Speaking of long range plans, another element that vendors are not often asked about is “What’s the end game?” Any venture-backed private company has one, overriding purpose: provide a positive return to it’s investors. In the history of LMS companies there are two primary ways of providing return, 1) sell the company, or 2) go public. Since going public is not realistic for many LMS companies, selling the company at a decent valuation becomes the most viable option for investors looking for a return. The pressure from venture capitalists and other investors on an LMS company’s management to do this can sometimes be intense.
Buyers need to be prepared for this event. And if history is any guide, I’d say there’s well over a 90% chance it will happen. Keeping source code in escrow, understanding what happens with the contract in a change-of-control event, and putting other provisions in that specifically cover this, is something any competent legal department can handle, as long as they receive direction ac- cordingly.
Predicting the future though can be tough, and acquisitions often carry an abundance of unrealized promise. Anyone remember these key events in LMS history?
• July 29, 1999: Lotus Buys Macromedia Pathware Training Soft- ware Business
o This was, according to Lotus, going to give the company the
“most comprehensive online teaching and learning solution” in the LMS and e-Learning industry.
• June 19, 2001: Sun Microsystems announced it has signed an agreement to acquire ISOPIA
o “ISOPIA’s industry-leading LMS system, combined with Sun’s
education consulting, courseware, eLearning program and professional certifications, will help Sun’s enterprise custom- ers better deploy new Net technologies in their IT organiza- tions and better manage all of their corporate learning pro- grams,” the press release said.
Predicting the fu- ture though can be tough, and acquisi- tions often carry an
abundance of unre- alized promise.
er ial n o t fo r d ist ri b u tio n
o According to PeopleSoft’s press release, the acquisition “will
make PeopleSoft the first major enterprise vendor to deliver a fully integrated enterprise learning management solution.” After every single one of these acquisitions I had industry experts essentially tell me it was “game over” for the pure-play LMS companies. These enterprise
software companies would now dominate the LMS space.5
In an article I wrote for T+D Magazine in April of 2003, I argued that enterprise software companies would actually have a difficult time dominating the e- Learning space, particularly the LMS market. The primary issues keeping them from dominating, I theorized, were focus, pricing, and business ap- proach. I pointed out that the industry had already had several examples of large, enterprise software providers claiming to be ready to compete in the learning technology space, only to pull back a few months later.
At the time, this article generated several immediate reactions from learning industry professionals. In one open letter to me posted on an industry blog, the author predicted a gloomy future for LMS vendors when he wrote: “Kevin,
you’re right that many of the enterprise software companies have entered and exited the market many times. Unfortunately, I think it’s going to be different this time. SAP, Siebel, Oracle, and many others are actually showing up at the right training industry events – and they’re actually looking pretty good.”
In another rebuttal article to my piece, titled “Enterprise Vendors are Good for the LMS Market,” the author had this perspective: The integration of e-
Learning technology into the enterprise application suites of the large enter- prise vendors such as Sun, Oracle, IBM, Siebel, Microsoft, PeopleSoft, and SAP is “good for the industry, particularly the LMS vendors. The presence of the large
suppliers validates the demand for the products. Their global market penetration will accelerate the adoption of e-learning technology. A rising tide lifts all boats.”
While funny to look at now, I’ll cut these guys some slack – it’s easy to go back in time and prove someone’s theory wrong. But the easiest prediction to make for years – one that is as true today as it was at the beginning of the decade – is that the LMS industry will see continued consolidation. The eLearning Guild’s own data lists out 135 LMS companies in the market today. And even with all of
5 Editor’s Note: Our data indicates that while the enterprise software players
have made inroads, the companies that started as “pure-play” LMS suppliers still dominate this space. See “Market Share, Satisfaction Results, and Guild
Acquisitions will be geared toward pro-
viding the Holy Grail for most hu-
man capital tech- nology providers:
an integrated talent management After every single one of these acquisi-
tions I had industry experts essentially tell me it was “game over” for the pure-
play LMS compa- nies.
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those different providers recorded, the Guild still gets requests from its mem- bers to add more LMS suppliers to its database.
The industry can’t support that many different systems. But future consolida- tion for the LMS space will likely be the most interesting we’ve seen, since many acquisitions will be geared toward providing the Holy Grail for most hu- man capital technology providers: an integrated talent management system.