What Kind of Software Do Top Online MBAs Use?
Business school students and applicants might be surprised to learn about the upheaval taking place behind the scenes in the market for the software that drives modern university degree programs.
A Learning Management System (LMS) is a virtual classroom—a digital learning environment that can manage aspects of the learning process.
An LMS is a software application that instructors can use to develop, manage, and deliver their courses online. For instance, Stanford University uses the 67-second vendor-provided video on this Web page to provide new faculty with an overview of the capabilities of their learning management system.
BSchools contributor Laura Childs is an expert on learning management systems. She has written extensively on LMS platforms and has interviewed several experts in this industry for articles on our sister site, OnlineEducation.com.
Learning management systems are virtual hubs students and professors rely upon for nearly all online learning functions. They are a medium for communication and collaboration. Students might log in to LMSes to attend lectures and access course materials. Professors use LMSes to deliver instruction, monitor discussion, and track learner outcomes. . . For example, courses that use web conferencing tools to deliver live, interactive lectures can recreate the spontaneity of classroom discussion; those that use pre-recorded lectures and forums provide a more flexible learning environment.
Doug Shackleford of the University of North Carolina at Chapel Hill explained to Poets & Quants how the school’s MBA@UNC online MBA program depends on a learning management system to enable two learning modalities. The first is self-paced instruction, through which, according to their own schedules, students view recorded lectures and study readings posted within the LMS. The second involves live interactive class sessions, that allows students to gather in their online “classroom” created by the LMS for a lively discussion using webcams:
“We call it ‘The Brady Bunch,’” Shackelford quips. The courses are limited to 15 students and one professor and are set up in a non-lecture, seminar format. It’s called “The Brady Bunch” because everyone’s face is on the screen in a grid format for the entirety of the 90-minute class period. “Everybody knows everybody else’s name,” says Shackelford, noting the format of the class is one of the elements that separates Kenan-Flagler’s online version from others.
A Vast LMS Market
The market for software with these capabilities is vast and rapidly growing. The most accurate estimate for the size of the global academic LMS market falls within the range of $1.5 to $2 billion per year. Combining this academic market estimate with an approximation of the market for corporate learning management systems results in a total market size of about $5 billion. Several studies estimate a compounded annual growth rate for this market of about 20 percent.
Microeconomic theory maintains that lucrative markets like this one should attract an influx of competitors that provide choices among products and drive prices down. Despite all this market potential, about ten years ago, LMSs seemed like just another winner-take-all technology industry contest—with yet another large player like Microsoft, Google, or Amazon appearing to have achieved overwhelming long-term market dominance.
In 2005, Blackboard, a vendor based in Washington, D.C., controlled 70 percent of the global market for learning management systems. Before the end of the decade, Blackboard had bought three firms which had grown large enough to pose competitive threats, then sued another for patent infringement. A decade ago, it looked like most universities and corporations around the world would have few options but to rely on Blackboard for their LMS software indefinitely.
Blackboard’s Dissatisfied Customers
Many of Blackboard’s customers were dissatisfied with a product criticized as bloated and inflexible. LMS industry expert Michael Feldstein writes that “Blackboard was already viscerally disliked, both as a product and as a company, by a large segment of the market in those days.” Feldstein continues,
Nobody would have predicted that a project started by two graduate students at Brigham Young University and assisted by their professor, who happened to be a bored former executive from a pioneering cloud storage company, would become the product that could break through Blackboard’s dominance. Yet that is exactly what happened.
In 2010, with $1 million dollars in seed funding from EPIC Ventures as well as angel investor and Mozy founder Josh Coates, the BYU team incorporated a startup they called Instructure and set up shop in Salt Lake City. The team built their learning management application, Canvas, to support a modern, flexible and easy-to-use interface that offered advantages over the dated Blackboard Learn legacy application first written by two Cornell University students twelve years earlier in 1996. Moreover, Canvas was cloud-based at a time when few recognized all the advantages of the cloud server model, like freedom from the burdens of software installation, maintenance, and upgrades. By 2013, Instructure had signed 300 universities and 4.5 million people were using Canvas.
Instructure has continued to gain market share at the expense of Blackboard ever since. Finally, in June of 2018, news broke that Instructure’s Canvas application appeared to have overtaken Blackboard Learn as the primary learning management system at more colleges and universities worldwide. Feldstein writes that “this is a stunning development for a company that seemed to have established an unbreakable market dominance a decade ago.”
Canvas: Capitalizing on Defections
Within the past few years, Canvas has benefited from a string of defections, taking business away from competing learning management platforms at high-profile universities—many of which operate some of the world’s highest-ranked MBA programs. Chief among them is the Harvard Business School. In this video, Steve DeMartino of HBS explains how the school finally chose Canvas after an unsatisfying experience with a competitor preceded by a custom-built solution which proved too expensive to maintain.
Other universities that recently switched to Canvas include Stanford, Yale, Northwestern—and even Cornell, Blackboard’s very first customer. Moreover, the University of Chicago Booth School of Business and the London Business School have also switched to Canvas. In addition, two of the top-ranked online MBA programs at Carnegie Mellon and Indiana University also use Canvas. A Purdue University study found that every Big Ten university that conducted a review of their learning management system since 2013 has also switched to Canvas.
Forcing a Switch to a New LMS?
The top-ranked University of North Carolina remains an anomaly. UNC continues to operate a combination of the Sakai and Blackboard Collaborate learning management platforms. However, UNC and the other remaining universities that have stuck with Blackboard may find that the vendor’s deteriorating financial condition, brought on by fierce competition from Instructure, may force them to switch sooner than they might prefer.
This ominous Bloomberg report notes that the loss of all these customers is making it difficult for Blackboard to make payments on the company’s $1.3 billion debt—a situation that threatens the firm’s survival. As a result, some of Blackboard’s bonds are selling at “deeply distressed” levels. The story also points out that “S&P Global Ratings downgraded Blackboard…to CCC+ because of high leverage and declining LMS revenue, saying there’s ‘limited time to turn around its business’ before maturities in 2019 and 2020.”