Questioning the Logic Behind the Anthology and Blackboard Deal

On Monday I stayed more on the objective side of analysis and described the news of Anthology and Blackboard agreeing to merge into a single company, noting that while it was technically a merger, Blackboard is the junior partner. Anthology is a provider of enterprise software solutions that was created by the combination of Campus Management, Campus Labs, and iModules. Today I’d like to shift and provide more of a subjective analysis.

Does The Deal Make Sense?

The answer to this question depends on whose perspective is relevant. From the investor perspective, it is difficult to answer since the financial details have not been disclosed. Bloomberg reporter Liana Baker (who has a good track record in these matters) heard that Blackboard was valued at $2 billion and Anthology at $1 billion, even though it is Anthology’s owners and executive team that are calling the shots. We don’t know the details, but I suspect that Blackboard owner Providence Equity Partners took the large majority of payment as cash with a smaller amount of stock, based on their long-running efforts to find a buyer. But this question is not my main concern in this post.

The bigger question is whether the deal makes sense for schools and for the LMS market in general. The basic argument being put forward was best described by Blackboard CEO Bill Ballhaus:

Over the past several years, Blackboard has transformed into a thriving SaaS software company partnered with the education community to advance learning around the globe.  As we look to the future, we are ready to both expand and accelerate our vision of delivering a personalized experience fueled by data. To support the next phase of our journey, we announced today that we entered into a definitive merger agreement with Anthology, a cloud-based software company focused on serving global education institutions. 

By combining the broad set of Blackboard’s and Anthology’s complementary capabilities – including Learning Management System, community engagement, student success, student information system and enterprise resource planning  –  we will provide you, our valued clients, a full suite of enterprise-level products and services that will drive learner and institutional success.  Combining the two companies will create the most comprehensive and modern EdTech ecosystem at a global scale for education. It will enable us to break down data silos, and surface deeper insights about the learner so we can deliver unmatched personalized experiences across the full learner lifecycle and drive better outcomes in enrollment, progression and graduation in privacy-friendly and secure way.  

For schools wanting to have the same vendor provide enterprise software such as student information systems (SIS) and academic software such as learning management systems (LMS), this deal not only simplifies vendor management but also opens up the possibility of data-driven software experiences.

For the other 95% of higher education institutions, there is a problem here. I was asked by a reporter if there is a demand for combining enterprise and academic software organizations, and I answered that there is a demand by the supply side. Some vendors and investors really want this to be true, and the argument around the benefits of combining data and providing deeper non-standards integrations looks good in spreadsheets and white papers. The problem is that schools – the demand side – largely are not asking for this combination, for valid reasons.

The biggest reason is that you have different buying communities for both sides of this deal. ERP and SIS decisions are owned by the CIO and the Registrar for the most part and are deeply administrative and workflow-based in nature. Extensive business process modeling and requirements management and customizations in multi-year projects. LMS and most academic decisions are owned by faculty groups, and the provost office, and academic deans.While RFPs may start with hundreds of requirements, the actual decisions are based on user preference and strategic judgement calls on who is the best partner and typically not based on workflow modeling. And crucially, most academic decision-makers do not want CIOs and administrative staff making the decision for them. The CIO is typically involved but largely as an advisor in the process.

EdTech in higher ed is heterogeneous in nature. Yes, K-12 markets value product bundles (see PowerSchool in particular), but that is not the target market for Anthology and Blackboard’s combination. Many academics leaders would love to have more useful multi-source data in many cases, but only after they get to use what they perceive as the best-of-breed system.

Anthology CEO Jim Milton as well as Bill Ballhaus acknowledged the nature of this heterogenous market in my interview with them. But they then stated that they are “confident over time the value proposition of the combination will become clear.” Sometime in the future this deal might make sense?

I asked them what was different from the 2000s when there was the initial wave of discussions about combining SIS / ERP companies with LMS companies (i.e., should Oracle/Peoplesoft buy an LMS vendor to improve the market, or similar considerations). Neither of the two CEOs were in EdTech at the time and said they could not speak to those issues. But what is different now is the prevalence of cloud computing and the two companies’ mission alignment. Now we have two companies largely delivering software in the cloud and they both think alike. Those are internal issues that do not address what schools want and need. What I did not hear was a statement about how the market is changing, or an understanding that addressed the different buying communities and how to address that challenge.

Just two years ago Blackboard sold its Transact product line and described the corporate strategy focusing on teaching and learning.

“As a market-leading, cloud-based education technology company, we are continuously examining all aspects of our portfolio and looking for ways to provide maximum value to our global client base and shareholders,” said Blackboard Chairman, CEO and President Bill Ballhaus. “This strategic move allows for the continued simplification of our business. Most importantly, it allows us to accelerate innovation in our teaching and learning platform, delivering unique value to our clients to drive learner engagement, improve academic effectiveness, and provide education insights.”

Does simplification accelerate innovation in teaching and learning platforms, or does a full suite of enterprise products and services?

What About Common Customers?

This argument changes for schools that already use both products. Or to a lesser degree for schools that already use the Anthology Student SIS (historically described as Campus Management and CampusNexus) and are open to different LMSs, such that this one issue can bump Blackboard over the finish line. In 2017 LISTedTECH posted an image showing the combinations of SIS and LMS usage in North American higher ed, sharing this useful chart [markup added]:

Those numbers have changed in the past four years, but not by that much. At the company level (combining product lines), Anthology is in fourth place in North American higher ed, behind Ellucian, Jenzabar, and Oracle. And SIS system have long lifecycles.

In Monday’s post I captured the real emphasis on cross-selling.

“This is a revenue growth opportunity”, according to Milton, with a big emphasis on cross-selling of products and services. Both Milton and Ballhaus stressed the significance that both companies have 24 unique solutions with virtually no overlap. Anthology and Blackboard are adjacent market players. Milton understands that higher education presents a heterogeneous market that will continue to support different vendors for different product categories. The combined company will have a much greater opportunity for cross-selling into existing clients while also looking to expand to new clients.

The focus on cross-selling as justification for the merger is hard to understand based on existing common customers.

Learn Ultra

The wild card here is Blackboard Learn Ultra. Blackboard has largely improved its services and customer support, and the bigger issue is based on products. For those who haven’t kept track of the Learn Ultra saga, see the timeline in this 2019 post. Learn Ultra was announced in 2013, already late by 2014, prematurely announced as available in 2016, and finally went into production by 2019. The goals of Learn Ultra were to move to a modern cloud (SaaS) infrastructure and to present a redesigned user experience that leapfrogged the competition in usability while offering “the functionality most instructors need to manage their courses today.”

Let’s be honest – Learn Ultra is finally succeeding in the goal of moving to the cloud, but it has failed in terms of the user experience redesign. In my opinion it’s past time for Blackboard to admit this situation and stop pretending that they are going to move clients to full Ultra course adoption. Here we are five years after Blackboard claimed that Learn Ultra is ready for clients, yet only 11% of clients are fully using Ultra at the course level. ¹Even if that number is off by a factor of two (to be generous), we’re talking about at most one in five schools having fully bought into the Learn Ultra vision.

Learn Ultra is consistently ranked third (after Canvas and D2L Brightspace) in end user evaluations, and even long-term customers are giving up on it being competitive. What I most often hear is from schools who have heard the vision but are waiting until Learn Ultra delivers more functionality. At UMBC, they have a wiki for core tools – those that faculty need the most – and currently they show just over 67% that are already available, with 16% in R&D, 10% not yet available, and 6% discontinued. The University of South Carolina, they describe the Ultra Course View “is still being developed and does not currently have all the features you are familiar with in original Blackboard. Courses will continue to be created in Blackboard’s original view as the default.” These evaluations are helpful, and typical.

Why continue this strategy? I suspect that Blackboard clients would appreciate an acknowledgement that Learn Ultra did not work and that the company will take stock and develop a new strategy, a better design, while no longer pushing clients to migrate in an endless “when will it be fully ready” cycle.

Perhaps the Anthology deal will provide financial cover for Blackboard to change strategy and rethink its user experience design in a realistic fashion, and in a design that is fully competitive.

Summary

Anyone interested in the academic LMS market should care about this news. To me, this deal does not make a whole lot of sense right now outside of investor financial considerations, but that would change if Anthology ownership and management can make a material change to the Learn Ultra strategy.

Disclosure: Blackboard and several of their competitors are subscribers to our LMS Market Analysis service.