Thomson Corp exits Learning Market

Life is very busy at the Thomson Corporation these days. Not only have they just completed the sale of their NETg subsidiary to SkillSoft for $270 million, but they have also announced they are selling Higher Education assets of Thomson Learning to a couple of venture funds for $7.75 billion. This now leaves them better funded to pursue growth in "better aligned" to their core operating model. Currently that means acquiring Reuters.

All this is very interesting for Thomson, but shows another big player significantly exiting the learning market place. I remember maybe 10 years ago speculating with Peter Rothstein, then head of Lotus's LearningSpace business, that the big publishers/information companies had a significant potential to engage in and shape the emergent e-learning industry. The sentiment was proved to be right, but the reality wasn't. Certainly the publishers came to the market. But then they floundered, and largely they have gone south.

What does this say about the ability of large companies to make money from the learning industry? Not sure it is a positive message. If large owners of learning content assets such as the educational publishers struggle, then what hope is there for smaller providers? Personally, I think their strategies for developing the market were flawed and therefore likely to struggle, but its still an indictment of the learning market that they couldn't make enough money to stay around!

The LMS M&A Drag Factor

We all know there has been (and still is) a lot of mergers & acquisition activity in the LMS market, with plenty of consolidation going on. But although we've seen a lot of vendor consolidation, how much consolidation of products have we actually been.

Whilst some of the vendors have been very focused on trying to consolidate market share, they seem to be struggling to actually consolidate the customer bases underneath them. For example, Click2Learn and Docent merged to form SumTotal Systems. SumTotal then buys Pathlore, who itself had fairly recently bought DK Systems, and Pathlore still had quite a lot of old Registrar customers that still hadn't moved off that platform. Now SumTotal may have a large user base, but user base for what? Certainly not the current SumTotal platform - yet. And SumTotal is not unique by any stretch of imagination. We even see this is smaller regional providers that have been playing the M&A game. Most of the LMS vendors have at least some of this kind of historical consolidation challenge.

One key reason for this is because many of the major customers just upgrade to the latest release of their old product to maximise their support window. They then sit and wait to see how things evolve with the new company. So it takes a while, often more than two years plus to see how a given customer base will react to the acquisition of its vendor, sometimes longer. We're also seeing the same thing happening (but with even longer timescales) in the HR systems space following Oracle's acquisition of PeopleSoft. This isn't so much a function of size, but of perceived effort versus value to move sooner.

Elearnity has been tracking and analysing these vendors for many years. But one new strategic consideration that we're now factoring in is what I call the "LMS M&A Drag Factor". Its all full well and good having a large user base, but you have to be able to service it and move it forward. That's tough to do in the LMS world with multiple platforms and technology bases. The more diverse this is, the more effort needed to leverage it yourself, and the bigger your investment sometimes needed to create something more compelling to move everyone forward with you, rather than jumping ship with someone else. I think the LMS M&A Drag Factor will have quite an influence on individual companies performances in 2007/8.

David

E-learning vendors - market ripples

The recent news of that AdVal had gone into administration was not a surprise, but it was a disappointment. Rumours had been circulating for most of the year that AdVal was struggling beyond the norm, but its' recent acquisition of the Maxim business has doubled the consequences of it.

Couple this with other acquisitions and uncertainties over the past year and it paints a mixed picture of change and uncertainty. WBT's recent acquisition by Horizon Technology is another local example. Some of the bigger US vendors have also suffering the same fate. And whilst the LMS market, for example, has seen significant vendor consolidation at the top end, we're yet to see significant platform consolidation follow on from it - i.e. the vendors still have a lot of legacy platform transitioning to deal with.

Whilst these vendor changes are part of a positive trend to a more mature market position, short term they are only magnifying corporate uncertainty. Or if they are not, this may largely through ignorance than insight!