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Author Phil HillBlog

Why Instructure’s News Matters: Market history

By 2019-11-18November 22nd, 201910 Comments

Last Thursday I shared Instructure’s news release that they are going “to explore strategic alternatives in order to maximize shareholder value”, where the alternatives could include selling the company to financial buyers (e.g. private equity) or strategic buyers (e.g. big technology). Of course, one alternative is to not make changes and remain a publicly-traded company.

Why is a potential change as mundane as having Instructure’s shares traded in public markets vs. being owned by a larger company newsworthy? After all, Instructure is growing, an established LMS market leader, and is not in financial trouble. Their stock price is even at its all-time high.

The reason this announcement matters is all about context. The history of the academic LMS market, the general environment of distrust of big technology and its data usage, and Instructure’s public marketing and communications are all key to understanding today’s situation. In this first post I’ll deal with market history.

Disclosure: I will note more prominently than usual that Instructure, Blackboard, D2L, and Moodle are all subscribers to the MindWires LMS Market Analysis data service, and that we have a number of investment firms who are also subscribers to the service and pay for in-depth market data and research.

Market History

When looking at the early history of the academic LMS market, from its inception in the mid 1990s through roughly 2011, the market was dominated by Blackboard. Most LMS market dynamics could be understood through the lens of Blackboard’s market position, its corporate acquisition strategy, its poor reputation for reliability and usability, its product pricing, and the market’s reaction to Blackboard. This was the situation that led to the original LMS ‘squid’ graphic, which was my attempt to help US higher education institutions understand how to interpret market dynamics.

LMS market graphic for US & Canada higher education, showing market share bands from 1997 - 2019, with notes on primary vendors and corporate acquisitions.
  • On the left side of each band is the origin of systems, and these LMS solutions mostly originated as projects at specific universities, with moves to commercialize the products happening after the fact.
  • The bands coming together show how Blackboard’s core strategy was acquisition of their competitors, eventually moving clients onto what is now known as Blackboard Learn. After Blackboard went public in 2004, their biggest acquisitions were of WebCT (#2 in market at the time) in early 2006 and of ANGEL (a growing #3 or #4 in the market) in 2009. Not shown is the 2006-2009 patent lawsuit against D2L (#3 and known as Desire2Learn at the time), where I (along with many others) believe that Blackboard tried to put that company out of business or soften it up for an acquisition. D2L ended up fighting and winning this patent lawsuit battle, but the other companies and their products are gone.
  • Based on the intense pushback against this corporate behavior, the open source market became the perceived safe haven, a way for schools to retain control and not be forced to migrate. Sakai originated in 2004, with Moodle before that, but the real grown of open source LMS adoption occurred in 2007 – 2011 in reaction to Blackboard corporate moves.

Why does this history matter? Because the academic market has a long memory, and many educators (faculty, staff, and administrators) deeply remember the days of corporate finance driving the market. Losing control of university projects, being forced to migrate from chosen LMSs, rising prices and constant cross-selling 1e.g. Bb Collaborate, created by acquisition of Elluminate and Wimba and upselling 2e.g. move from Bb Basic to Enterprise, to Academic Learn suite, with constantly rising prices, systems going down during Finals week, clunky frustrating systems, etc.

Change in Market Dynamics

The market changed in 2011 for two reasons. One was that Blackboard was taken private by a private equity firm, leading to the early 2013 change in executive team and the end of corporate acquisition of competitors. Blackboard acquired Moodlerooms in 2012 (now known as OpenLMS), but note that this product is still alive – there was no forced migration, and Blackboard has contributed heavily to the open source community. Note: Moodlerooms was the largest Moodle Partner and is not the same as Moodle HQ, the company that leads the development of the Moodle open source product. 3See Michael Feldstein’s post at e-Literate to get a description of the Moodle ecosystem.

The second reason is that Canvas emerged as the fastest growing LMS solution – an intuitive, cloud-native product with a company with a unique corporate culture. From 2011 through the present, Canvas began to dominate the market dynamics – either through its constant growth with no losses, or from competitors’ reactions to Canvas. We now have much more reliable systems with better usability built in, not just in Canvas but in particular with D2L Brightspace and increasingly with Blackboard Learn itself. While many people are frustrated with the pedagogical limitations of most LMS solutions, the market is much healthier and more focused on educators’ needs than it was a decade ago.

One related change in the market is that the primary buyers of an academic LMS – the most important people in a decision on which LMS to adopt – has shifted from the CIO to the faculty and academic technology support. This shift happens along a spectrum and differs among schools, but there have been dramatic changes. A decade ago, LMS migration mostly occurred in spite of faculty wishes. CIO-type needs, or product end-of-life coming from acquisitions, forced schools to change, and academic types (faculty, academic tech support) at best had input in reaction to these needs. Today, quite often it is the faculty or academic technology support staff that are driving LMS adoptions, requesting changes with the CIO and IT staff having to react to these demands.

Underlying Tension

There has been an underlying tension this whole time, however, with many educators wondering whether and when the market might shift back its previous dynamics. Would corporate finances come back and take priority over customer satisfaction, would Canvas become just like corporate players of the past market?

It is this underlying tension that still exists and in my opinion is increasingly coming out in reaction to Instructure’s corporate moves recently. Many of the details of the market history are forgotten or jumbled, but the underlying tension is deeper than the surface language. The sentiment is more intense for US higher education than for K-12 markets or for global regions outside of North America, partially as these other market segments never viewed Canvas quite as intensely as the market champion. But the tension is still there.

Why does this news matter? From the market history perspective, there is a risk that the potential sale of Instructure will unleash more of this market sentiment against the company, impacting future market growth. And this sentiment is particularly intense among the academics that have driven the growth of Canvas. At the same time there is a chance that Instructure will come out of the process better able to serve the academic markets. The result of the risk and opportunity mostly depends on whether Instructure is sold, to whom, and how the company responds in public during this process. But there is a lot on the line and underlying questions are being raised. In this market, I would not discount sentiment based on history.

In the next post we’ll deal with the broader context of Big Tech.


  • Bill King says:

    Good read as always. One market dynamic that I’m sure you are aware of, but is worth including here, is why Canvas could take off so quickly (I was in sales at WebCT, and then a non-LMS edtech vendor, who moved from on-prem to cloud deployment, and then Canvas, before leaving academic IT system sales). While the ease of use and faculty-friendly interface and design was important, so was AWS (Amazon Web Services). CIOs by nature are conservative — generally, they don’t like change, because all the change falls on their shoulders, with limited staff, and usually with a bigger demand that they get the SIS, ERP and other admin systems correct. This left little time for academic systems. Even when there was a strong academic tech department, Academic tech was usually classroom tech. The area of servers (and network traffic) still had to go through the CIO office. Which reminds me – at the time, another big IT project was upping the bandwidth capacity across campus. IT had LOTS to do.

    Canvas came along with a cloud-based deployment scheme that eliminated the need for the CIO to source servers and stand up instances (let alone fail-over and backup systems). Even when early vendors moved to “managed hosting” (where a third party ran your server license for you), often times the CIO required proof of the safety of the data — at rest and in transit. You also had to prove the up time commitment (I remember early boasts of 93%, which is laughable today). So, you had to sell your product AND you had to sell the hosting service. With Canvas, you could just point to AWS’s terms of service, and EVERYONE knew Amazon was rock-solid reliable and secure. Whether that was true or not (I generally think it is), the point is that Amazon was like IBM from a few decades ago. Everyone trusted them and, even if AWS went down, it impacted everyone, so your IT group would not be blamed.

    This, to me, is the key why faculty and academic technology were free to choose their LMS platform. The entire IT services equation was taken care of, and AFAIK, Canvas had first mover advantage here. Then you throw in their culture at the time, and the product, and it was never a question of “if” – it was always a question of “when.” (e.g. I remember talking with one major private research university in 2014, that had planned their Canvas move for 2017, once all their legacy contracts expired and a few other internal issues were taken care of.)

    • Rob Gibson says:

      You raised several great points. Certainly one of the determining factors for our migration to Canvas was the cloud hosting. You didn’t have to be Nostradamus to see that staff and budgetary reductions were going to make the decision inevitable. Although Canvas was nowhere near its rivals in regard to features, the sprints (then every two weeks – later every three weeks – now monthly) that didn’t disrupt service availability made it a no-brainer. (I’ve been a member of the BLK-BRD list at ASU since its inception in the 1990s, and I still see institutions struggling with upgrades and patches. I’m really glad all that is in the rear-view mirror.)
      We’ve had one or two AWS outages in the past five years. (One that garnered quite a bit of attention because it brought down so many web services.) It’s not perfect – and not much cheaper, all things considered – but the ‘hassle-factor’ is greatly reduced.

      I agree with your comments regarding CIOs (and their conservative approach to change). That’s playing out right now in plain view with the back-and-forth tussle over cloud-based SIS systems. Another inevitability, but likely no where near as fast as the LMS migration.

      In conclusion, I was a little surprised by Instructure’s meteoric rise. I think it was all about timing. Blackboard was fresh off the Angel acquisition which really turned a large number of practitioners against them. (That’s about the time the “Blackborg” meme was propagating listservs.) There was a significant ‘anti-Blackboard’ movement afoot. Along comes Instructure. The first time I saw the product was a presentation by Pittsburg State University (Kansas) who was among the very first clients outside of Utah. So new, in fact, that Devin and Brian personally flew out to little Pittsburg to pitch the product. (That Midas touch ended a few months later.) Moreover, Blackboard was becoming TOO feature rich. (Everything and nothing as they say.) A reset was in order.

  • Bill King says:

    One other comment – we lost a lot of low-end market when I was at WebCT, but it wasn’t because of open source vs commercial (academics generally loved WebCT, it’s culture, and what they were trying to do from a product), it was because of the then-perceived price, i.e. “free” though later, people came to realize that open source “free” is not actually free – there’s a lot of cost-shifting. The question later, before cloud solutions, was did you have staff. I think the emergence of AWS and cloud is something that put a big damper on open source. The academic was free to pursue a product that fit them, and budget might even be non-IT, which helped in the decision making.

  • Phil Hill says:

    Thanks and excellent points, Bill. I plan to touch on the subject of AWS in my next post, but you are right about its importance to this story.

  • Jeff Alderson says:

    I find it interesting that this article didn’t attribute Instructure’s early and broad support of industry standards, such as LTI and their creation/hosting of the EduAppCenter as part of their success. LMS platforms today are seen as a commodity. I always viewed Canvas’ primary differentiator as their openness to support an ecosystem of apps, as well as fostering that ecosystem by including the EduAppCener marketplace directly within their own product.

  • Phil Hill says:

    Jeff, the post is not intended to lay out all the reasons why Canvas took off; rather, bigger issue is to point out that Canvas taking off changed the market. But to your point, I think the standards approach was very important, but even more important was openness in general (culture, messaging). Sometimes that standards approach is more important to observers than to actual end users, but important nonetheless.

    I disagree with the LMS as commodity argument, however, as switching LMS can make a very big difference in adoption of the LMS and integrated tools, and for helping faculty get over the hump to engage in digital learning and associated pedagogical considerations. Basically, LMSs are not fungible, despite the large overlap in feature check-boxes.