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.
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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.