About the PowerSchool Acquisition of Schoology
I have covered Schoology in a series of posts at e-Literate, mostly focusing on their partial entry into the higher ed LMS market. I described the company and product in some detail in this 2016 post. In addition, Jeanette covered the recent Schoology NEXT users conference. In the EdSurge article last week, she observed:
New K-12 LMS Market Data
The “third and fourth place” comment relates to our new K-12 LMS Market Analysis service, and the data helps explain why this acquisition makes sense.
Like our higher ed market analysis, we (through our partnership with LISTedTECH) track historical trends in the K-12 market, allowing a view of market trends. One view is looking at percentage of North American (US & Canada) new LMS implementations each year by vendor.
Some notes from this data: 1
Schoology and Canvas are strongest competitors for revenue-generating LMSs in K-12, generating far more new business than other proprietary systems.
Not directly shown in this view, but Google Classroom is playing an increasingly large portion of the “All Others” category. This is important, but that solution does not directly generate revenue, and this story is about corporate finances.
PowerSchool did not get big impact from the 2016 Haiku acquisition and is a secondary player at best in the LMS market. This position has limited their ability to truly provide full enterprise K-12 solutions and “unified classroom”. Schoology, however, does have real market power in K-12.
At the same time, business is difficult in this market, and Schoology has gone through layoffs since their late 2015 fund-raising round of $32 million. Their biggest competition in the K-12 market is Canvas and Classroom (primarily) and D2L (secondarily), and it takes capital to aggressively compete.
Does It Make Sense?
Seen in this light, the acquisition makes sense from a PowerSchool perspective. They can now try a more realistic approach to fully serve K-12 districts with their “unified classroom”. This is a data play at its heart, as described in a 2016 EdSurge article on PowerSchool.
The acquisition also makes sense from a Schoology perspective, as they now have a “potential” source of capital in a difficult market. I put potential in scare quotes because we don’t know how much Vista Equity Partners and Onex will invest in Schoology product and service development. Vista is well known for having a playbook on how they view software companies, as described in a 2018 WSJ article.
The article is largely about Vista’s founder and leader, Robert Smith. Yes, the one who said he would pay off all student debt for Morehouse College 2019 graduates.
Potential Impact on Market
Assuming that Vista follows this playbook, there will be significant changes to Schoology’s operations, and if successful the company will become more profitable. If those changes take investment, Vista has been known to put in near-term money (often debt) to get longer-term payoff. The real investment is in PowerSchool, but there are certainly signs that Schoology will be run as a separate entity, at least initially.
I can see both positive and negative effects for other LMS competitors such as Canvas and D2L (something makes me think that Google doesn’t spend too much time worrying about this type of move). On the positive side, corporate acquisitions tend to create pushback from academics, although this effect tends to be greater in higher ed than for K-12. But certainly Schoology’s competitor’s have new marketing messages to use. On the negative side, one of the top four K-12 LMS competitors is about to get a lot more financially sound and likely more aggressive. The acquisition makes sense, but that does not necessarily mean that it will succeed.
For now, the pending PowerSchool acquisition of Schoology is more evidence that corporate finances will have an outsized influence on the LMS market. This move could even accelerate other LMS companies to shore up finances. We’ll keep our watch on the market.
Update: Make sure to read this post from our partners at LISTedTECH, including a really cool graphic showing K-12 SIS & LMS shared usage data.
Reminder: If you’d like a deeper look at the data, check out our new K-12 LMS Market Analysis service.
Disclosure: Schoology, Canvas, and D2L are subscribers to our LMS Market Analysis service.
1 Disclosure: Schoology, Canvas, and D2L are subscribers to our LMS Market Analysis service.