Ellucian's Acquisition and the New LMS Wars

Ellucian's Acquisition and the New LMS Wars

If you want to get drunk, go to a higher education conference and take a shot every time someone says competency-based education (CBE). It is one of the most discussed concepts in the industry today, but what is more impressive is that CBE isn't just the buzzword du jour in “edtech” circles. This drinking game would get you drunk in education policy, instructional design, and even accreditation conferences.

And the party is about to get rowdier, as the industry’s largest software player, Ellucian, has thrown its hat—and cash—into the ring with its acquisition of Helix Education’s Learning Management System (LMS), one of the only LMS’s designed specifically to support CBE. (Full disclosure: Paul was one of the initial architects of the Helix LMS when he founded and ran Altius Education, but he no longer has a financial stake in it.)

The only thing surprising about the acquisition is how little attention it has generated. Despite the muted response, the acquisition is big news for CBE and could signal a new front in the LMS wars if Ellucian is able to prioritize the new asset and let it thrive. Here are three reasons why.

1. The momentum for CBE is growing; this move signals that the big guys believe it is for real.

Hype doesn't always translate to reality. There are only a small handful of institutions that have either pioneered or made the move to CBE models. As many as 300 more are investigating or actively considering it—potentially a substantial enough market for a startup—but truly adopting CBE involves complex business model innovation that won’t be easy for many existing institutions. From Ellucian’s perspective, therefore, CBE is still a small niche.

But in certain respects, CBE has similar potential as online learning, which started with just a few institutions but has grown to be a huge multi-billion dollar industry. Over a third of postsecondary students are taking at least one fully online course—and many, many more in blended courses—after just a couple decades. Combining CBE with online learning can create an even more disruptive model that could revolutionize higher education, especially given the widespread political support on both sides of the aisle for CBE that online learning by itself has not enjoyed. This move signals that Ellucian agrees.

2. Ellucian now owns two of the three systems critical for supporting a CBE environment at scale.

It’s hard to overstate how much CBE changes the internal functions of a university. It changes how students learn, the student-faculty relationship, and how students progress toward a credential. These changes require re-engineering the processes and priorities of a university, which in turn requires supporting systems.

As is typical in the early parts of a new industry, the early CBE adopters have gotten through by building their own systems or hacking systems not intended for CBE. But as CBE goes mainstream, schools will likely need at least three off-the-shelf systems.

First, they will need a CBE LMS to support the reengineered learning and assessment experiences. Ellucian now has this.

Second, they will need a way to support the changed student-faculty relationship. This could still break many ways, but we believe that the emerging Learning Relationship Management (LRM) system category—led by players like Fidelis Education and Motivis—will play a big role in supporting this. (Full disclosure: we are both on the board of Fidelis, so we are admittedly biased—but you can also ask why we both chose to be on the board.)

Third, universities will need a Student Information System (SIS) that can track progress and financial aid in a CBE world. The SIS world has been the bread and butter of Ellucian, and the company has many years of experience using it to support CBE institutions.

Don’t be surprised to see Ellucian build or buy a system to get into the LRM game as well. The early winners in most industries are integrated players, as it is unknown how the different pieces in a system must integrate. Ellucian has a difficult but intriguing opportunity to provide the off-the-shelf bundle to help universities move into this world.

3. The Helix LMS is an integrated offering that is designed well, low-cost, and CBE-centric, which means it could compete with and be disruptive relative to Canvas and Blackboard.

Although Ellucian's representatives denied that this acquisition was a move into the generalized LMS market—even announcing the acquisition at a conference where Blackboard and Canvas were present (can you say awkward?)—the last thing you want to do as a potential disruptor is to galvanize a response from potential competitors until you have the clear upper hand. What else would you expect the company to say?

Canvas captured market share from Blackboard in the LMS wars through a classic disruptive strategy—by being simpler to use and lower priced. Ellucian has the potential to play a similar game with the Helix LMS, which has theaesthetic chops to rival Canvas’s usability, offers tools built specifically for CBE, and the potential for integration with Ellucian’s Banner and Datatel products, for simplicity’s sake.

If a school wants just one LMS to support both its classic credit-hour and CBE models, those that are designed for CBE will have the leg up. That’s because these systems allow competencies to be aggregated to create the equivalent of a classic course. (On the other hand, there is no way in a standard LMS to easily sub-divide a course into its component competencies.)

And because Ellucian makes the lion’s share of its revenue today from an expensive SIS, it could choose to beat Canvas on price by effectively pricing the LMS as free, as long as the inclusion of an LMS allowed them to maintain SIS margins or acquire new customers.

Of course, this last fact also remains the big question mark for Ellucian: Will it be able to prioritize this new asset in what is likely to be a fast-growing but initially small market? But for now, they have some good assets at their disposal to make a splash and reignite the LMS wars. And regardless they’ve added just a bit more spice into the CBE party mix.

Paul Freedman is founding partner and CEO of Entangled Ventures. Michael B. Horn is an EdSurge columnist and co-founder and Executive Director of Education at the Clayon Christensen Institute for Disruptive Innovation.

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