Monitoring Vendor Risk: Ellucian, BlackBoard and Open Source Software

The higher education enterprise software market biggest issue isn’t simply vendor consolidation of Ellucian (Datatel+SunGard) and BlackBoard acquiring Moodlerooms and Netspot. The biggest issue is that SIS market leader Ellucian now joins and BlackBoard as a privately held company with no public debt.

Impact of Vendors Going Private

When a public company goes private the immediate concern is that you lose visibility into the companies financial condition. That concern is certainly valid and stems from the company usually not being required to file the SEC reports unless they also have public debt.

It also means their regulatory requirements and internal controls under SOX will probably change and wall street analysts and ratings agencies may no longer be publishing their ratings on the company.

But, just because a company is publicly traded there is no guarantee of transparency for higher education customers as with Oracle.

SunGard and BlackBoard SEC Filings

For those of you with an active vendor management program there were probably no surprises in my last post What’s Driving Ellucian and Blackboard. That’s because the generic story is actually a mash-up of the SEC filings from BlackBoard and SunGard.

Specifically their more recent Form 10-K which includes lots of insights into the then current conditions at each company as well as their management’s view of the markets they operate in and their perceived business and product risks.

If you were to take some time and read BlackBoard’s 2010 10-K (their last one), with particular attention on the Risks, you might conclude the acquisition of open source players like Moodlerooms and Netspot was foreseeable.

Similarly, if you read SunGard’s 2011 10-K, you might not have been surprised SunGard Higher Education was sold off or that SunGard was barely worth enough to pay off the debt and the taxes on the sale.

You might also form an impression of what has been going on in SunGard Higher Education contributing to the employee turnover and likely future of Ellucian based on the SunGard 2011 Q2 10-Q and understand my caution to buckle up.

Changing Vendor Risk

Even if you conclude there is a change in the vendor risk profile for the Moodlerooms and Netspot customers under BlackBoard it doesn’t necessarily mean there will be any material impacts. So far in fact is sounds like BlackBoard may just leave them alone to operate as before in the new open source group.

Fortunately we can look at some of BlackBoard’s previous acquisitions including Elluminate, Wimba and Presidium to better judge this possibility.

For colleges running Ellucian products I suppose it will depend on whether or not your SIS or ERP represents a strategic asset. Just as with BlackBoard though, Ellucian customers may never see any material effects from the consolidation of SunGard and Datatel.

There are of course other SIS, ERP and LMS vendors that are privately held so this isn’t all that unusual and the sky isn’t falling. It is just that when there is a change to private ownership it has the potential to change your comfort level with the vendor and in turn your IT strategy going forward.

Open Source Software

The fact that most people running Moodle have never heard of Moodle Pty Ltd, or even the Moodle Trust, or that Moodle’s leadership has been characterized as a “benevolent dictatorship” ought to illustrate just how little concern there actually is for vendor risk management in higher education.

That viewpoint isn’t limited to open source software managed by a private company in Australia it applies equally to non-profit foundations in the United States. For instance how many Sakai customers ever check The Sakai Foundation 2010 Form 990 to decide if the Director’s conflicts of interest are acceptable or if Sakai has overcome the earlier concerns on developing a sustainable model.

What about those considering or implementing Kuali who could review the Kuali Foundation 2010 Form 990 to decide if the In-Kind contributions relied upon and Kuali governance represents a sustainable business model they can tolerate.

Unfortunately the downside of relying on Form 990 is the lack of detail and currency in the data as evidenced by not yet having access to the 2011 Form 990 for the Sakai and Kuali Foundations.

In the end, the point is to take a more active approach to monitoring your core vendors for changes that might affect your institutional and IT strategy.

Added Footnote: Because many of you also support academic medical centers and health systems, I realized I should have also noted the recent turmoil at Allscripts as an example of what can happen post-merger (Allscripts-Eclipses) and why monitoring your vendors is so important.

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6 Responses to Monitoring Vendor Risk: Ellucian, BlackBoard and Open Source Software

  1. Cedrone Stoney says:

    Awesome issues here. I’m very glad to see your article. Thanks so much and I’m looking forward to touch you.

  2. Tim says:

    Hi Jerry,Just read your blog. Excellent post!Excellent post. When mergers occur, the companies have also to beware of becoming self-absorbed and losing sight of the fact that they have customers to please. True story: I recently proposed a small innovation project with a vendor that just merged with another company. I was told the following in response: As you can imagine combining two $4.5B companies takes a great deal of effort. I believe our attention will be very internally focused for the next 24 months. 24 months! Are you kidding me?! If you throw our our needs as irrelevant (which they are not), how much will the underlying technology change during that span of time?! So as a customer we’re supposed to put our needs on hold while the vendor focuses internally on something important to them but not to our institution. Customers feel good when vendors are genuinely focused on their success. Tim

  3. niceguy says:

    ellucian ie sungard treats those of us working in the helpdesk as second class employees. we are treated terribly and its sad really that this company pushes their wares with the customers having no idea what kind of conditions we work under even in the usa.

  4. tom.hawn says:

    Hi this is Tom Hawn at the helpdesk I am manager there. We treat you helpdesk people the way you deserve to be treated, you’re disposable.

  5. The Higher Ed CIO says:

    Taking your comment on it face I feel like I should offer some sort of reassurance that you are not alone. That is that nearly every help desk analyst or technician feels pretty much the same way you do – in every company. Not that it is right or helps you feel any better about your situation but outsourced help desk work can be even more brutal than regular in house help desk work because it becomes even more like production piece work. So you have really hit the jackpot. If there is any silver lining it is that it is just the starting point for a much more rewarding career in IT if you stick with it.

  6. The Higher Ed CIO says:

    To all readers – I left this comment in even though it appears to be from NiceGuy who commented just moments earlier. That decision was based on it not being Spam and that I don’t moderate the comments even when they are uncomfortable even if they use creative ways to make their point. On that basis I thought this additional note by the provider behind Niceguy’s comment would add to the dialogue.

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