Reaction: LMS Market Trends and Michael Feldstein

Michael has two excellent blog posts about his vision regarding the state of the LMS market and his expectations of the trends in the LMS market over the next four years.

Not surprisingly, we see things a little differently so I added a comment to his post which I replicate here.

I think that if you re-drew your market share graphs with Moodle stacked on top, it would be clearer that Moodle has real, significant growth, and Sakai and Desire2Learn are growing very gently in terms of customer counts. I think the for schools who decide to switch who are price conscious, Moodle is nearly always be the choice and so Moodle will slowly completely take over the “lower-end” of the market.

But as you also have said previously – the low-end of the marketplace (historically Bb Basic, WebCT CE, and Moodle) is not where the real money is at and so even if the number Blackboard client numbers may have declined, revenues continue strong because the remaining customers (a) buy more, and (b) pay well. And any new customers they get are high-end schools.

So if we segment the market into the “price conscious” and the “not-so-price conscious”, we end up with two sub-markets, and Sakai, D2L, and Blackboard will fight of the the piece of the market that represents the schools with real money to spend.

I am not suggesting Moodle is an inferior product in any way. I just think Moodle’s market approach is dramatically different than the other three. Moodle has the low-cost / high volume model completely owned and are making good revenue in large and increasing volumes of low-marginal-revenue customers and an outstanding franchise model. The other three are fighting for the “high-cost-per-sale” crowd – and when you win one of those, you make more money per customer.

You see grand tectonic shifts in market share that are in motion and seemingly inevitable. I disagree – I see a market that is shifting from a seller’s market to a buyer’s market. Blackboard, Desire2Learn and Sakai will have to deliver more and more and deliver better and better to keep or gain customers. It is now a race and in the next four years there will likely be a clearer winner than now.

It kind of looks like the market has been tweaked as much as it will be tweaked by acquisitions. Those willing to sell have sold. The rest are in it for the long haul. With the acquisition option seemingly off the table – the only other option is to compete based on building the best product.

You seem to feel as though you know at this moment who will win or lose. Not surprisingly you paint a pretty gloomy picture for Blackboard. I feel that the race has just begun and that Blackboard, D2L, and Sakai have an equal shot at winning starting now. The winner of the race will be that LMS that throws themselves at making their user’s happy rather than looking furtively to the left, right or over their shoulder at their competition.

I would suggest that Blackboard has just as much chance to surprise and delight their current and future customers if they put their mind to it. And the game is theirs to win as long as they hold the largest market share. If Blackboard combines a dedication to making their users truly happy with their product – and with their current entrenched market position – they can easily out-run Sakai and D2L. Of course the question is, “will they make that commitment and stick with it?” or will they “coast on their market share and end up the Lotus-123 of teaching and learning”. If I take that Lotus-123 analogy way-too-far, that would mean that D2L becomes Microsoft and Sakai becomes Open Office :). And if I take it even further, years later when Oracle buys …

Sorry about that digression in italics – back to my story. My feeling is that Blackboard literally has no other choice but to work hard to please their customers. It is the only way to maximize shareholder value at this point in the marketplace where we are moving towards a buyers market. Remember how the US finally “won” the cold war….

What is absolutely clear to me is that any LMS vendor (Sakai, Moodle, D2L, Blackboard, etc) that sits on their hands for the next four years – will likely end up outside looking in. So it is time for everyone in the marketplace to play strong or go home. An frankly, everyone in the market needs to just get cranking and build the best damn teacher-and-learner-centered mousetrap ever seen and stop imagining that unseen forces are inexorably driving the market to one advantage or another.