As we noted in the latest release of our industry study covering the LMS market, LMS and Learning Platforms 2009, right now is a turbulent time for LMS providers.  Announcements of new consolidation and/or partnerships are coming fast and furious:

• Two different firms are vying to purchase SumTotal.
• Saba and IBM have deepened their relationship, meaning IBM is now selling Saba as the learning & talent management portion of their own product offerings.
• Cornerstone announced a partnership relationship with ADP.
• Then, on May 6 of last week, Blackboard announced its intent to acquire Indianapolis-based, ANGEL Learning in a deal worth $95 Million, excluding transaction costs.

Josh has already commented on the first two items above.  We will get to the Cornerstone and ADP relationship in another post.  Right now, I want to say a few things about the Blackboard announcement.

Blackboard is aquiring ANGEL Learning, who provides enterprise e-learning software to over 400 clients, including 80 corporate clients. The ANGEL product portfolio includes the ANGEL Learning Management System, ANGEL ePortfolio as well as ANGEL Managed Hosting. Additionally, ANGEL also provides consulting and training services.

First of all, this combination strikes me as long term plus for Blackboard’s corporate clients (or as they call them: Professional Education) and probably also a long term plus for the general corporate LMS market as a whole.  The combined product will likely be compelling for many corporate buyers. However, the deal is likely at least a short term headache for ANGEL’s clients, both corporate and education (it always is for the acquired).  And, I think the question is out on the overall implications for the education space. Blackboard is by far the dominant player in the education space.  Angel, while much smaller, was one of the few remaining commercial providers offering them any competition. 

Expect competition in the near term to be less, but there is still a lot of whitespace out there in the education market.  And we are seeing more and more fragmentation within individual universities, B-schools looking for their own solution for example.  And open source (Moodle, Sakai, Bodington) providers and integrators have been making significant headway into the education space, more so than with corporate users.  If fact, much of the general blogging traffic regarding this deal seems to think the growth of open source at the expense of Blackboard was a major impetus for their pursing this deal – that and the fact that Angel’s product and customer service reputation was pulling customers away from Blackboard.

In 2005, Blackboard bought an even bigger competitor, WebCT, for $180-million. And in 2002 Blackboard bought another competing course-management system, called Prometheus, from George Washington University. Last year Blackboard diversified its product line by acquiring the NTI Group, which sells emergency-notification software.
Blackboard did attract some antitrust scrutiny from the Justice Department with the WebCT acquisition. This deal is not subject to many of the anti-trust laws because Angel was a private company.

The blog, Inside Higher Ed, has a post on this deal with reactions from the education world which – so far – have been decidedly negative. Here is one excerpt from a recent switcher from Blackboard to Angel:

Perhaps of greater worry to Blackboard will be the reaction of Don Gardner, associate vice provost for academic technology at California State University at Long Beach. That university just completed a lengthy review process for its course management system and decided to move from Blackboard to Angel. Gardner said late Wednesday afternoon, within an hour of the Blackboard announcement, that he was consulting with the university's purchasing department on whether the news would justify Long Beach abandoning its new contract with Angel "This is of grave concern to us," said Gardner. He said that Blackboard has provided "consistently poor customer service" both at Long Beach and at the previous institution where he was CIO, Weber State University. He said that the review process led him to think that Angel was "like day and night" compared to Blackboard on customer service. Blackboard wasn't even the university's second choice, Gardner said (Moodle was).
Told of Blackboard's praise for Angel's customer service record, Gardner said: "Their intentions may be sincere, but I have no faith in their ability as a company to become more like Angel." 

 

Who else is left to compete?
Desire2Learn and Person eCollege are probably the two largest remaining competitors in education.  However, Desire2Learn remains in a protracted patent fight with Blackboard.  Smaller, but growing, Epsilen benefits from being backed by The New York Times (although given the issues with the newspaper industry, it is unclear how much this backing is helping).

Why is Blackboard pursuing this deal?

I talked with them this week to get their perspective.  Their response: Both companies saw in the other unique and complementary strengths. Especially in today’s economic environment, bringing Angel’s well-known focus on customer service and product innovation to Blackboard would ultimately benefit Blackboard’s current customers and products.  And bringing Blackboard’s industry leadership and financial stability would benefit Angel’s customers. 

What’s next?

Both companies' boards of directors as well as ANGEL Learning's shareholders have approved the transaction and closing is expected in May 2009. Following the closing, ANGEL will become a wholly-owned subsidiary of Blackboard. 

For the immediate future, Blackboard intends to maintain the products separately, and will continue to actively market and sell Angel’s software offerings.  However, Blackboard does plan to bring key features and functionality of Angel to the Blackboard community as quickly as possible.

The yearly Angel Users conference is this week, and Blackboard will be sending a very large contingent of executives there to welcome everyone on board and field questions.

One immediate beneficiary of this deal is Indiana University-Purdue University Indianapolis, where the Angel software was first developed. In July 2000, the university spun off a company called CyberLearning Labs to sell the software to other institutions. Later the company changed its name to Angel Learning, but the university remains the largest shareholder.

LMS customers and buyers should be paying close attention. We expect to see additional consolidation activity throughout the rest of this year and into next.  Check out our latest comprehensive study of the LMS market: LMS and Learning Platforms 2009.

As always, questions and comments welcome.

-David

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