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Instructure Considering Sale Options

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Instructure, maker of the popular Canvas LMS, announced this morning that they are “reviewing strategic alternatives”.

Instructure (NYSE: INST) today announced that in response to interest received from multiple third parties, its board of directors, supported by management, has commenced a process to explore strategic alternatives in order to maximize shareholder value. These alternatives may include continuing as a standalone public company, going private, or being purchased by a strategic partner. The board has retained J.P. Morgan as its financial advisor and Cooley LLP as its legal advisor in connection with the review.

“Consistent with its duties and in response to interest from several parties, our board of directors has determined that it is prudent to undertake a review of alternatives to identify the best way to maximize shareholder value,” said Josh Coates, Chairman of the Board at Instructure. “As the board conducts its review, we remain focused on executing our strategy with an increased focus on the education market as well as the previously-announced strategic review of Bridge.”

This news comes on the heels of several articles about investor pressure being applied on the company.

  • April 2019 – Activist investor Praesidium takes 5+% stake in Instructure and pushes thesis that Instructure would be more valuable by selling off Bridge (corporate learning market) and concentrating on Canvas (academic market).
  • Early October 2019 – Instructure announces investor day on December 3rd where “management team will describe the company’s new strategy and operating model, key decisions about future financial goals, and the plan for focused capital allocation”. (couldn’t find direct link anymore, so using Google cache)
  • Late October 2019 – Activist investor Sachem Head takes a stake in Instructure and pushes company “to explore alternatives, including selling itself, two people familiar with the matter said”.
  • November 2019 – Praesidium joins Sachem Head in call for Instructure to explore a sale.
  • Today – Jana joins activist investor pool.

As part of today’s announcement [emphasis added]:

The company has not set a formal timetable for this exploration, nor has it made any decisions related to strategic alternatives at this time. While Instructure is pursuing opportunities, there is no assurance that the process will result in a transaction. The company does not expect to make additional public comment regarding these matters until the board approves a specific action or otherwise concludes the process.

The previously scheduled financial analyst day on December 3 has been canceled to allow management and the board to explore these strategic alternatives for the company.

Disclosure: I will note more prominently than usual that Instructure is a subscriber to the MindWires LMS Market Analysis data service (as are many of their competitors), and that we have a number of investment firms who are also subscribers to the service and pay for in-depth market data and research.

There will be more analysis coming in the future, but I would note several items to set context, especially for academic readers:

  • Bridge is a corporate learning LMS created by Instructure (not a corporate acquisition) starting in 2015, the same year that Instructure went public. This additional product line, with its larger available market, was a key part of Instructure’s IPO story.
  • When Blackboard went through a similar process and actually went private (i.e. a private equity firm acquired the company, taking them off of the public stock market), the process lasted from early summer 2011 until October 2011. That should give some sense of the timeframe of these decisions.
  • Blackboard also considered a sale in 2015 but did not actually change ownership – these processes do not always result in a sale.
  • At the risk of annoying some readers (again), I have pointed out that “there are strong arguments that company financial health in 2018 / 19 for the providers will continue to have an outsized impact on the future of LMS offerings”. Consider PowerSchool’s planned acquisition of Schoology and Blackboard’s recent debt ratings news (more on that in future post). This news is as much about the LMS market as it is about one company.
  • For academic community, it is worth noting that much of the investor-based pressure is for Instructure to focus more on supporting Canvas, not less. Instructure management has made it a point to say that they are increasing investment in Canvas, but today’s news puts even more emphasis on that need.

Keep watching – this should be interesting for the LMS market.

Update 11/14: Added note about Jana disclosing investment. Also added bullet about Bridge history.

Bb Learn Hosting Models: New global data for LMS market

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Justin Menard from LISTedTECH (our partners in LMS market analysis service for higher ed and K-12) shared today that we now have the ability to track Blackboard’s Learn LMS hosting models. Self-hosting, Managed Hosting and SaaS Hosting (software-as-a-service, aka cloud hosting) are now captured in the data – globally for higher ed and in the US and Canada for K-12. This is a great addition, and to my knowledge we are the only ones to have this data in this scope. Head over to Justin’s blog to read more on the data additions. Also note that we will be validating and updating this new data over time, so treat this as our initial views. 1Disclosure: Blackboard, D2L, Instructure, and Moodle are subscribers to our LMS market analysis service.

Part of the reason this is so important is that Blackboard, their competitors, and many in the investment community agree that a client moving to SaaS hosting changes their likelihood of remaining with Blackboard, and not just due to the contract extensions involved in the SaaS move. The movement to Learn SaaS and then to the Ultra user experience remains the core of Blackboard’s corporate strategy.

We can now provide independent analysis of the global transition to Learn SaaS, whereas previously we tracked this transition based on public Blackboard statements.

Blackboard Learn SaaS deployments showing linear progression from fall 2016 to summer 2019, reaching 586 by BbWorld19.

Our data confirms that roughly 30% of clients have shifted to Learn SaaS:

Percentage of Blackboard Learn clients who are using self-hosting (44%), managed hosting (26%), and SaaS hosting (30%) globally

Recently Blackboard announced that they are making significant progress in moving many of their Middle East clients to Learn SaaS, which is impressive given the historical tendencies in this region to strongly favor self-hosting models. From the press release:

Blackboard, a leading education technology company for teaching, learning and student engagement, announced today that many of its clients across the Middle East continue to transition to the Software as a Service (SaaS) deployment of Blackboard Learn, the company’s flagship learning management system (LMS). [snip]

The benefits of moving to a cloud-based delivery model include continuous delivery of new features, zero-downtime updates and quicker delivery of fixes. Once institutions are on SaaS, they can enable Learn Ultra, Blackboard’s next-generation LMS, which offers educators and students a clean, modern interface and intuitive workflows.

Using our data, we see that the Middle East has indeed started a significant shift to Learn SaaS hosting models. In Justin’s post you can see that approximately 20% of Blackboard Learn clients are now on SaaS, and interestingly they shifted directly from self-hosting (i.e. there is no managed hosting usage in this region).

Percentage of Blackboard Learn clients running on Learn SaaS hosting model by country.

What is interesting is to look at the age of Blackboard Learn implementation for each of the current hosting models. In other words, for each hosting model of Learn, how long have those schools been Blackboard LMS clients.

Box and whisker chart of Bb Learn age (time of client on that LMS) for each hosting model. Broken out for global higher ed and North American K-12.

For higher ed clients, there is a broad range of ages moving to Learn SaaS, yet for K-12 there is a narrow range of mostly 4-6 year clients that have moved. Part of this is likely due to K-12’s smaller support staff and budgets for LMS, which also has lead to a smaller percentages on Learn SaaS than in North American higher ed (19% vs. 33%).

We expect this data addition to open new capabilities for us to analyze the LMS market and its underlying trends. Instructure’s Canvas was created designed on cloud hosting, and D2L’s Brightspace has recently completed its transition to the cloud. The story is broader than Blackboard.

Disclosure: Blackboard, D2L, Instructure, and Moodle are subscribers to our LMS market analysis service.

Did Instructure Refute LMS Market Slowdown? It’s a matter of semantics

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On yesterday’s Instructure Q3 earnings call, the company’s opening statement seemed to refute the LMS market slowdown that we noted just over a year ago.

Now I would like to share details on how key areas of our business are performing. Domestic Canvas is progressing nicely, on track to deliver results in line with our outlook for the year. So while some analysts have been reporting a sharp slowdown in Higher ED LMS switches we are not seeing that trend in our domestic Canvas bookings. In fact our high ED domestic bookings are on track to be up this year over last year.

Brian Peterson at Raymond James is the other analyst besides us reporting on an LMS market slowdown, using independent data collection.

Did Instructure 2Disclosure: Instructure is a subscriber to our LMS Market Analysis service. refute our argument of “a sharp slowdown in Higher Ed LMS switches”? That’s a question that we take seriously, as it gets to our reputation and accuracy of data for market analysis. On one hand, if we have big holes in the data or even wrong data, we need to describe this openly and fix the problem. On the other hand, if our data is accurate, we need to call out why we have different interpretations.

One explanation that is becoming more clear is that we’re dealing with a matter of semantics, and Instructure’s statements include confusing terminology.

Before we go on, I should clarify that what we provide at MindWires and through this blog is LMS market analysis. We describe the relevant trends on the higher ed and K-12 markets and how to best understand what might happen in the future. We are not a financial analyst firm. My interest is in transparency and accuracy in market trends and not in stock prices.

Confusing Blog Post

Instructure changed their announcement strategy on new clients to list most of them in a blog post released just after the earnings call instead of during the call. In this blog post yesterday, Instructure did list some impressive new wins, including some that we did not yet have in our data set. We’ll highlight the domestic ones, since that is the scope of Instructure’s comments on our market slowdown reporting.

Previously, a list of customers from each quarter was highlighted on our quarterly earnings call, but moving forward, we plan to dedicate blog posts, like this, to highlight the organizations that are joining the Instructure family.

  • Princeton University, Wake Forest University, and Ferris State University were big wins that we already had.
  • Prairie View A&M, CalPoly Pomona, Eastern Gateway College, University of South Alabama, and Chapman University are wins that we found out about through the Instructure blog post. Note: Upon further research we discovered that CalPoly Pomona was not a new Canvas client – they remain a Blackboard client. Their listing in blog is based on some other system (e.g. Portfolium, MasteryConnect).
  • This is a good quarter with some solid wins, but let’s get to the confusing part.

Instructure also listed several clients that moved to Canvas years ago.

  • Skyline College in California adopted Canvas as its LMS through the Online Education Initiative (OEI) 3Disclosure, OEI is a long-time consulting client of MindWires, and I facilitated the LMS selection in 2015. back in 2016/17, and in early 2018 their academic senate even produced a report describing their cost savings by using this statewide contract.
  • Laramie County Community College adopted Canvas as its LMS in 2017.
  • University of North Texas Health Sciences Center adopted Canvas as its LMS prior to 2017.

Why would Instructure list old clients in a blog about “organizations that are joining the Instructure family”? This is particularly important when there are claims and counter-claims about market slowdowns.

I asked the company for a statement, and they clarified that this post included upsells and that they would update and clarify the language.

Depends on what the meaning of “Canvas” is

One issue I see is that the definition of Canvas is changing, and these changes confuse the story about organic growth. To understand, we should look at two changes in branding that happened this year. This summer Instructure rebranded Canvas from being the core LMS to being the Canvas Learning Platform. This bundled Catalog, Practice (acquired product), and Studio into the definition of Canvas.

The Canvas Learning Platform now includes the LMS and Practice and Studio and Catalog.

This fall, Instructure further rebranded the software products from their acquisition of Portfolium. In essence, the Portfolium Network kept is name and is offered free to all Canvas clients, but the revenue-generating portions of Portfolium are now branded as Canvas. Canvas Folio Management, Canvas Pathways, Canvas TalentMatch, Canvas Outcomes Assessment. In essence, Portfolium brand is the free stuff, Canvas brand subsumes the paid stuff.

Now go back to the earnings call. The prepared remarks are highly-edited and very deliberate in wording. I would think that the corresponding blog post was highly reviewed as well, but that is not as clear. CEO Dan Goldsmith acknowledged our (and Brian Peterson’s) LMS market slowdown analysis as LMS switches, but he answered this claim as “we are not seeing that trend in our domestic Canvas bookings“. During the Q&A portion of the earnings call, Brian Peterson asked for more details. [emphasis added]

Brian Peterson

And maybe just a follow-up on the domestic Canvas bookings. I think the comment that the higher ed bookings are on track to be up this year but that’s better than I expected. Can you confirm if that’s an organic comment or does that include Portfolium? And are there any large deals for the rest of the year that could swing that figure one way or the other? Thanks, guys.

Daniel Goldsmith

So that is 100% an organic number. You know I can’t speak to the rest of the industry but as you and others have been indicating you are seeing us sort of sharp slowdown in LMS switches. This year when we look at our domestic higher ed Canvas bookings, you know we are forecasting being up in bookings year-over-year which we’re pretty excited about.

Note that Goldsmith said organic but did not say explicitly that the bookings growth did not include Portfolium stuff. Is this due to Canvas branding now including Practice, Studio, Catalog, Folio Management, Pathways, TalentMatch, Outcomes Assessment when these were not included last year? I do not know the answer to this question but have asked Instructure for clarification.

Who else saw the slowdown? Instructure

We should be clear that Instructure’s CFO Steve Kaminsky noted the LMS market slowdown one year ago in their Q3 2018 earnings call.

So for renewals what we’ve seen specifically this year is fewer large deals in the multi-hundred thousand dollar range than we’ve seen in previous years. It’s a little still too early to talk about 2019, we’ll be doing that in a few months but we have seen that and when I referenced earlier that it didn’t look like we’re going to grow domestic Canvas by much of it all, that’s what I was really referring to, that’s the key driver there.

There has been a slowdown in the LMS market, but there is a question of when it started and whether 2019 is different than 2018.

At the very least, Instructure is playing around with semantics and not directly answering relevant questions about its core LMS platform and the LMS market slowdown. Instructure is coming out with statements that appear to refute our analysis of an LMS market slowdown, but they have not (thus far) provided meaningful specifics backing up their claims. When they appear to show new clients in a blog post, the conflate upselling old clients with acquiring new clients (but kudos for promising to fix the post). The definition of Canvas is changing, and it is not clear how much of their platform redefinition and M&A activity gets included in their definition of Canvas bookings.

If Instructure is changing these definitions and bundling in new items into Canvas bookings, then I do not believe that Instructure has refuted our claims of an LMS market slowdown. And I believe it is misleading to describe year-over-year changes in Canvas without clarifying how the definition might have changed. It’s all well and good that Instructure is expanding its product line and generating new business, but we need to have clarity around the core LMS market trends.

If we find out that our analysis of the market slowdown is inaccurate, we will update our analysis and publicly disclose the changes.

Update 11/5: CalPoly Pomona is not a Canvas LMS client. See description above.

Disclosure: OEI is a long-time consulting client of MindWires, and I facilitated the LMS selection in 2015. Instructure is a subscriber to our LMS Market Analysis service.

About the PowerSchool Acquisition of Schoology

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On Thursday we got word that PowerSchool has reached an agreement to acquire Schoology, potentially shaking up the K-12 LMS market. EdSurge covered the news on Thursday.

If approved, the pending acquisition would mark the latest puzzle piece that PowerSchool has purchased this decade. Founded in 1997, Powerschool was first bought by Apple in 2001, and then by Pearson in 2006. The publisher sold the PowerSchool to private equity firm Vista Equity Partners in June 2015. Onex, another private equity firm, invested in PowerSchool in 2018 and shares equal equity ownership with Vista.

Since 2015, PowerSchool has acquired eight companies. Through these deals, the company has expanded its product suite beyond its original K-12 student information system offering to assessment, enrollment, special education and talent management services. Schoology would be PowerSchool’s second purchase of a learning management system (LMS), after it acquired Haiku Learning in 2016. Haiku has since been rebranded as PowerSchool Learning.

I have covered Schoology in a series of posts at e-Literate, mostly focusing on their partial entry into the higher ed LMS market. I described the company and product in some detail in this 2016 post. In addition, Jeanette covered the recent Schoology NEXT users conference. In the EdSurge article last week, she observed:

Even in third and fourth place, Schoology holds unique bragging rights. While Instructure, the developer of Canvas, has reportedly never lost a higher ed customer, “our data showed that two K-12 districts became the only losses of customers that we are aware of in the history of Canvas, with both selecting Schoology in 2019: Tempe School District and Turner Unified School District in Kansas City,” wrote Jeanette Wiseman, a senior associate at MindWires, an education market consulting and market analysis firm, earlier this year.
From her perspective, PowerSchool’s desire to add a popular tool to complement its flagship student information system makes sense. “They’re taking what is a really successful LMS in the K-12 space, and pairing it with the tool that all teachers have to work with, the SIS. All the data that schools manage … everything flows into the SIS,” she tells EdSurge.

New K-12 LMS Market Data

The “third and fourth place” comment relates to our new K-12 LMS Market Analysis service, and the data helps explain why this acquisition makes sense.

Like our higher ed market analysis, we (through our partnership with LISTedTECH) track historical trends in the K-12 market, allowing a view of market trends. One view is looking at percentage of North American (US & Canada) new LMS implementations each year by vendor.

LMS percentage of new implementations each year in K-12 market for US & Canada, showing Canvas, Schoology, PowerSchool, and All others.

Some notes from this data: 4Disclosure: Schoology, Canvas, and D2L are subscribers to our LMS Market Analysis service.

  • Schoology and Canvas are strongest competitors for revenue-generating LMSs in K-12, generating far more new business than other proprietary systems.
  • Not directly shown in this view, but Google Classroom is playing an increasingly large portion of the “All Others” category. This is important, but that solution does not directly generate revenue, and this story is about corporate finances.
  • PowerSchool did not get big impact from the 2016 Haiku acquisition and is a secondary player at best in the LMS market. This position has limited their ability to truly provide full enterprise K-12 solutions and “unified classroom”. Schoology, however, does have real market power in K-12.
  • At the same time, business is difficult in this market, and Schoology has gone through layoffs since their late 2015 fund-raising round of $32 million. Their biggest competition in the K-12 market is Canvas and Classroom (primarily) and D2L (secondarily), and it takes capital to aggressively compete.

Does It Make Sense?

Seen in this light, the acquisition makes sense from a PowerSchool perspective. They can now try a more realistic approach to fully serve K-12 districts with their “unified classroom”. This is a data play at its heart, as described in a 2016 EdSurge article on PowerSchool.

PowerSchool has now added an array of services in the past 15 months, including a learning management system (through its purchase of Haiku Learning), special education reporting (TIENET), student enrollment (InfoSnap), formative assessments (Interactive Achievement) and a Canadian SIS (SRB Education). The company doesn’t plan to halt its shopping spree, Gulati says: “We’ll continue to remain acquisitive and continue innovating.”

By hooking up different education tools into the PowerSchool SIS, which serves more than 24.5 million students across the world, Gulati hopes to make data more accessible and actionable for teachers. He’s not alone: other companies such as Alma, based in Portland, Ore., also aim to combine SIS, LMS and other education data tools into one single package.

“What we’re trying to solve is the problem of data silos and fragmentation in K-12,” he explains. “Teachers currently have to go through several systems to use all the tools they need for instruction.”

The acquisition also makes sense from a Schoology perspective, as they now have a “potential” source of capital in a difficult market. I put potential in scare quotes because we don’t know how much Vista Equity Partners and Onex will invest in Schoology product and service development. Vista is well known for having a playbook on how they view software companies, as described in a 2018 WSJ article.

The goal of the Austin, Texas-based firm, which is 18 years old, is to transform business-software companies into profit machines. Behind its approach is Mr. Smith’s belief that certain aspects of the companies Vista buys are interchangeable.

“Software companies taste like chicken,” he said at a conference in New York a few years ago. “They’re selling different products, but 80% of what they do is pretty much the same.”

Derek Jones, managing director at longtime Vista investor Grosvenor Capital Management, says “their process is like a factory. A deal comes in and it gets compartmentalized, and they apply experts on each compartment. After it goes off the assembly line, the margins are higher.”

The article is largely about Vista’s founder and leader, Robert Smith. Yes, the one who said he would pay off all student debt for Morehouse College 2019 graduates.

Potential Impact on Market

Assuming that Vista follows this playbook, there will be significant changes to Schoology’s operations, and if successful the company will become more profitable. If those changes take investment, Vista has been known to put in near-term money (often debt) to get longer-term payoff. The real investment is in PowerSchool, but there are certainly signs that Schoology will be run as a separate entity, at least initially.

I can see both positive and negative effects for other LMS competitors such as Canvas and D2L (something makes me think that Google doesn’t spend too much time worrying about this type of move). On the positive side, corporate acquisitions tend to create pushback from academics, although this effect tends to be greater in higher ed than for K-12. But certainly Schoology’s competitor’s have new marketing messages to use. On the negative side, one of the top four K-12 LMS competitors is about to get a lot more financially sound and likely more aggressive. The acquisition makes sense, but that does not necessarily mean that it will succeed.

For now, the pending PowerSchool acquisition of Schoology is more evidence that corporate finances will have an outsized influence on the LMS market. This move could even accelerate other LMS companies to shore up finances. We’ll keep our watch on the market.

Update: Make sure to read this post from our partners at LISTedTECH, including a really cool graphic showing K-12 SIS & LMS shared usage data.

Reminder: If you’d like a deeper look at the data, check out our new K-12 LMS Market Analysis service.

Disclosure: Schoology, Canvas, and D2L are subscribers to our LMS Market Analysis service.

LMS Decommissions: A view of lost clients and campus closures

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One theme of our coverage of the academic LMS market over the past 1 – 2 years, both at e-Literate and in this blog, continues to be worth watching:

there are strong arguments that company financial health in 2018 / 19 for the providers will continue to have an outsized impact on the future of LMS offerings.

Both posts linked above described the overall market slowdown – where there has been a significantly lower number of LMS switches – that we first described to our LMS market analysis subscribers just over a year ago and in the blog starting this year. Our updated data over the summer shows no signs of the slowdown ending.

Another issue to consider is not just who is winning and how often, but from the opposite side. Who is losing LMS clients? Let’s first look at the US and Canada for LMS switches since the beginning of 2017, from our report this summer. The left side shows the previous campus LMS, measured by number of institutions, and the right side shows the new LMS.

LMS migrations in North American higher education from 2017 - mid 2019, showing the previous LMS on left side and new LMS on right.

Blackboard Learn lost the largest number of campuses, followed by Pearson LearningStudio and Moodle, then by D2L Brightspace and Homegrown and Sakai.

When looking at company finances, however, it is important to expand this view. One expansion is to look at global regions beyond North America. Another expansion is to include campus closures as a source of losses in addition to switches. The following chart shows the percentage of decommissions each calendar year in North America, Europe, Latin America, and Oceania combined (but note that North American numbers are the largest portion of these numbers). Decommissions is a combination of switches and closures, and the percentage is calculated on a per-year basis.

LMS higher ed decommissions per year for combination of North America, Europe, Latin America, and Oceania.

We see that two LMS end-of-life situations created by Blackboard acquisitions (where bought their competitor and eventually cut off the product line) were huge factors through 2015. WebCT was acquired in 2006 and shut down by 2013. ANGEL was acquired in 2009 and shut down in 2016.

Blackboard Learn has consistently lost customers since mid 2000s, with roughly 27 – 36% of decommissions each year coming from this solution recently. While Blackboard is the primary beneficiary of the LMS market slowdown, and its improved performance is clearly one of the causes of that trend, when looking at the data it is clear that they are still a big source of LMS losses. Consider their recent loss of long-time clients Purdue University and Princeton University. They also are at risk from several high-enrollment systems expected to complete LMS evaluation processes this year and next.

One of the most remarkable stories in EdTech is that Instructure has not lost a single Canvas higher education client due to an LMS switch. 5In terms of primary systems available campus-wide in higher ed. They have lost two K-12 clients to Schoology. But Instructure has lost clients due to campus closures, particularly from Education Corporation of America (two systems shut down) and secondarily from DeVry University (several campuses closed), mostly in 2018.

D2L Brightspace has lost a relatively small number of clients over the years, but their LMS decommissions ramped up in 2018 and 2019, largely due to campus closures. They were particularly hard hit by the closure of Dream Center systems (Art Institutes, South University, and Argosy University, all acquired from the for-profit EDMC).

Moodle has lost a consistent number of clients over the years, particularly in North America, despite it having the largest installed base worldwide. We documented a broader look at the overall changes in Open Source systems recently.

Pearson LearningStudio, formerly known as eCollege, was popular with for-profit chains and with some nonprofit fully-online programs, but Pearson shut down that system by the end of 2017.

Sakai has slowly but steadily lost clients for years, and it continues to do so with recent decisions at the University of Rhode Island and UC Davis, and potentially with several other decisions expected within the next year.

Every LMS provider loses clients, and these losses are important to understand in terms of the organization’s financial health. If you’re interested in seeing more information on the data behind these charts, we have them available with our LMS Market Analysis service.

Addressing the Decline of Open Source LMS for #altc Discussion

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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.

Laura Czerniewicz posted in reply:

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.

Global market share for LMS in higher education, broken out for Europe, North America, Latin America, and Oceania.

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).

Historical higher ed LMS market share for commercial and open source providers.

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

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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.

North American Higher Ed LMS Market share for mid 2019, based on number of institutions using each solution as 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) 6Disclosure: 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.

Consolidation of North American Higher Ed LMS Market in Big Four of Canvas, Blackboard, D2L, and Moodle, moving from 76% combined share in 2012 to 95% today.

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.

North American Higher Ed LMS market share by enrollment, with Canvas at 35%, Blackboard at 31%, Brightspace at 14%, and Moodle at 12%.

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

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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. 7Disclosure: 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.

Blackboard Learn SaaS deployments showing linear progression from fall 2016 to summer 2019, reaching 586 by BbWorld19.

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.8Please 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.

BbWorld keynote presenting Learn Ultra adoption - half of 173 on Base Navigation only, quarter mixing Ultra and Original Courses, quarter on Ultra Courses.

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 D2L Fusion and LMS Market Slowdown

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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 9Disclosure: 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.

LMS institutional migrations for 2017 - 18 in North America, showing the previous and current systems.
LMS institutional migrations for 2017 - 18 in Europe & Latin America & Oceania, showing the previous and current systems.

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.

D2L Fusion: Continuing product approach and market differentiation

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The following is a guest post by O’Neal Spicer, consultant at MindWires and long-time observer of EdTech markets.

D2L held its Fusion users conference in Kissimmee, FL the week before last. Of the roughly 1,000 attendees, the majority were from the United States and Canada, but there is a growing number coming from Europe, Latin America, and Australia, reflecting D2L’s increased international presence.

This year’s conference was in many ways a continuation and elaboration of many of the themes we noted last year. D2L 10Disclosure: D2L is a subscriber to our LMS Market Analysis service. appears to have found a consistency in its approach to and messaging around product development; consistency in its one platform approach to the K12, higher ed, and corporate learning markets; and consistency in how the company contrasts itself with the competition – primarily Instructure.

Product

Over the last several years D2L has revamped its product team and their approach to product development for its Brightspace LMS platform. There is a greater focus on including users in the product development process than what we had seen in prior years. There has also been a recognition that incremental product improvements make a big difference for customers and can be more impactful than large-scale new feature development. At this year’s Fusion, the emphasis seemed more on the user role in product development, as seen in the product spotlight, where the company highlighted the Product Idea Exchange (PIE).

PIE is where users can share their pain points and ideas for product improvements directly with D2L’s product team. There were several break-out conference sessions based on the exchange, where customers worked with one another to share common needs and to brainstorm possible solutions, which are then shared and discussed with the larger group. I later found out that these were no-go sessions for analysts (my mistake), so I cannot share specific details except to note the general interest from both users and D2L staff in the process and its outputs. Some of the product improvements announced this year appear to have been directly influenced by similar sessions last year. One representative from a university in Brazil described how pleased she was to see her handiwork from a year ago incorporated in a revamped workflow.

Specific product highlights showcased during the product keynote focused mostly on incremental improvements that had already been released. One area that got a lot of attention was improved tools for grading and assessment – better organization of items in need of grading (Quick Eval, shown below) and in-line feedback (Annotations) were two specific highlights. There was also mention of a new content experience around rubrics and assignments that leverages templates, a simplified quiz engine that uses progressive disclosure to preserve robust functionality for the 10% that need it but keep things easy to use for the 90%, and an updated Pulse mobile app that makes a complete student learning experience possible on a phone.

Market Differentiation (especially from Instructure)

There were several strategic views shared during the conference that are clearly in contrast with Instructure and the Canvas LMS. For one, it was noteworthy that the live product demos shifted seamlessly between K12, higher ed, and corporate learning use cases. This combination shows D2L’s view that there is one broad learning market that can be served with one platform, which is in contrast with Instructure and their segmentation of academic (Canvas) and corporate learning (Bridge) markets served by different core platforms. 11It should be noted that over the past six months Instructure has introduced different platform offerings (e.g. Portfolium) that make their market segmentation more of a spectrum than a binary, although the core platforms are different.

Breakout sessions at the conference included a mix of K12, higher ed, and corporate presenters, and at least some sessions had a mix of attendees as well. For example, Accenture uses Brightspace for a leadership development program, and there were several learning design questions posed by academic attendees who were interested in hearing about different ways to use the platform.

D2L believes its less segmented approach and reliance on a common platform can in some cases lead to an easier sales pitch. One example is a university looking to teach students and conduct professional development for employees. With D2L, there is one platform with combined data sets. With Instructure, it is potentially two platforms, two sets of data, and multiple integrations. D2L also believes that its approach allows shared internal resources working on the same platform, avoiding separate developments on separate systems.

A further area of differentiation is that D2L’s leadership team was fairly explicit that they do not think of themselves, nor do they want to be thought of, as a software company. They prefer to think of, and position, D2L as a learning company and a partner in learning (an approach and even phrasing that they share with Blackboard).  Partially by design, and partially by coincidence, this self-image and projection is in direct contrast to Instructure who entered the market explicitly as a software company, as described in an interview with then CEO Josh Coates in early 2018.

But we are a software company. Customers should expect us to create new independent software products every 12 – 18 months. Some existing customers will use, some won’t. That’s the strategy – create new business by building great new software.

We should note that we have talked to several university clients of D2L, particularly outside of North America, where the market differentiation message is confirmed. At Fusion, we spoke with people from three universities in the Netherlands and one in Denmark. For all of them, D2L’s interest in getting to know the university and understand their needs during the evaluation process was a big part of the decision to go with D2L. Of course, the platform had to be competitive as well. We also spoke with people from a university in Brazil and a university in Colombia who are both relatively new D2L customers. They reiterated the general themes raised by their European colleagues and also found the versatility of the Brightspace platform met their needs better than competitive platforms.

The Challenge

Part of the consistency that we noted last year includes market performance.

D2L appears to have largely revamped its approach to product development that is more responsive to customer needs, and is putting resources into building partnerships. Yet they have not made the market gains envisioned after winning the Blackboard patent wars and then raising two large rounds of financing. We still see a two-horse race for new implementations (LMS product switches) in higher education, largely shared between Canvas and D2L, but the second horse that is looking better than it used to still needs to make further adjustments and run faster

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.

We do not believe that the academic LMS is a commodity, although it can seem that way in feature-driven evaluation processes. At a strategic level, the competitors are quite different, and D2L showed at Fusion further evidence of their approach and market differentiation.

Disclosure: D2L is a subscriber to our LMS Market Analysis service.