New Mentality Entering LMS Market

This is a guest post by Phil Hill from Delta Initiative, follow on Twitter [email protected] or his blog

Since 2008 I have been sharing with clients the observation that the current generation of LMS solutions were conceived and designed circa 1996 – 2004. This timeframe was eons ago in terms of technology and business models. Furthermore, the major LMS solutions were designed as solutions for specific institutions and only later “commercialized” for broad market release.

In fact, this observation of LMS origins was a key reason behind the creation of the “squid chart” looking at the LMS market in one view. Notice the origins of each major LMS solution.

Well, that situation has changed in a big way over the past year, and the LMS market will be the better for this change. The best two examples of this change are the entrances into the market by Instructure and by LoudCloud Systems. The change in the market will be more significant than just having two additional competitors. The real significance will be the entrance of a new mentality – one based on new investment (venture capital, private equity, strategic publisher moves), one based on startup companies willing to challenge the status quo with new approaches, and one that is almost naive in its assumptions about giving end users what they want.

The educational technology market has become a new darling of the investment community, and when investment comes in, changes occur. The NextWeb recently posted that educational technology is the next gold rush and that Slicon Valley will be at its heart. I’m not convinced on the Silicon Valley angle, but I do see the gold rush mentality. Think Khan Academy, Inkling, etc.

There was a time when prospectors from around the world converged on San Francisco with picks and shovels to extract gold from the rolling hills. Today, a similar migration is taking place, though the tools have changed slightly, as servers have taken the place of shovels and a sharp resume will get you deeper into data than blasting caps through solid rock. Education startups will be the new gold rush, and Silicon Valley is sure to be at its heart. Already the epicenter of tech innovation and venture capital investment, San Francisco is poised to become heart of a new industry that will be powered by the Internet. And unlike me-too food apps and daily deals websites, education is more than a hot fad. American taxpayers invested more than $536 billion on K-12 education between 2005 and 2006, according to the U.S. Department of Education, with an additional $373 billion in taxes going to fund higher education nationwide. The educational pie is enormous, and anyone who can get his or her hands on even a small slice can expect to reap huge returns. Computers have become essential learning tool, with Internet access being discussed as a fundamental human right in some quarters.

Disclaimer:  I do not endorse any one company over another, and am not doing so here. My point is about the effect in the marketplace coming from the new mentality that these two companies represent.

Instructure is less than three years old, and they have already captured an impressive customer list – over 40 institutions of higher education, including the Utah Education Network, University of Mary Washington, Auburn University, New Mexico State Univesity, and several significant schools that have not gone public yet with their decision. Instructure has taken on Blackboard and Desire2Learn at large institutions and won, and they are gaining momentum.

LoudCloud is younger, but their approach is quite disruptive based on personalized learning and architectural disaggregation. They are focused primarily on for-profit institutions and online programs, and they have already gained 150,000 students through wins at Grand Canyon University and Career Education Corporation.

How are these companies of a different breed than the current generation of LMS providers?

  • Their LMS products have been designed from the ground up based on current technologies – social networking, web services, multi-tenant cloud-based models. It is a lot easier to include a social networking approach into your design after social networking has become prevalent.
  • Instructure and LoudCloud designed their systems based on market analysis and feedback, rather than by taking a single-institution project and attempting leverage into the market. Instructure was started by two graduate students who thought they could design a better LMS as a class project. Their instructor, Josh Coates (now CEO) who started and came from a successful internet startup (Mozy), encouraged the students to take their user design and shop it around to get feedback. The students did so, “Instead of starting to write code, which both of us loved doing, we took all our ideas and built them into a mocked-up version of the product in PowerPoint. Then we started calling schools. We would cold-call the CTO, CIO or the head of Instructional Design and tell them we were a new company who wanted to show our thoughts on the future of the LMS and get their feedback as well.”
  • LoudCloud Systems was created by executives formerly in Tata Interactive Systems, part of the huge technology firm from India. They worked with for-profit schools to understand what design was needed, then built their system from the ground up. During my phone call and online demonstration, they mentioned that Career Education Corporation is migrating to the LoudCloud LMS from their homegrown LMS, tool by tool. This is significant – LoudCloud has designed their system as a suite of web services, where each tool is designed to use role-based authentication and to be available on its own merits – architectural disaggregation. Furthermore, LoudCloud Systems has been designed for personalized learning environment driven by analytics. As the system tracks the students usage and a demographic profile from the Student Information System, the LMS will serve up specific content that appears to fit that students learning preferences and learning style.
  • Both systems are built as cloud-based models leveraging third-party web services – enabling the smaller companies to compete with larger companies. In this case, the cloud approach is allowing startups such as Instructure and LoudCloud to rapidly develop their product lines and directly compete with large established competitors such as Blackboard, Desire2Learn, Pearson, and even established open source providers such as Moodle and Sakai. Both Instructure and LoudCloud sit on top of Amazon Web Services, providing scaling and reliability, while enabling both companies to focus their attention on the learning design itself.

What does this mean?  It remains to be seen if these two new competitors will be able to fully execute on their strategies – none of the clients mentioned in this post are fully in production yet. And the bigger players are not going to stand still. However, the market change represented by these two companies is a good development for clients. For too long we have had the same players fighting over the same pieces of the pie. I have already seen at the Desire2Learn users’ conference signs that they no longer are competing just with Blackboard and open source, but they now have to match or beat Instructure’s usability and innovative features. Pearson needs to compete with the new kid on the online block in LoudCloud, taking their system to the next level.  Same issue with Blackboard, Moodle and Sakai – they will need to improve their usability and social networking capabilities to successfully compete in the future.

However these battles shape up, higher education clients are going to be the richer for having true competition fueled by new investment – the Silion Valley mentality, even if the geographic locations are not in Silicon Valley.

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About Phil Hill

Phil is a consultant and industry analyst covering the educational technology market primarily for higher education. He has written for e-Literate since Aug 2011. For a more complete biography, view his profile page.
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16 Responses to New Mentality Entering LMS Market

  1. Pingback: Jared Stein – Education, Technology, Culture, and the Internet » Phil Hill on “New Mentality” in LMS Market

  2. I’m sorry. I read articles like this in 2001, 2002, etc. where the focus of learning was (should be) on ‘personalized learning focused primarily on for-profit institutions and online programs.’ Back then, they were called LCMSs and there was a group of seven companies who collectively tried to engage the market (by taking on the LMSs and taking over a trade-show), yet they all but disappeared within a year. While I believe there is great promise in the new generation of social based platforms to supplement learning (and have written on that topic (Beyond Formal vs. Informal Learning, there is still the nee to address the larger issue of knowledge transfer as an enterprise operational problem. Hence, integration of business processes, alignment with strategy, capturing/expanding profile information, etc. are key application processes. Also, the integration of other Talent Management processes, of which Learning is a key part (and right in the middle). Learning folks have usually been challenged by LMSs mostly because they don’t understand or know how to work with business process integration and change. In my view, that’s been the heart of the LMS challenge, effective alignment of business interests and change management. Learning folks do love learning, and the new capabilities are attractive to advancing the cause. But, alignment around strategic initiatives is still the key to organizational success.

  3. Pingback: New mentality entering LMS market [Hill]

  4. Phil Hill says:

    Grant – it sounds like a lot of your comments are based on corporate LMS space rather than higher ed LMS space, which have had distinct sets of vendors. The reference to personalized learning I made is about LoudCloud using analytics to serve up different content to students based on their past interactions and their demographic profile imported from student information system.

  5. George Lorenzo says:

    Is there any data/information on a higher ed LMS called WebStudy (see

  6. Phil Hill says:

    WebStudy is interesting – it’s been around for a while, but never really become a market force. It seems to be well-received, but no real momentum. I would classify it as a niche provider, but not a broad market participant. If I’m missing something, let me know.

  7. I would be far more interested in an LMS that is able to provide analytics on HOW students used instructional content to achieve objectives, rather than WHAT they used. Analysis of “what” students used does not inform the researcher about the cognitive entry point(s) of the learner, and the manner by which instructional content helped to achieve outcomes through a systematic cognitive process. Efforts by developers to create a user-based LMS are asking the wrong people. They should be asking successful students, not Ed Tech/CIO. Development of systems-based information systems will produce systems-based analytics, which are not as efficient predictors of information needs and use as user-based analytics. Dr. Brenda Dervin and Dr. Michael Nilan have published extensively about UbD for decades. I hope it gets picked up on some day.

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  11. Matt Henchen says:

    You should also check out It’s an amazing cloud-based LMS that has seen tremendous growth since it began in 2007.

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  14. James Mundie says:

    “Since 2008 I have been sharing with clients the observation that the current generation of LMS solutions were conceived and designed circa 1996 – 2004. This timeframe was eons ago in terms of technology and business models. Furthermore, the major LMS solutions were designed as solutions for specific institutions and only later “commercialized” for broad market release.”

    I like the idea of the Educational Technology “gold rush” as you describe it, but I’m not sure I buy the observation above. This assumes that companies are always monolithic entities incapable of change. This assumes that the products themselves haven’t changed, from version to version. This assumes that new technologies have to be ‘tacked on’ to existing code, that products are never redesigned. While that might be true of some (although I can’t think of any, maybe Windows), I don’t think we can just assume that the codebase, business practices, business philosophy, programmers, facilities, etc. being used to create D2L or whatever “old” LMS is the same as it was in 1996 or even 2004, just because the company/product is that old. I also don’t think we can assume that these companies haven’t been listening to their customers, learning from their experience, and not incrementally improving their product over the years, even if Social Networking didn’t exist when their product was first compiled.

    If we applied this same argument to other software or we might find ourselves saying things like “iOS can’t possibly compete with Android. For Pete’s sake it has code written in C in it. Imagine that! C is what, 40 years old? And Apple? They’ve been around waaay longer than Google. They can’t possibly know anything about what kids these days want in a mobile device OS like those smartypants over at Google do.”

    I think you’re right that there is a serious problem that could potentially sink Higher Ed, or at least take a big chunk of our pie, and very astute to foresee it emerging from Silicon Valley. But it isn’t the presentation layer of our LMS software. Its that our educational practices assume, even now, that knowledge is something that can/should be commoditized, packaged, and transmitted from expert to novice. This is the use case that the LMS is built around because that is the use case that Higher Ed is built around, and I see no real evidence that this isn’t the case with Instructure’s product or even the Khan Academy. This is a perfectly viable business model if you’re selling it on the cheap and don’t have any competitors (and acknowledge that you have a ‘business model’). The problem is, we’re not cheap, we’re just coming around to the idea that “omigosh we’re a business”, and now we have tons of competitors.

  15. Phil Hill says:

    James, very interesting point and thanks for the comment.

    To be clear, I do not mean to imply that “companies are always monolithic entities incapable of change”, and Apple is probably the best proof that companies can change. No other tech company has been as successful throwing out old assumptions and creating new world-class designs. What I am implying, however, is that the higher ed LMS market leaders have not been redesigned and do in fact have most of the same core assumptions underlying the solutions as they did 1998 – 2004.

    Without naming names, I saw a demo of one of the current market leaders at EDUCAUSE in terms of embedding web 2.0 content – youtube videos in this case. While the feature exists – you can embed youtube video – the process all but made the feature unusable. The use would select the video for embedding, click the appropriate tab, select the appropriate left-frame option, select the radio button in question, scroll for options, hit submit. Then to validate what others saw, switch to student view, click here, click there, and voila – the video. This was the essence of tacking on a feature onto an old design, or a previous mentality. Compare this to WordPress – add link to youtube along with any options needed, hit submit – hit ‘preview post’ anytime during process to see others’ view.

    I agree with you – it isn’t the presentation layer that is important. What I saw at EDUCAUSE is a classic case of trying to address a problem by UI changes, rather than having a product, business strategy, design that facilitates what the users (instructors, course designers, students) are currently trying to do. These designs typically go to the data modeling of an enterprise system itself, as the actual definition of what a student is, what an instructor is, what a course is, etc – as well as the relationship between these entities. I didn’t put this as part of the original post, but my argument at a technical level is that this data modeling design is what has not changed, and that the new concepts and designs will come from new competitors with new approaches.

    The exception to this argument, and one that backs up your point, is probably Sakai 3. That is the legacy LMS that has been re-conceived and designed with new assumptions in mind. I would also add that the legacy LMS vendors are clearly reacting to the new LMS competitors and trying to make changes – witness Bb 9.1 ocho. Would these changes have happened without the new competitors?

    Since I’ve written this post, we’ve seen even more of this new mentality coming from new investments – coming from big established companies (Pearson’s OpenClass, Apple’s iTunesU app), small, newer companies (NIXTY, Coursekit), and even institutions (MITx).

    FWIW, I also agree that the bigger issue is one you describe around the current higher ed model.

  16. Luciana Lage says:

    Great discussion. I run a small language school and am actively looking for a LMS. I am curious about, mentioned above by Matt Henchen. Does your school use it, Matt? I would very much appreciate any help on this quest.

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