Consolidation in the e-learning industry

Friday, 12 June 2009

Blackboard Inc (NASDAQ: BBBB), a global leader in education technology, recently acquired Angel Learning, a leading developer of e-learning software for the U.S. education industry. The deal, valued at approximately $95 million, has created a stir amongst college administrators, many of whom who had chosen Angel products to keep away from Blackboard. Some wonder if this might be the beginning of a monopoly. e-learning: the need of the hour With the global economy in a near state of free-fall, there is a greater need to maintain a highly skilled workforce. Corporations and academic institutions are re-examining the way training and education is imparted. e-learning has now become a crucial part of their strategy to deliver knowledge. With budgets being slashed, many organizations are moving from developing their e-learning requirements in-house to outsourcing them. Apart from the cost advantages, outsourcing offers access to a wider talent pool and quicker time-to-market products. To address this growing demand, e-learning service providers are keen to scale up their operations to cater to a wide buyer community and to expand their geographical reach to emerging markets. In the recent past, providers have received large outsourcing deals. General Physics, a subsidiary of GP Strategies Corporation (NYSE: GPX), completed the last phase of its large outsourcing engagement for Cigna Healthcare, which included a SumTotal Learning Management System, training administration support, help desk and vendor management. Under a five-year contract announced in August of 2008, Affiliated Computer Services (ACS) will provide curriculum redesign and management, content development and delivery, learning administration, managed learning technology and vendor management to Hertz to meet the company's human resource transformational objectives on a global basis. Strategic partnerships on both sides of the Atlantic Adayana, an Indianapolis-based firm that improves organizational success through human capital development, has been on an acquisition spree. The company’s merger focus is on vertical-market learning-services. In March this year, the company merged with Gradepoint, an enterprise learning company in Detroit. In 2008, it acquired Vertex Solutions based in Virginia; and in 2005, it acquired Indianapolis-based ABG, Inc. With an offshore development center in India, Adayana offers its global clients the cost advantage of offshoring. Across the Atlantic, providers in India are looking to gain onshore marketing and delivery capabilities to target the U.S. and European markets. This has resulted in some interesting deals. Back in 2006, NIIT, a leading Indian talent development corporation, acquired Element K, a leading provider of learning solutions in North America, for $40 million. Together, today they are one of the world's largest e-learning content developers owning the largest library of off-the-shelf online learning products. In the same year, Tata Interactive Systems, one of the largest e-learning service providers in India, acquired two companies from the Tertia Group to gain access to the non-English speaking markets of Europe. The company continues to be on the prowl for strategic partnerships to further expand its geographical reach. More recently in March of this year, Upside Learning Solutions, a privately owned company headquartered in India, partnered with Ohio-based MindLeaders to resell their collection of over 2,000 e-learning catalog courses in India. Going forward Growth estimates for the e-learning industry look promising. According to IDC (2004) forecasts, the e-learning market, which was about $6.5 billion in 2003, was expected to expand to more than $27.2 billion by 2009. The Indian e-learning offshoring industry, estimated to be approximately $341 million at the end of calendar year 2008, is expected to grow at a CAGR of 15% to reach $603 million by 2012. Going forward, the global e-learning industry is likely to see a fair number of M&As and strategic partnerships, both domestic and cross-border. ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing. This weekly publication analyzes events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities. No responsibility is accepted for errors of fact or opinion. Neither the analyst nor ValueNotes has a position in the stocks covered above, or has received any payment in any form for this report. ValueNotes does not own or trade in the stocks of companies under coverage. 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