By Sam S. Adkins, Chief Research Officer
This article was originally published in the ASTD eLearning newsletter in June 2007. The information in the article is based on the report, "The US Corporate Market for Learning Services: 2007-2012 Forecast and Analysis."
There are now waves of new learning products hitting the global education and training industry. On the surface it appears like open source technology is the most significant wave. It is certainly getting the most attention. Yet, a "big-picture" analysis reveals that open source products are just part of the story. There are larger socio-economic trends at work that transcend open source.
These trends can be conceived as a concurrent series of innovation waves that go beyond the concepts and business models of open source software licenses. In each of these waves there are several layers of paradigm shifts that change the way we view technology, business models, learning design, and the needs of the learners. Viewed in this perspective all of these waves are necessary and are all contributing to a profound evolution of the industry. These waves of innovation represent a shift from centralized sources of learning technology to widely distributed peer-to-peer learning communities.
The first wave is cresting and it is the shift away from classroom-based instruction to electronic instruction. The needs of buyers and sellers dominate this wave. From the buyer's perspective, the goals of the first wave are to increase the number of students reached and to reduce the cost of training. Sellers are obviously motivated by revenue and profit. The instructor's role is that of an SME. The primary innovation is the quantitative and qualitative consistency of delivery. It also overcomes the logistical limitations of physical classroom training. As an unanticipated side effect, it vicariously solves the infamous Pygmalion Effect because it circumvents the inherent biases of human instructors.
The learning paradigm of the first wave is a one-size-fits-all model that can be characterized as compliance. The leading commercial elearning vendors now tout compliance as the core value of their products. The dominant product type is the learning management system (LMS) and the key output of this product is usage reporting.
The impetus for the first wave is training. There is an old saying that "training is narrow and education is broad." The thrust of the second wave is education and true to form the wave is much broader.
The second wave of innovation is building momentum and characterized by customized open source products. The needs of teachers, trainers, and practitioners dominate this wave. The goal is pedagogical and centers on improving educational methods. The instructor's role is integral. This wave is being championed by teachers and instructors that are modifying and adapting open source products to improve knowledge transfer in particular situations. The learning paradigm is still one-to-many but customized to groups. The primary innovation is the pedagogical adaptation to the needs of specific learner groups. Suppliers define their core value as providing custom services to practitioners. The dominant product type is the course management system (CMS) and the key output of this product is curriculum. Often the courses are distributed with open content licenses allowing the content to be edited and repurposed. There is a natural progression from open content developed with open source technology to Open Learning applications built with Web 2.0 technology.
The term "Open Learning" was coined many years before Web 2.0 entered the lexicon. In both, the locus of control is centered on the user. The traditional pedagogical concept of open learning involves giving the learner control of most of the instructional process. Web 2.0 Open Learning gives the learner complete control.
This third wave is just visible on the horizon and includes technologies that are designed to be used by the learners themselves. The goal is collaborative-learning and there is no instructor per se. Every contributor is both a teacher and a student. The needs of the contributing members of the community dominate this wave. This wave is being championed by Web 2.0 technology suppliers and non-profit organizations with large user communities. The learning paradigm is personalization. Suppliers define their core value as providing technology that supports communities of individual contributors. The primary innovation is technology-based social engineering. Suppliers are experimenting with several revenue models right now with subsidies and advertising being the only clear opportunities so far. The success of any product is usually measured in terms of revenue or reach. While the revenue model is still hazy for open learning products, the global reach will be unprecedented.
Open Learning products tend to revolve around reference-ware, self-paced elearning, and collaboration so far. There is no dominant product type yet, but the most succinct early expressions of community-based open learning are three Wikipedia projects: WikiEducator, Wikiversity, and Wikibooks. In each, learners are explicitly invited to contribute and edit content.
Measuring the Individual Waves
The wave metaphor is often used to measure the success of individual products as well. Ambient Insight identifies five product lifecycle phases: market research, market creation, value creation, commoditization, and value migration. The lifetime of a product is visualized as a wave that crests in the commoditization phase but there is no guarantee that a product will make it that far. Many products stall in the early phases. And there is always another wave that washes away products that fail to gain traction.
Commercial learning technology is well into the commoditization phase. A wave of new open source products has entered the pipeline but very few new commercial learning products are now being released. In contrast, many new service suppliers are appearing in the market and this is indicative of the shift from products to services brought about by open source business models. In a nutshell, services are hot, products are not.
There are now several types of open source learning technology products that are entering the value creation phase and products continue to enter the pipeline. A growing number of user-centric Web 2.0 open learning products have just entered the R&D phase.
The most mature open source product is open source course management systems (CMS) and they are now in the value creation phase. This phase is characterized by wide adoption and the invention of new features. Course management systems are interesting products in that they cannot be directly compared to learning management systems. A CMS is designed around the needs of the practitioner and the focus is on content. An LMS is designed around the needs of the administrator of large organizations and the focus is on reporting. The demand shrinks in direct proportion to the size of the organization; the smaller the organization, the less demand for LMS products.
In the corporate market the demand for open source CMS products grows in direct proportion to the size of the organization; the smaller the organization, the higher demand for CMS products. But this is not true in the academic market. In a recent study by Courant and Griffiths, the authors stated that educational institutions with annual operating budgets of greater than $100 million were more likely use open source applications. They remarked, "In other words, the organizations that are most able to afford proprietary systems are the ones that tend to use open source products."
What is fascinating from a market perspective is that commercial learning content management systems (LCMS) products never made it out of the market creation phase. To some degree their momentum was cut off by LMS products and enterprise content management systems. Yet open source CMS products have managed to enter the pipeline and reach wide adoption in a matter of a few short years.
There are now several popular open source CMS products on the market. The best known (at least in the US) is Moodle and is clearly in a phase of wide adoption. As of February 2007, Moodle has over 23,000 registered sites and rapidly approaching 10 million users. Over 40 of these sites have more than 20,000 users. But the real strength of Moodle is the 1.8 million practitioners that are now using the product.
Profit Rides All the Waves
Taken in context, open source learning technology is just a part of general open source technology trends. In November 2006 Michael King, director of market development for IBM's Global Education Industry group said in the press that, "Open-source software and open standards can revolutionize the applications and technology for learning, just as Linux, Apache and Eclipse have transformed and standardized infrastructure software."
The business model for open source learning products is identical to the business models of all open source products. According to the Free Software Foundation (FSF), "free software is a matter of liberty, not price. To understand the concept, you should think of free as in free speech, not as in free beer." According to the FSF, the "freedom" in free software relates to the freedom to "run, copy, distribute, study, change, and improve the software."
The FSF has been strident about the commerce issue and comments that, "Since free software is not a matter of price, a low price isn't more free, or closer to free. So if you are redistributing copies of free software, you might as well charge a substantial fee and make some money. Redistributing free software is a good and legitimate activity; if you do it, you might as well make a profit from it."
Thomas De Praetere, the creator of the Dokeos CMS writes that, "The basis of the open source business model is to release a software (usually for free) in the public domain so as to allow anybody to use and/or modify it and sell something associated to that software, whether advertisement, hardware or different kinds of services: content, support, development, consulting."
In open source products, the value proposition is not the product itself, but rather the services surrounding the product. This kind of shift is called a value migration in product marketing analysis. In open source the value migrates from the product to services, sometimes called the "product halo". This halo of services includes administration, training, integration, customization, localization, and support.
There is now a clearly visible product halo surrounding many open source learning technology products. In other words, there are now ample revenue opportunities for vendors selling services for open source learning products. In recent Ambient Insight research it was found that the demand for open source learning services in the US was growing much faster than the demand for services on commercial systems.
The US demand for open source services is growing faster in the corporate segment than in the academic segments, driven largely by small business buyers. In terms of revenues for suppliers, corporate buyers will account for 82% of all open source learning services revenues by 2012. What is surprising in the Ambient Insight data is the new interest coming from larger corporate organizations.
The growing adoption of open source products has created a cottage industry for suppliers that specialize in services. There are now hundreds of service firms across the planet offering services for open source learning products. This growth of services mirrors the trends in the larger IT industry. In what is perhaps the most comprehensive study on the economic impact of open source software funded by the European Commission’s Directorate General for Enterprise and Industry, the analysts forecast that by 2010, 32% of all commercial IT services will be related to open source software.
Relative to open source learning products, training is the top revenue-generating service for suppliers. A growing number of associations, corporations, and academic institutions now sell fee-based training on open source platforms and tools. Hosting, support, and customization services are also lucrative revenue opportunities for suppliers. Many companies are now selling the courses they develop and deliver on open source platforms.
In the US alone there are at least 90 firms that provide commercial services or content on the Moodle platform. Almost all of these companies are small businesses. Moodle has a commercial arm that provides fee-based services and also has a certified partner channel that offers services.
Let Me Count the Waves
There are other popular open source CMS products besides Moodle including LON-CAPA, ATutor, LAMS, Claroline, .LRN, ILIAS, Ganesha, metacoon, and Dokeos. Sakai is starting to get traction as well. All of these products are attracting commercial services suppliers.
LON-CAPA is a web-based CMS supported by the National Science Foundation. This product has a strong emphasis on exams, quizzes, and assessments. As of early 2006, LON-CAPA averages over 40,000 course enrollments each semester. What is interesting is the uptake for LON-CAPA in high schools and the participation of commercial content publishers.
The ATutor CMS is another popular product and originated in Canada. The organization has a transparent business model and openly publishes their pricing for various services on their Web site. There are dozens of third-party service providers listed as well.
Claroline (for "Classroom online") is popular in Europe and is now available in 30 languages. Claroline has a commercial arm that provides fee-based services such as hosting, training, customization, and support.
Originally developed at MIT, .LRN is used by over half a million global users in corporate, government, non-profit, and academic organizations. Corporate users in the US include Coachville and Partners HealthCare. There are several US vendors that provide commercial services on .LRN including The Otter Group and Solution Grove.
Dokeos is prominent in Europe and beginning to gain traction in the US and Canada. What is interesting about this product is the high percentage of business users compared to other products. For example, Aerolearn uses Dokeos for their commercial aviation training platform and offers a "packaged" version of it customized for other aviation training companies.
LAMS is an interesting product that breaks the CMS mold. It is in use in over 50 universities and hundreds of K-12 schools across the planet. According to the developers the adoption rate is accelerating. The developers define the product as a "revolutionary new tool for designing, managing and delivering online collaborative learning activities." LAMS International sells three types of services: support, hosting, and training.
Sakai has been getting a lot of attention lately. Sakai has attracted major suppliers and publishers in the past but this latest wave is different. In the last few months very large commercial providers like Oracle and IBM have created dedicated service divisions centered on the platform. IBM has committed programming resources to the project and has started donating code. IBM's Michael King said in the press that, "We believe an open cycle of innovation that leverages common platforms such as the Sakai framework will become the model for developing and broadly deploying new solutions for educational institutions."
Open Source is not the Last Wave
Ironically, the biggest threat to open source learning technology may be new Web 2.0 products. It is ironic because most of the current Web 2.0 applications are built on open source platforms and running on open source servers.
There is a lack of consensus on the precise definition of Web 2.0, but from a product standpoint, these products are Web-based applications. The use of the entry-level application is often provided for free, the business model tends to be based on advertising, and the source code is almost never made available. In terms of design, these products allow users to create their own content and share it with members of their community.
Open source licenses are designed for software distribution but there is no software distribution process with Web 2.0 applications. Tim O'Reilly coined the term "Web 2.0" and in 2006 made a series of provocative statements declaring that open source licenses were obsolete. In explaining those statements he said, "…because their conditions are all triggered by the act of software distribution, they fail to apply to many of the most important types of software today, namely Web 2.0 applications and other forms of software as a service."
In open learning the value migrates to something never anticipated by product suppliers or practitioners: user-generated content and data. In terms of adoption, it enables very large numbers of people to not only get access to learning but to participate in the development of it. Open Learning could potentially replace both commercial and open source products. This is called product substitution in traditional competitive analysis. An example is the decline of encyclopedia sales blamed on the Wikipedia phenomenon.
Do Waves Have Tails?
The researchers at Ambient Insight track eight pedagogically-defined learning product types and there are now open source versions of six of them. There are open learning versions of five of them.
New types of open source products such as e-portfolios, personal learning management systems, social learning networks, and user-generated content platforms defy traditional categorization but are also steadily growing in the market. Elgg is a good example.
Open Learning applications are appearing in the product pipeline much faster than open source products. Yet suppliers are struggling to find a way to monetize the products. In the meantime a wide range of open source products are making it past the R&D phase into the market creation phase. The second part of this article is called, "Shorter Waves, Longer Tails: The Rising Tide of Open Source and Open Learning Products" and describes the astonishing array of new open source and open learning products.
It appears the waves are coming faster but have longer trajectories, or tails, meaning they reach very particular but highly distributed groups of people. This could turn out to be the most significant innovation so far, but then again there is always another wave.
Adkins, S., (2007)."The US Corporate Market for Learning Services: 2007-2012 Forecast and Analysis. Ambient Insight, LLC."