The Case Against Blackboard

In reading the news about Blackboard’s take over of Elluminate and Wimba (on the heel of the take over of WebCT and ANGEL), I got a little fired up and decided to check out Blackboard’s public financial statements. I have prepared an argument against any institution choosing Blackboard based on this information:

1. Most of the money Blackboard charges a client is going to overhead and not into the value of the product itself.

In 2009 Blackboard took in $377 million and spent $98 million on sales, $56 million on administrative costs, $11 million on interest, and $10 million on patent issues while only spending $20 million on professional services (training), $45 million on software development, and $90 million on hosting/production costs. This means that for every dollar spent by a school on Blackboard $0.41 went to services provided and $0.59 went to sales, administration, overhead, and profit. Blackboard has 1,100 employees of which 370 are in marketing and sales, 183 are in administration, and only 270 are in development. Moodle HQ has 16 employees and yet still manages to create a competitive product.

2. Their business strategy involves take-over of competition, vendor-lock of clients, and up-selling clients on new products. I will let you read their strategy in their words first.

“Our Growth Strategy

• Growing annual license revenues. We intend to increase annual license revenues with existing clients through upgrades to current products, cross-selling of complementary applications and increased total license value commensurate with the value of our offerings.

• Increasing penetration with U.S. postsecondary and K-12 clients. We intend to capitalize on our experience in U.S. postsecondary and K-12 education to further enhance our leadership position.

• Offering new products to our target markets. Using feedback gathered from our clients and our sales and technical support groups, we intend to continue to develop and offer new upgrades, applications and application suites to increase our presence on campuses and expand the value provided to our clients.

• Increasing sales in our emerging markets. We intend to continue to expand sales and marketing efforts to increase sales of our various offerings within the less mature domestic and international markets we serve.

• Pursuing strategic relationships and acquisition opportunities. We intend to continue to pursue strategic relationships with, acquisitions of, and investments in, companies that would enhance the technological features of our products, offer complementary products, services and technologies, or broaden the scope of our product offerings into other areas.”

Why is this so insidious you ask? Well the cost to acquire new customers and develop new software is very high. A study in 2006 estimated the cost to Bb per new client was $250,000. Once a client has been established, Bb needs to recoup its losses from that sales process. That means preventing that client from leaving and cross selling that client upgrades and enhancements. Once the sale has been made to administration, there is inertia to stay with a product in spite of complaints about support, documentation, usability, etc from the users. Essentially Blackboard has become a giant software reseller. It purchases ed tech software companies (such as NTI Group->Connect) and then sells it to its existing LMS clients. It purchases competing LMS’s and then absorbs them into its single product offering. Blackboard has purchased two of the three major commercial LMS competitors (WebCT and ANGEL) and just purchased two real time web collaboration companies at once (Wimba and Elluminate). This has created a vertical monopoly in ed tech. There is no other vendor to go to, no other solution. (Except for open source).

Of course at the time of merger the spin is always, “You will experience no change”, “Our support will stay the same”, etc. But Blackboard buys companies in order to integrate and streamline them. That means cutting wasteful support staff and making sure that you can’t use one piece of software without the whole enchilada. There is ABSOLUTELY NOTHING BINDING about verbal statements assuaging fears by any of the parties involved. You cannot get WebCT or ANGEL anymore, why would you think you will be able to get Wimba/Elluminate on their own in the future? Why are they buying two companies that produce the exact same product at the same time? Why are they paying $116 million in cash for expected revenue (not profit) of $30 million/year (which can’t mean more than a few million in yearly profit)? There is no way they are going to merge the code bases of these two products. They are sending a chilling effect to developers, “We own real time web collaboration”.

3. Open source options are equally reliable, usable, and feature rich. They have professional companies supporting/partnering with them to provide training, hosting, integration, and extensions. If at any time you choose to change service providers or software the open nature of the platform will allow you to get your data.

Check out http://www.masmithers.com/2009/09/20/public-lms-evaluations/ to see that many institutions have evaluated the available LMS’s and found that Moodle and Sakai are both very viable. You can host open source yourself or hire any number of companies to do it for you for a very reasonable cost. Sure some places choose Blackboard, but once again think about that sales staff. At my district we “evaluated” Blackboard and Moodle. This meant that the Blackboard sales staff were in constant contact with administrators and then gave a professional presentation to a committee. Then on the Moodle side, a teacher (me) presented the software to the committee. The committee was told not to consider cost in the evaluation, even though Blackboard was 15 times the annual cost. Moodle won by a single vote. Since that time we have continued to use Moodle in spite of the recession and budget concerns. A cheaper solution means you can spend more on training (where the software meets learners) the and have a higher chance of weathering recession. (70% of all web servers run open source software Apache, Linux, MySQL – if its good enough to run the internet its good enough for your school). Great post about open source fears.

4. Why am I writing this?

I am not in the employment of any software company and not part of any software development. I am an educator (7 years science teacher, 2 years ed techie). I  truly believe that Blackboard’s business model is going to make it harder for schools to embrace new technology because Blackboard will prevent open standards and increase costs. The lack of competition means a decrease in innovation. I first used Blackboard as a student and really liked it, but I had no way to use it as an individual teacher. Open source software empowered me to use new tools with my students without needing top down buy in. I am not an open source fanatic, I use commercial software all of the time and understand you have to pay for development somehow. I wouldn’t mind if a company produced a nice, competitive LMS, however Blackboard has a habit of using unfair competitive practices to maintain its dominance. Think about the arenas where open source products have high market share, Open Office and Firefox jump to mind. Why isn’t there a company creating commercial competition for Microsoft Office and Microsoft Internet Explorer? Many people (including Anti-trust court cases) would say that there wasn’t any way a business could viably compete against a monopoly.

Don’t spend money meant for the education of students on Blackboard’s sales team and corporate merger fund.


Comments

The Case Against Blackboard — 14 Comments

  1. Great post, thanks for putting it together.

    One correction “There is no other vendor to go to, no other solution. (Except for open source –> and Desire2Learn <— )."

    Don't forget Desire2Learn, Blackboard didn't and chose to sue them first after they were granted their dubious patent.

  2. Course Info->Prometheus->WebCT->Angel->Wimba/Elluminate->Desire2Learn….

    Where is this sequence going?

    At some point BB will buy D2L because it can – because D2L’s code is closed source, it can be owned, and at some point Roberts et al. are going to get an offer that matches their exit strategy.

    Moodle and Sakai won’t be on that sequence because their code can’t be owned, and thus can’t be bought.

    The only real choice in this space is Blackboard or GPL.

  3. “Both companies are passionate about the academic market and, alongside our respective clients, have truly pioneered the category together,” said Carol Vallone, WebCT President and Chief Executive Officer. “Given the alignment of our visions, technologies, and overall strategies, the combination of our two companies will advance the teaching and learning technology industry, benefiting customers worldwide.”

    Sound familiar???

  4. Chrome, Safari and Opera are all commercial competitors to Internet Explorer. Technology companies come and go and leadership changes. Blackboard is full of people like me who are passionate about education and technology. I work every day to make better software and make it easy for students to access information and share things with their class and instructors.

    There are many alternatives to Blackboard and clearly from this thread there are more being developed each day. This is a sign of a healthy and competitive market. Technology companies either acquire other companies and expand their portfolio or they are bought out. Every company Blackboard has purchased was put up for sale, and the question was would they be acquired by Blackboard or someone else. Just look at Equella, Fronteer and ECollege.

    I’d also like to point out that while Blackboard publishes a quarterly audited financial statement, none of the others do. No one knows what Moodle PTYs or D2Ls revenues are. Finally one years profits may not reflect the years of sacrifice that went in to getting to market or keeping it there.

    Most places like LSU that have switched to an alternate product have found no cost savings. Higher Education customers are the most knowledgeable I’ve known in my tech career. They also have staff to be able to accomplish anything they want. They know what things cost to diy and many see value in choosing Blackboard.

    I hope Blackboard will be able to provide anyone who wants it with a good solution at a price that matches the value of the offering. If you don’t find Blackboard meets your needs I’m happy to listen to suggestions to make it better and talk to you about alternatives or help you customize the product.

  5. “Most places like LSU that have switched to an alternate product have found no cost savings.”

    Beg to differ – LSU found cost savings – which they spent on providing more services 2 faculty and students – services they couldn’t afford to provide when paying for the Blackboard license.

    “They also have staff to be able to accomplish anything they want.”

    Many in edu are now having to choose between staff (and faculty!) and software licenses…

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  7. Hi John,
    Thanks for sharing your perspective. I know that the blog/twitter sphere can often become an echo chamber or a flame war and so I appreciate your thoughtful comments which disagree with my post.
    I totally agree with you that Blackboard has some excellent and committed employees. The development team is obviously very skilled and has created a great product. Every comparison I have seen puts all of the major LMS’s as fairly equal.
    However, my concerns about Blackboard are two fold – the focus of the company on sales over development and the purchase of so many competing companies in a short time.
    Just think about what $116 million in cash could have developed for Blackboard (Around 500 developer/years of work). Some really great software could have been created which would have competed with existing software and improved the market for everyone.
    I have to point out that the reason Blackboard provides those financial statements is because it is required to do so as a public traded corporation not because it is inherently a transparent organization.
    The presence of alternative browsers and LMS’s does not mean that there is actual market competition, especially since the markets are dominated by a particular company.
    Once again, thank you for taking the time to share you perspective.

  8. Ben,
    I agree that LSU has probably saved money on licensing and spent it on development, training, and integration. That is the advantage of open source software: take the extra cash and spend it on getting your users to actually use the features of the software. Much better than paying for features which no one uses because you never pay for professional development.

    Matt,
    You bring up a great point about the D2L patent lawsuit. In the financial statements it looked like Bb spent $10 million on patent issues last year. That is a great example of Bb attempts to dominate the market through unfair competitive practices.

  9. A few folks at Elluminate have given their perspective on how the new venture, Blackboard Collaborate will further the development of synchronous collaboration tools that integrate with a number of learning platforms.

    http://bit.ly/d2KOCe Steve Hargadon who runs http://www.learncentral.org at eLuminate

    http://bit.ly/980DtI eLuminate president and soon to be head of Blackboard Collaborate, Maurice Heiblum

    I think you’ve articulated a number of concerns and I encourage you to continue to watch and hold us accountable if we don’t deliver on our commitments. I also beleive that the Blackboard Learn 9.1 is a great product born from the collaboration of Blackboard, WebCT and ANGEL Learning developers.

    I will conclude by saying that Ray Henderson has brought a lot of change to how Blackboard participates in the community and the marketplace. I think if you look at actions in the last year you will see that we’ve heard the concerns regarding how we must align our mission and values to those of our customers. I hope this becomes your experience as things move forward.

  10. To Ben,
    One correction – although no one owns Sakai code a single person DOES own Moodle code. Martin Dougiamas is the creator of Moodle and owns the code solely. As of right now he is committed to the open source movement but so was Murray Goldberg, creator of WebCT. A foundation presides over Sakai however no one actually owns the code – the code belongs to the community. This should be kept in mind when looking at open source solutions.

  11. Hi Linda,
    I have to disagree with your interpretation of the state of Moodle ownership. Martin can’t destroy the code or hide the code. Martin could decide he was going to start closed source development, however all code up to the point he decided to go closed source would still be public. Just like the foundation that owns Sakai could decide to go closed source at any point, but the code created under GPL is available under GPL. Here is a quote from Moodle.org:

    “Martin Dougiamas is on record that Moodle will always be free and under the GPL. Even if it weren’t, the community could take the latest GPL code and continue development from there. One of the reasons why Moodle’s so good is that it’s open source code, and so the world wide educational community can contribute to making it better still.

    In other cases where such things have happened, the community quickly “forked” the tool and continued it, with ongoing improvements, as an open-source project. What is out there up to this point will stay out there – legally – even if something in the future did not. Nobody can “buy” Moodle, and any co-opting without the consent of the global community wouldn’t get very far.”

  12. John,
    Thanks again for your comments. I want to say that it has opened up my eyes to hear from a Blackboard developer (mixed metaphor there) who obviously is a committed professional. I agree that Blackboard NG looks like a great product and I think Blackboard Collaborate will be a great product too. My concern is still that they will be the ONLY products. I don’t want to be in a position where I have to trust a single company with filling the diverse needs of online/blended learning (both asynchronous and in real time) in Kindergarten through College education.
    MS Vista was a bad OS. There wasn’t much anyone could do except wait for MS to fix it when they came out with Windows 7. Windows 7 is fine, but I would love to have a lighter version to run on old computers. I could set these old boxes up on Linux, but the OS’s aren’t very compatible (run different software). The OS monopoly has hurt me and my students. I don’t want the LMS monopoly to hurt education. If Bb doesn’t hold true on its commitments, are there going to be viable options for schools to take their business to? What if Bb NG/Collab ends up being a great fit for large universities but a poor fit for small middle schools? Who will help to fill the niches? Can you honestly say that Bb will make a product and a pricing plan to fit all institutions?
    Thanks again for your comments and your work in ed tech. I can tell we are on the same team, even if I feel opposed to some of the decisions of your corporate bosses.

  13. Linda, you should read up on the GPL – the release of code under the GPL cannot be revoked by the person who wrote the code.

    Similarly – if the scenario you propose were true any contributor to Sakai could claim ownership of the code they wrote for the Sakai Foundation.

    Martin has a good write up of this issue in layperson’s terms here (including what happens if he gets eaten by a kangaroo :-) :
    http://docs.moodle.org/en/Future

    In short, Moodle code belongs to the community exactly as much as Sakai code belongs to the community.