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Why Instructure’s News Matters: Market history

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Last Thursday I shared Instructure’s news release that they are going “to explore strategic alternatives in order to maximize shareholder value”, where the alternatives could include selling the company to financial buyers (e.g. private equity) or strategic buyers (e.g. big technology). Of course, one alternative is to not make changes and remain a publicly-traded company.

Why is a potential change as mundane as having Instructure’s shares traded in public markets vs. being owned by a larger company newsworthy? After all, Instructure is growing, an established LMS market leader, and is not in financial trouble. Their stock price is even at its all-time high.

The reason this announcement matters is all about context. The history of the academic LMS market, the general environment of distrust of big technology and its data usage, and Instructure’s public marketing and communications are all key to understanding today’s situation. In this first post I’ll deal with market history.

Disclosure: I will note more prominently than usual that Instructure, Blackboard, D2L, and Moodle are all subscribers to the MindWires LMS Market Analysis data service, 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.

Market History

When looking at the early history of the academic LMS market, from its inception in the mid 1990s through roughly 2011, the market was dominated by Blackboard. Most LMS market dynamics could be understood through the lens of Blackboard’s market position, its corporate acquisition strategy, its poor reputation for reliability and usability, its product pricing, and the market’s reaction to Blackboard. This was the situation that led to the original LMS ‘squid’ graphic, which was my attempt to help US higher education institutions understand how to interpret market dynamics.

LMS market graphic for US & Canada higher education, showing market share bands from 1997 - 2019, with notes on primary vendors and corporate acquisitions.
  • On the left side of each band is the origin of systems, and these LMS solutions mostly originated as projects at specific universities, with moves to commercialize the products happening after the fact.
  • The bands coming together show how Blackboard’s core strategy was acquisition of their competitors, eventually moving clients onto what is now known as Blackboard Learn. After Blackboard went public in 2004, their biggest acquisitions were of WebCT (#2 in market at the time) in early 2006 and of ANGEL (a growing #3 or #4 in the market) in 2009. Not shown is the 2006-2009 patent lawsuit against D2L (#3 and known as Desire2Learn at the time), where I (along with many others) believe that Blackboard tried to put that company out of business or soften it up for an acquisition. D2L ended up fighting and winning this patent lawsuit battle, but the other companies and their products are gone.
  • Based on the intense pushback against this corporate behavior, the open source market became the perceived safe haven, a way for schools to retain control and not be forced to migrate. Sakai originated in 2004, with Moodle before that, but the real grown of open source LMS adoption occurred in 2007 – 2011 in reaction to Blackboard corporate moves.

Why does this history matter? Because the academic market has a long memory, and many educators (faculty, staff, and administrators) deeply remember the days of corporate finance driving the market. Losing control of university projects, being forced to migrate from chosen LMSs, rising prices and constant cross-selling 1e.g. Bb Collaborate, created by acquisition of Elluminate and Wimba and upselling 2e.g. move from Bb Basic to Enterprise, to Academic Learn suite, with constantly rising prices, systems going down during Finals week, clunky frustrating systems, etc.

Change in Market Dynamics

The market changed in 2011 for two reasons. One was that Blackboard was taken private by a private equity firm, leading to the early 2013 change in executive team and the end of corporate acquisition of competitors. Blackboard acquired Moodlerooms in 2012 (now known as OpenLMS), but note that this product is still alive – there was no forced migration, and Blackboard has contributed heavily to the open source community. Note: Moodlerooms was the largest Moodle Partner and is not the same as Moodle HQ, the company that leads the development of the Moodle open source product. 3See Michael Feldstein’s post at e-Literate to get a description of the Moodle ecosystem.

The second reason is that Canvas emerged as the fastest growing LMS solution – an intuitive, cloud-native product with a company with a unique corporate culture. From 2011 through the present, Canvas began to dominate the market dynamics – either through its constant growth with no losses, or from competitors’ reactions to Canvas. We now have much more reliable systems with better usability built in, not just in Canvas but in particular with D2L Brightspace and increasingly with Blackboard Learn itself. While many people are frustrated with the pedagogical limitations of most LMS solutions, the market is much healthier and more focused on educators’ needs than it was a decade ago.

One related change in the market is that the primary buyers of an academic LMS – the most important people in a decision on which LMS to adopt – has shifted from the CIO to the faculty and academic technology support. This shift happens along a spectrum and differs among schools, but there have been dramatic changes. A decade ago, LMS migration mostly occurred in spite of faculty wishes. CIO-type needs, or product end-of-life coming from acquisitions, forced schools to change, and academic types (faculty, academic tech support) at best had input in reaction to these needs. Today, quite often it is the faculty or academic technology support staff that are driving LMS adoptions, requesting changes with the CIO and IT staff having to react to these demands.

Underlying Tension

There has been an underlying tension this whole time, however, with many educators wondering whether and when the market might shift back its previous dynamics. Would corporate finances come back and take priority over customer satisfaction, would Canvas become just like corporate players of the past market?

It is this underlying tension that still exists and in my opinion is increasingly coming out in reaction to Instructure’s corporate moves recently. Many of the details of the market history are forgotten or jumbled, but the underlying tension is deeper than the surface language. The sentiment is more intense for US higher education than for K-12 markets or for global regions outside of North America, partially as these other market segments never viewed Canvas quite as intensely as the market champion. But the tension is still there.

Why does this news matter? From the market history perspective, there is a risk that the potential sale of Instructure will unleash more of this market sentiment against the company, impacting future market growth. And this sentiment is particularly intense among the academics that have driven the growth of Canvas. At the same time there is a chance that Instructure will come out of the process better able to serve the academic markets. The result of the risk and opportunity mostly depends on whether Instructure is sold, to whom, and how the company responds in public during this process. But there is a lot on the line and underlying questions are being raised. In this market, I would not discount sentiment based on history.

In the next post we’ll deal with the broader context of Big Tech.

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. 1In 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) 1Disclosure: 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.