Wednesday, August 3

Merger mania in and around eLearning

First, on Monday, WebEx buys for $45M in cash (details) then today SumTotal buys Pathlore for $29M in cash (details) and $19M in stock. And then I hear that back on July 27 Premiere Global Services announced that it was buying Netspoke for $23.2M in cash (details).

So a virtual meeting company buys a collaboration company.
A LMS company buys another LMS company.
And a communication services company buys a collaboration company.

Looks like the convergence that Elliott Masie has been talking about taking place is finally happening. Anyone familiar with my posts and company knows that I am a big believer in the power of collaboration (and ideally done to such a level of integration that it results in mentoring not just with 'experts' but also with your peers) so it is heartening to see that finally we are moving past 'simplistic' collaboration (i.e. like stand-alone web meetings) in learning with and PGS+Netspoke while the fragmented LMS sub-industry is getting so much needed consolidation with SumTotal+Pathlore (and remember that SumTotal is the March 2004 merger of Docent and Click2learn).

All of this comes of the heels of SkillSoft releasing SkillSoft Dialogue, their version of a virtual classroom and NETg buying KnowledgeNet last year for their virtual classroom technology/LMS resulting in their Knowledge Now suite.

Are we finally getting to the point where educational content is merging with collaboration technologies which is merging with learner management infrastructure?

Collaboration is important as it allows learning to become a continuous process and acts as a quality feedback loop while helping to generate new content out of the resulting interactions, all of which sits on top of the learning management system. It has been long neglected in the eLearning industry due to it's complexity (trust me I founded and struggled with the scalability of it's mentoring model long after SmartForce bought it) for it has been far easier to manage content objects than collaboration objects. I always said while at SkillSoft/SmartForce/CBT Systems that the value of SkillSoft is not the 5000+ hours of training but the fact that you could potentially tap into the collective knowledge of their 3 million users. Of course the Internet bubble burst and they went back to the tried-and-true model of producing generic content.

Anyway ... sorry for the rant but I have been concerned about the health of the eLearning industry over the last 2 years and I am glad to see this much needed consolidation taking place. Hopefully it will result in some truly innovative stuff versus people scrambling to get into liferafts. Think social networking analysis, workflow learning, collective intelligence, presence awareness, expert locating, communities of knowledge (made up of smaller communities of practice) ...

Or as BusinessWeek recently put it - The Power of Us. If you haven't read their cover story on how mass collaboration is shaking up business you should as they talk about how large scale collaboration has changed the delivery of services like auctions (eBay) and product like books ( which makes you think about how mass collaboration could change the sharing of knowledge which until recently has been done on a small scale, typically geographically driven, basis or through static content.

PS - for those that care it is interesting to note that the 2 collaboration acquisitions were basically done at 2x trailing 2004 revenues (Netspoke) and 3x projected 2005 revenue ( while the LMS acquisition was done at 2x trailing 2004 revenues (Pathlore). These multiples are indicative that there is a resurgence of interest and hence increased value.


Clark Aldrich said...

So Mr. Masie predicted consolidation. Wow, he's good.

Downes said...

yeah, nobody but Elliot Masie saw that coming.

Ben Watson said...

... and in his newsletter last night he predicted "at least one more major deal before the end of 2006".

Clark and Stephen - I thought you guys would be on top of this (grin).

Clark - is there a need for new LMS functionality for simulations or are sims stand-alone or already being integrated into LMSes todays?

Stephen - is open source a viable threat yet to LMSes? Is this just two dinosaurs mating?

Downes said...

I've covered some of the larger mergers and takeovers but I tend not to follow the minutae of the business (it's churn, not news). I'll run an item on the current post in today's newsletter.

I think open source is a very large threat. One the one hand, you have the dinosaur vs dinosaur scenario: there is a lot of work being done, and a lot of takeup, in platforms like Bodington, Moodle and Sakai. As these products mature (and they are very close) I think the LMS industry may lose the academic market completely. Corporate will take longer, because corporate has a vested interest in promoting commercial solutions, and a natural disinclination to trust anything not produced by means of the corporate model. The only major barriers for OS LMSs I can see are integration with proprietary MIS and possible concerns about liability for patents and other IP infringements.

Then there is the dinosaur vs mammal scenario. This isn't even a contest. There's nothing in the commercial e-learning space that competes with, say, WordPress, dwiki, ELGG, or the like. If commercial competition emerges, it will be in the e-portfolio space, where work is being done to freeze out the open source alternatives (much in the way SCORM has frozen out open source alternatives in that space).

The success of commercial e-portfolio (and therefore, commercial educational blogging, etc.) will depend on those companies convincing potential customers that they need to centralize, for reasons of proprietry and security, and hence purchase (closed) enterprise solutions. I expect a fair bit of this, with a consequent push back and forth between whether a student (say) has to have a personal identity / portfolio on an institutional system, or whether the student can choose his or her own system and merely import their login and identity.

I wouldn't be wanting to make any bets in this space; the tighter (and more closed) the e-portfolio specs work is, the more likely is a commercial solution (and it has been pretty tight so far), but I don't think you can get 'tight and closed' to work with 'open and distributed', which is the wave of these new apps.

I'd be working on a service, with an api, that can just be plugged into whatever emerged. There are some solid commercial opportunities there.

Downes said...

This comment, being too long, will probably get deleted, so read it quickly before the Blog Police remove it.

Ben Watson said...

Wow. Excellent post Stephen.

Ben Watson said...

In terms of good open source LMSes I would also add Saki
(released by Akiva) to the list as it looks like it has potential and interestingly it has been released not-for-profit by a for-profit company (kind of a reverse of what not-for-profit FireFox did with their recent creation of the for-profit Mozilla foundation). I would be interested in hearing what others think of Silk or ven this emerging hybrid of profit/open source.

Harold Jarche said...

I agree with Stephen about the LMS battles that may be looming. This discussion is so far about what is happening in North America but I think that we will see some real threats and new business models coming from elsewhere.

As many of you know, I think that the services space is where the real action will happen. The big companies will be able to compete with proprietary apps like LMS, but there will be no room for medium-sized players. Unless you plan on competing/being bought by Microsoft, then I would suggest that you leverage the power of open source and add services to an existing OS platform.

David Grebow said...

Stephen, Ben et al.: I'm working as the CLO for an open source LMS -Moodle based but on steroids - and in the academic marketplace we're taking one customer a week away from eCollege, WebCy, Embanet and BlackBoard.

They cannot compete on price, fucntionality, features, security, no MSFT tax, runs on all platforms (Tiger OS thru Firefox), has a great GUI and oh yes did I mention price - about 70% LESS than the other vendors who provide less for more.

So the dinosaur is a Tyranosaurus Rex and the older proprietary platforms are toast.

Downes said...

Well there you go.

This raises the question of the reliability of LMS reviews produced by the consulting companies.

Brandon Hall's 2005 reviews, for example, do not cover any of the Open Source LMSs. I wasn't able to find a similar page for Elliott Masie, but would hazard a guess that his work is similar.

Are the e-learning pundits missing the biggest story in e-learning this decade? Probably.

Mark said...

Hi Guys,

Full Disclosure - I work for Elliott I'm both biased and have insider information. I do have a couple of points to offer:

1. Ben - we do need to be looking for ways to better integrate LMSs and sims/games. I have seen some examples, notably Boeing and ECS (Orlando) in which performance in a sim/game reports back to an LMS but this is not widespread and I don't quite have a sense of the urgency it occupies on the part of LMS vendors.

2. While David is to be congratulated on his success, Stephen is also correct in noting that the corporate sector will be the last to penetrated to any degree by the OS LMSs. I would add that I think there is also a Total Cost of Ownership question here and not just a case of promoting corp. solutions. Open Source LMSs can require new staff where and ASP-model COTS product doesn't ask for the company to assume that overhead.

3. Finally I'd just chip in that the MASIE Center doesn't do product reviews but I can assure you that at our Extreme Learning Workshops we've held this summer and our Learning Retreat, we've covered open source not just in LMSs but in blogs, wikis, game engines, communication/collaboration and even graphic design.

Harold Jarche said...

Good for you Mark - glad to hear of your work with Elliott. As soon as we get out of this stupid proprietary software model we'll be able to concentrate on learning and performance and maybe get rid of a few snake oil salespeople in the process.