, emphasizing the importance of MasterConnect and Portfolium acquisitions. The long-delayed Quizzes.Next was briefly mentioned, with the current roadmap targeting full production (ready to become the default quizzing engine and replace the original tool) sometime next year as shown in the Canvas Community page.

As I have described before, Quizzes.Next is late. After being announced in summer 2016 with promises to be “made available to you over the course of the next several months”. It is now two years later, and the chart above shows, the product won’t be fully ready until 2020.

This update captures some of the contrasting messages. Besides executives being on edge, there is also some confusing messaging around Quizzes.Next. When I asked during interviews about this tool’s progress, I got a concerning answer talking about Instructure not ever promising to offer feature parity with the previous quizzing engine. Whatever the case of previous promises, I know that there are a minimum set of features that Instructure must deliver for true replacement of the old quizzing tool. Informal conversations with clients at lunch and outside of sessions seemed to confirm that this replacement is indeed in the future and not here today.

On the positive side, however, I think the current chart and roadmap appear to be realistic, and what seems to be most important about Quizzes.Next is not at the feature level. The bigger news is the re-architecture into a more scalable and more accessible toolset – mostly happening behind the scenes. Instructure is investing in Canvas, and much of that investment is along these lines of modernizing and making systems more accessible, supporting assistive technologies through out.

Below are some of the key product updates to Canvas coming out this year.

Data, Data, Data

The most significant product news continues to be the evolving description of their Data, Analytics and “Dig” plans (scare quotes here and below as Instructure folks keep saying the name will change but no replacement name has been shared yet).

Instructure started re-investing in data & analytics work over two years ago after initial phase of work in the 2013 – 15 time frame. The primary result from the earlier efforts was Canvas Data – the ability for schools to access data from the LMS and do their own data analysis work – along with several visualizations that were lightly used by faculty. During this year’s InstructureCon there were several schools (e.g. UC Berkeley, Stanford, and Seminole State College) presenting their own analysis tools and results – mostly basic analysis of grades and participation measured by discussion posts, assignments, and page views. While these stories largely were not sexy or truly innovative, per se, it is interesting to see real schools consuming data and figuring out how to improve their student success initiatives.

The biggest product showing for the whole conference was the new Analytics tool in Beta (schedule for full release by the end of the year).

The focus of this tool is to improve faculty visibility of student performance within courses, with ability to compare results (e.g. section to section, or even section to student) or to drill down into specific assignments or students, as shown in this video.

Live demo during InstructureCon 2019 of Analytics faculty view

Beyond the Analytics tool, “Dig” is touted as a set of AI and machine-learning tools (or products to be sold separate? the details are not clear) with the goals of:

Help faculty and staff gain deeper insights into student success
Help institutions support best practices in usage and course design
Help students stay focused and succeed

The only tangible example of Dig mentioned at the conference was a nudge system to be released later this year where the machine learning is to build a profile of each student using their historical course data – not just the current course. The idea is to better understand individual student habits to let the system know whether, when, and how to send a nudge about a late / missing assignment or poor course performance. I’ll have more to share on this subject in a separate post.

Contrasts

The reason that the issue of contrasting messages matters is that it takes thick skin to stick to a strategy while also understanding pushback coming from analysts or customers. I have talked to several schools who are frustrated that it does not appear that Instructure executives fully hear what they are saying about delayed or missing functionality, or are concerned about company direction in data & analytics or consistent customer service. And when I or Jeanette asked questions in interviews, we got some answers that were almost dismissive of the unique challenges around educational data usage, or sounded like mischaracterizations of customer sentiment. That matters, especially in a company like Instructure, as I described two years ago:

While Canvas is a market-changing platform, that is not really Instructure’s primary strength. Instructure as a company is the real strength.

But Instructure’s competitors should not pop the champagne yet. Even for the frustrated clients, I am not aware of any who are thinking about leaving Canvas, and the company’s win rate for new LMS implementations has not dropped. The current re-architecture of Canvas to improve scalability and embed accessibility support throughout is making Canvas a better platform. And I heard many examples backing up Goldsmith’s claims that investment in the Canvas product is increasing.

There’s a lot to watch here. Instructure is the market leader in the academic LMS space and continues to perform well. It will take some time to see if the contrasting messages I heard will adversely impact the company’s future or if their company culture will continue to prove their biggest advantage.

Disclosure: Instructure is a subscriber to our LMS Market Analysis service.

Pearson’s Digital-First Textbook Initiative and Student Choice

Author Phil Hill, Blog July 16, 2019/by Phil Hill

This morning Pearson announced a bold move into a digital-first world for textbook publishing, as described by Inside Higher Ed:

Pearson, like many publishers in higher education, has long signaled its intent to move from print textbooks to digital courseware. But today the company went farther than anyone else — announcing that all of its 1,500 U.S. titles will become “digital first.”
From now on, instead of publishing new editions of print textbooks every few years, the publisher will focus its energy on its digital course materials.

The focus of the announcement is about the change in mindset and processes, with ongoing updates to material and removal of the “costly and time-consuming” print revision cycle. Pearson will still rent print textbooks themselves while actively trying to discourage the second-hand rental market mostly through Amazon, college bookstores, and Chegg. They will also push their Inclusive Access programs.

“We want students to have the best and most up-to-date content for the best price,” said Fallon. Pearson plans to lower its prices so that fewer students are tempted to buy secondhand books. It will also push its rental program so that fewer books ever enter the secondhand market.
“We will effectively have three price points. They will vary by discipline, but broadly speaking, the average ebook will be $40. You can still rent a physical textbook for $60. And a fully integrated digital product, like Revel, MyLab or Mastering, will be $65 to $80,” said Fallon.
With inclusive-access deals, where whole classes are signed up for a product and charged for access by their institution, the prices will be 30 to 40 percent lower than those above. Over 700 universities now have inclusive-access deals with the publisher, accounting for about 9 percent of its sales, said Fallon.

This is big news that will change the textbook market, and the whole article is worth reading. EdSurge also has a good report here.

I am quoted in the IHE article expressing skepticism about the removal of student choice in the process.

Phil Hill, partner at MindWires Consulting and publisher of the Phil on Ed Tech blog, said going digital first “makes plenty of sense on paper” for textbook publishers, as it enables them to “re-establish control” over the distribution of their products and cut off the secondhand rental market.
“It’s a bold move,” said Hill. “The risk is that it could further alienate nearly all stakeholders by being so obvious in intentions. Students have benefited from the secondhand rental market in pricing, and many prefer print over digital.”
Students like having the freedom to choose where to buy textbooks, so taking that ability away “will create big problems,” said Hill. “I suspect bloggers and commentators will have a field day comparing past statements of principles about good corporate intentions with current moves.”
“Sometimes the marketing copy for open educational resources writes itself.”

To be clear, I believe the change in pricing levels, removing the $200 or $300 textbooks over time, is a good move, and I believe the move to ongoing updates and revisions not driven by print cycles is also a good move. My concern is that the approach that Pearson is taking ignores student preferences and their long-running choice in finding the best prices for textbooks. Consider these two charts from the National Association of College Stores (NACS) Student Watch survey released last year. ⁹Disclosure: I was paid to speak at a textbook affordability conference that was sponsored by NACS this past spring. The first chart shows (as have many other studies) that students quite often prefer print textbooks over digital.

My youngest daughter goes to Santa Clara University, and for the majority of her classes they are not allowed to use laptops or tablets. It’s not just a matter of preference, it can be a matter of policy even in 2019.

It appears it will be nearly impossible to buy a Pearson textbook in the future without first renting it, and the company will allow rent-to-own while they try to control the distribution of these printed copies. In 2017 Pearson introduced a consignment textbook rental program through a subsidiary of NACS, allowing college bookstores to rent material where Pearson owns and controls the pricing of the textbooks (chalk this up to “there have been signs that Pearson is moving this direction for several years).

Beginning this fall, 50 of Pearson’s most popular titles will be available for under $100 via a “rental-only” model; the company plans to expand the titles included in the program over time.

Read this article from March of this year to better understand the consignment rental program. When Pearson, Cengage, and McGraw-Hill sued Follett that same year, Follett claimed that the real purpose was to effectively remove options for students.

Follett believes the intent of the lawsuit is to cripple the campus store’s ability to provide lower-cost course material options, leaving students little choice but to buy higher priced texts from the publishers. Prior to this lawsuit, the publisher group had been pressuring Follett and other campus retailers and text distributors to adopt certain “best practices” created by the publishers that Follett believes would effectively restrict access to low-cost used and rental course materials on campus.

I believe there have been other deals with Amazon and others for some form of consignment rental.

This approach from Pearson, if successful, removes the second-hand nature of the rental market – students selling used textbooks and someone else reselling or renting them out. Pearson-driven rentals but no second-hand rentals. Consider the current sources of textbook rentals and how seldom students use publisher websites:

These charts help explain why I believe the underlying intention is for Pearson to control distribution channels. Unless there is some hidden mechanisms or change in Pearson’s plans (and there many details to iron out), students will not be able to buy and sell back their materials, find best prices through second-hand markets (rental or purchase), but they will benefit from lower initial price points. If they can trust Pearson.

Disclosure: I was paid to speak at a textbook affordability conference that was sponsored by NACS this past spring.