Not too long ago, Pearson contributed the Equella software to the Apereo Foundation as open source software.1 Equella, which both Pearson and Apereo refer to as a "digital repository," might have been called a Learning Object Repository (LOR) in a previous era (and probably was called that back then). Because LORs are considered passé in many circles, and because Equella is not widely adopted, it's easy to dismiss this as an unimportant story to anyone who is not an Equella customer. But there are some interesting lessons here about Pearson and the market.
Why Pearson was in the Enterprise Software Business, and Why it isn't anymore
In her annual epic end-of-the-year post series, Audrey Watters made some astute observations about recent changes in Pearson's business vis-a-vis software platforms:
Pearson announced last year that it was leaving the learning management system market. Pearson does not have a platform. It has a lot of content – it’s still one of the largest textbook publishers. It still runs testing centers and has testing contracts. But Pearson is not a platform.
Pearson represents an older business model – the conglomerate. Pearson was founded in 1856 in Yorkshire, England as a construction company but expanded throughout the nineteenth and twentieth centuries to own newspapers, book publishers, airline companies, oil companies, electric companies – the information and infrastructure of the material world. Pearson has been – until recently, that is – an active acquirer of education technology companies. That’s how it’s attempted to make a move from the material world to the digital one.
Pearson has not made any acquisitions this year. Rather it has continued to divest itself of products. It sold a 22% stake in Penguin Random House to the publisher Bertelsmann for about $1 billion. It sold its tutoring companies TutorVista and Edurite to the tutoring company BYJUs. (The terms of the deals were not disclosed.) It also sold its adult language learning company Wall Street English to two private investment firms.
What's going on here?
We don't have to go back as far as 1856 to understand the company's entry into and exit from the enterprise software business. Pearson acquired eCollege in 2007 and Equella in 2009. It bought a controlling stake in TutorVista in 2011, which was the same year that it launched OpenClass.
A few things were going on during this period. First, Pearson had come to realize that they had a monster hit on their hands with MyMathLab. This was the product that proved to the textbook publishing industry that digital products could be profitable in and of themselves, rather than just providing window dressing for textbooks. Suddenly, digital was a thing in the curricular materials market. Second, online learning was at peak hype as a revenue generator for universities. It's hard to think of plain old non-MOOC LMS-based online learning as having been hyped, but it was—at least from a financial perspective. University of Phoenix and the for-profits in general were growing and the spate of scandals was just beginning to break. Public colleges and universities were also experiencing something of a gold rush in terms of building out online programs to attract profitable out-of-state students. Academic Partnerships, one of the first online program management companies (OPM), was founded in 2007. At the same time, we were also at peak dissatisfaction with the LMS. The infamous Blackboard '138 patent, which the company had asserted against Desire2Learn, was invalidated in 2008, which was the same year that a little Utah startup called Instructure was founded. Meanwhile, the textbook publishers were beginning to realize that their period of easy growth was over but had not yet come to grips with the fact that their fundamental business model was in trouble.
Pearson executives of the time decided they could give a shot in the arm to their still very profitable curricular materials business by creating essentially an online school in a box. Customers who licensed eCollege could gain easy access to Pearson materials. Since a large portion of the market was deeply unhappy with their LMS at the time, offering a hosted LMS—eCollege was cloud before there was such a thing as cloud—seemed like a move that could bring in customers. A LOR like Equella seemed like a natural fit for this strategy, since it had become clear by this point that one of the main niches for LORs would be centralized online learning programs like many of the for-profits run. (In that context, a LOR is a workflow tool rather than a content sharing tool.) And Pearson bought EmbanetCompass, an OPM, in 2012.
But the textbook was still at the center of all of this in their minds. eCollege appears to have been thought of almost as a sales channel for curricular materials. It, Equella, and other software offerings, were certainly treated by the sales force as "deal sweeteners." Schools that signed large contracts for textbooks, MyLabs, and so on were offered the enterprise software bundled in at huge discounts. And therein lay the problem, because Pearson executives had misread the direction of the market. They thought that their content would retain its differentiation while the ed tech platforms commoditized. But the opposite proved true. The rise of Instructure while OpenClass, which was free, languished, proved that customers were still interested in differentiation in the LMS market. Meanwhile, the market began to experience downward pricing pressure on curricular materials that continues to this day. (See, for example, Cengage's recent all-you-can-eat announcement.) As a result, Pearson found itself in a position where it had essentially given away licenses to enterprise software products that required an annual investment by the company to keep them maintained and up-to-date, while the only "boom" for company turned out to be the sound of the curricular materials market imploding.
So Pearson proceeded to divest itself of these products. It shuttered OpenClass. That wasn't a huge deal in terms of customer impact, since the platform had few adopters. eCollege was a bigger deal, but the company dealt with that by making a deal with D2L to give eCollege customers support and a price break to transition over.
But Equella was a problem. First, there simply aren't a lot of LORs on the market, and the ones that are out there are quite different from each other. This product category never converged around a standard feature set in the same way that the LMS did. Second, many Equella customers had highly customized their installations to fit their particular workflows. These two factors made migration off Equella and onto something else an intensely painful prospect for Equella customers. That said, Pearson didn't have to care. The software had a small customer base relative to the company's scale. A few of those customers may have been fairly large or strategic, but probably not enough to move the needle on the company's numbers. Pearson probably could have killed the product with manageable damage.
That's not what they decided to do.
The Open Source Route
There are a number of ways for a company to abandon a product that has existing customers. The worst, obviously, is just to kill it flat out. A slightly less harsh version of this approach is to give the clients a perpetual license, possibly with source code access, and tell them, "Good luck keeping it running!" (Note that this strategy only works with old-school on-premise software. If you're in the cloud, then you're out of luck.) A variation on this theme is to release the source code under an open source license, dump it into Github, and walk away. The term for this kind of open sourced product is called "abandonware."
Pearson chose none of these strategies. In a move championed by Matt Leavy, Pearson's Managing Director of Global Managed Services (and formerly head of the team that had been responsible for maintaining many of these enterprise software products), the company decided to spend the money necessary to release the code in a way that would be most likely to lead to a sustainable future for the product. They hired Unicon, a company that has businesses both developing software for companies like Pearson and supporting academic open source software for universities, to perform a code audit and, in close collaboration with Edalex, an Australian company that has some of the original Equella developers on staff, prepare the software for incubation in the Apereo Foundation.2 For those not familiar with it, Apereo is the closest thing higher education has to the Apache Foundation. It is a university-run non-profit that hosts multiple open source academic software projects, including Sakai, uPortal, CAS, and Student Success Plan (SSP), among others. Unicon and Edalex are leading Equella through Apereo's project incubation process, which includes attracting university participants in the open source project.
Again, Pearson spent money to make this happen. That's unusual in an era when the company is cutting everywhere that it can. And this decision had to go pretty far up the food chain. The press release quotes Curtiss Barnes, Pearson's Managing Director, Product Management and Design, Global Product. (It can be hard to tell how high-ranking people are from their titles if you don't know how the company is organized, but Barnes is just a couple of notches from the top.) Some of this is driven by the personalities involved. Leavy and Barnes happen to be among the more community-minded executives at the company. But it is also a reflection of a more general change in attitude at curricular materials companies. Back when Pearson first came out with its big efficacy push, I observed that the company's strategy, while a step in the right direction, still demonstrated that they had not figured out that they have to listen to and engage with their customers in new ways if they are going to survive. Since then, the major publishers have slowly begun rethinking their relationships with their customers. Pearson's handling of Equella is a small example of this; I'll be writing about a couple of larger examples in the next couple of weeks.
Revenge of the LOR?
I also think the timing of this is interesting because of what's currently happening on the university side of things. Again, one major niche for LORs has been team-based course design, where instructional designers and media specialists are actively engaged with faculty in putting together the curriculum and all the curricular materials, sometimes standardized or semi-standardized across multiple course sections. The for-profit sector that really pushed this approach is starting to bottom out, while high-profile leaders in the not-for-profit sector, including Western Governors University, Arizona State University, and Southern New Hampshire University, are doing a lot of team-based course design in an effort to improve student outcomes. There aren't many LORs left on the market, and some of the most successful and sophisticated ones are focused specifically on video. We could learn something about the propagation of team-based course design based on Equella's ability to attract adoptees and contributors (or not). Unicon and Edalex, along with a company called Next Education Services, all are or will soon be offering Equella support in their respective geographies. Their progress will be worth watching.
- Disclosure: Pearson is a former client of ours and a current sponsor of a yet-to-be-announced e-Literate project. [↩]
- Disclosure: Unicon is a sponsor of a yet-to-be-announced e-Literate project. [↩]