TechEDge | California Community Colleges

Pedagogy 2.0: Blackboard Sees Red

Last Updated on Tuesday, 10 May 2011 Written by Dr. Douglas E. Hersh Tuesday, 03 May 2011

"Blackboard…took one in their shorts last week." —Kenneth C. Green, Founding Director, Campus Computing Project

Blackboard Slips … and Falls

Campus Computing reports that the number of schools using Blackboard for their core learning software dropped from 71 percent in 2006 to 57.1 percent in 2010. Over the next three to five years, Blackboard CFO John Kinzer expects learning management system (LMS) revenues to decline from 55-60 percent to 20-30 percent of total corporate revenue. This may be related to the company’s reputation for monopolistic practices, its inflated licensing fees, its poor quality of service or its reputation for playing hardball with a rapidly diminishing customer base.

According to Herb Greenberg, Senior Stocks Commentator at CNBC, “Blackboard’s relationship with many schools has been rocky, in part because of cost, quality of support and a difficulty to tailor the product to fit specific school needs.” Aware of these issues for years, the authors of the California Community Colleges Chancellor’s Office 2007-10 Technology III plan noted that:

Recently…Blackboard merged with WebCT—an action that sent ripples throughout the CMS competitive and customer landscapes. Moreover, Blackboard recently filed lawsuits against Desire2Learn—a company that provides eLearning solutions to academia, government, and other customers—for patent infringement. This action created much concern within the competitive landscape, and, if successful, it could have long-term ramifications. This rapid shift to an environment of consolidation, acquisition, and corporate focus on aggressive legal strategies versus open competition and product improvement has crystallized the important need for continued development of viable open-source alternatives.

Hubris: A Case Study

When faced with the potential loss of even a single customer, Blackboard has been known to respond with vehemence. In the case of one California Community College that chose to go open source, Blackboard initially ignored the LMS contract termination notices sent them, arguing that the institution was essentially on the hook for another two years and close to half-a-million dollars. After several months of wrangling, Blackboard backed down and confirmed termination of the single-year contract. The institution was then free to customize an open-source Moodle platform into the Human Presence Learning Environment, improving their student completion and success rates in the process and winning a number of state and national awards to boot.

Curiously, not long after the Human Presence Learning Environment began to receive notice in higher ed circles, Blackboard launched a hefty marketing campaign for its “Collaborate” suite. To create this product, the company further leveraged itself through the purchase of Wimba and Elluminate, tools known to be central to Human Presence. Consequently, the community college again found itself dealing with Blackboard. They received a renewal quote for the application formerly known as Wimba Voice at a now-increased cost. Moreover, as before, the contract came with an automatic renewal clause. As before, this would require that the institution send Blackboard a notice of termination within a defined period of time prior to the ending date of the contract term.

Clearly, the college did not intend to be caught twice by the same trap. It requested that the auto-renewal language be removed such that both parties were clearly entering into a stand-alone one-year contract. Blackboard refused, stating that “we cannot accept the removal of the auto renew language.”

Thus began another round of time-consuming negotiations with a company that often seems to act with its clients more like a bully than as an educational service provider. Ultimately, it may have been the refusal of the college to pony up the funds for the year that nudged Blackboard to remove the auto-renewal clause. After all, Blackboard’s bottom line suggests that it is in need of funds.

Blackboard on the Block

Greenberg feels that “Blackboard’s share isn’t likely to be going up” and states that the company is seeking ways to “enhance shareholder value, including whether other third parties would have an interest in acquiring the company at a price and on terms that would represent a better value for its shareholders than having the company continue to execute its business plan on a stand-alone basis.” CNBC stock blog notes that this news comes as short interest in Blackboard’s stock “hovers at a nosebleed 44 percent—an indication that 44 percent of its shares outstanding have been sold short … short-sellers of Blackboard’s stock are betting that the company’s fundamentals are going the wrong way.” Kenneth Green notes that:

Blackboard confronts significant competitive pressures across most of its business units … there has been erosion in its LMS position in the higher ed market: more erosion seems inevitable as some 700 current LMS clients confront “up or out” decisions because Blackboard has announced plans to terminate support for the Angel Learning and WebCT plafforms over the next two years.

Blackboard’s market share may well be tumbling as competitors—some using open-source standards—have eaten away at the core. Down deep, the company may be taking a titanic beating due to an emerging awareness of its questionable practices and an increasingly apparent aroma of customer discontent. Overextending itself through dubious legal challenges directed at its competitors or through costly buyouts—the company may view being sold as it only opportunity to keep shareholders at bay for a little while longer.

Speculation over who may be interested in purchasing Blackboard could fuel its own market. Green lists Google, IBM, McGraw-Hill, Microsoft, News Corp., Pearson, Oracle, SAP and Sungard as prospective buyers, yet his “hyperactive inference engine” tells him that it is more likely an investment firm. And he says that this would not be “a good thing for our community.”

Many believe that Blackboard’s business model is inconsistent with the times and that their practices may negatively impact higher education. Josh Baron writes that “I’m often surprised that more institutions are not getting serious about open source options such as Sakai and Moodle. The open-source model reduces the risk of buyouts to zero and places control over the future of the LMS in the institutions hands.” To Goldman Sachs or any other firm undertaking due diligence of the behemoth, scout well the imperium. You may learn that it is too big to bail.<>