This applications market sizing report examines the 2009 performance of the top 10 applications vendors in the education vertical dissecting their strengths and challenges using the SCORES methodology. Even though many education institutions have been facing financial shortfall because of the recession, the report explains some of the bright spots in the vertical as vendors have benefited from upgrade and replacement opportunities among schools eager to become more efficient and accommodating to the needs of their key constituents.
Top Line and Bottom Line
On the top line, the business of selling applications to the education vertical is expected to grow faster than the overall apps market in 2010 because of the following reasons:
Pent-up demand from users that are planning to replace or upgrade their legacy systems that are either outdated or could not keep up with their changing requirements in areas such as financial accounting, student information management and eLearning.
Expansion of the education market is evident in many developing countries as government-funded initiatives are spreading in the Middle East, Latin America and Asia Pacific to raise the quality of their higher education institutions to Western standards. Such programs call for the building of state-of-the-art facilities that sport the latest teaching and administrative tools to deliver world-class education to their students.
Schools in North America and Western Europe are relying heavily on new applications for eLearning and constituent relationship management to enhance education experience, while cultivating stronger ties with students, alumni, donors and benefactors to win their financial backing in the future.
The bottom line is that the education vertical remains an attractive market for applications vendors as growth-oriented schools are aiming to use the latest software tools to help them improve their existing facilities, while laying the foundation to expand their continuous education divisions and satellite campuses around the world.
The market for applications for education vertical edged up 5.7% in 2009 as schools around the world continued to invest in new software products to help them automate increasingly diverse and complex business processes due to the proliferation of distance learning as well as the coming onslaught of learning via mobile devices, not to mention government mandates to boost the quality of teachers and schools.
Major applications vendors specializing in the education vertical have benefited from the trend as they ramped up their global expansion plans through alliances, acquisitions and product extensions. For example, after buying Talisma in 2008, Campus Management started selling Talisma CRM applications to higher education customers in the United Kingdom.
Similarly, Constellation Software bought SDS Software, which offers ERP systems for K-12 schools in Canada, in January 2010, following a series of acquisitions of education applications vendors in the United States. It has also announced plans to gain the full ownership of Gladstone, a UK software vendor specializing in education and leisure verticals.
The increased consolidation marks a new era for the education applications market as customers become more global and sophisticated in nature demanding scalable and integrated solutions to handle an array of tasks from centralized reporting to full visibility into student and constituent information.
Implications Of The Great Recession of 2008-2009
The recession has not hit the education market evenly around the world. Some countries, especially those in Asia Pacific and the Middle East, proceeded with their plans to establish digital campuses for their schools and universities as their long-term strategies to use education as a weapon to boost their competitiveness on the global stage. As a result, applications and the associated technologies from eLearning to portals have become their power accessories.
Some schools in the United Kingdom, on the other hand, reported substantial surpluses – ranging anywhere from 5% to 8% of their budget that amounts to more than £1 million in some cases – after years of prudent financial management. Many are expected to use such surpluses for facility improvement and IT projects, or risk forfeiting them to the authority.
The U.S. K-12 school systems fared much worse during the recession because much of their funding came from property-tax receipts, which dropped precipitously with plummeting housing prices.
The higher education segment was a mixed bag. While state colleges experienced revenue shortfall during the recession because of depleted government funding, the sluggish economy prompted many to go back to schools and that in turn boosted enrollment. Other colleges resorted to tuition hikes or expanded their distance learning programs.
As housing prices began to pick up, school revenues could rise accordingly. The same applies to the steady college tuition increases, a rate that for many years has outpaced inflation, which is at an all-time low. Finally the rising popularity of for-profit colleges has also given the market a big boost. Vendors such as Blackboard have already been successful in selling elearning applications to such institutions as Capella University and KC Distance Learning. All of which meant that the overall IT spending environment in the education vertical was bleak, but not dire.
On the regional front, schools in Asia Pacific and the Middle East will remain the fast-growing region for education applications vendors. SunGard High Education, for example, has reaped the benefits by chalking up numerous wins at UAE Ministry of Education, UAE University, Zayed University, and the Higher Colleges of Technology in UAE, all of which have been running their campuses with SunGard Higher Education applications.
Oracle, on the other hand, has built a strong presence in some of the well-established higher education institutions such as Hong Kong University, which helps serve as the IT model for schools in other Asian countries, a common practice among educators and administrators.
In terms of the customer size segmentation, smaller colleges and universities are likely to outspend the bigger ones because of years of underinvestment. That comes at a time when survival of these schools is at stake, which has prompted many to join consortiums to seek better pricing and support from vendors. For example, the Boston Consortium for Higher Education has seen its membership grow, while the nonprofit IMS Global Learning Consortium and European Schoolnet, which is supported by 31 Ministries of Education in Europe, have begun working together in a formal program to improve the adoption of learning technology standards and specifications in Europe.
Such collaboration could spur the standardization of school technologies for a large segment of the education market, something that until recently was done at the local or regional level.
Top 10 Applications Vendors In Vertical
The following table lists the 2009 shares of the top 10 applications vendors in the education vertical and their 2008 to 2009 applications revenues(license, maintenance and subscription) from the vertical.
|Vendor||2009 Share(%)||2009 Applications Revenues From Education ($M)||2008 Applications Revenues From Education ($M)|
Vendors To Watch
One of the trends that applications vendors are heeding is the ubiquity of mobile devices, which could become instrumental in helping spread education to developing countries where basic school infrastructure and services have been lacking.
The same applies to the onslaught of social media tools that can be harnessed to reshape curriculum development, raising the question whether Web 2.0 technologies can be incorporated into a new, and perhaps a more effective way, to deliver education to a bigger set of students.
Desire2Learn, Moodlerooms, Inc., and RenWeb are among the vendors to watch in this space, leveraging the Web as the global platform for easy distribution of content, learning management systems and school management systems.
On the upside, the education vertical appears to be holding up well despite the lingering effects of the recession. Developing countries are forging ahead with their plans to place education on top of their domestic agenda, while industrialized nations are aiming to use their precious dollars to rebuild their school systems through private and public sector collaboration and a healthy dose of technology overhaul in order to support one of the major planks of their communities.
On the downside the slumping housing market in the US could curtail applications investment in the K-12 market extending the already elongated upgrade and replacement cycle. Because of customer inertia and lackluster growth in their installed base, major education vendors appear to show little interest in ramping up their research and development efforts for their campus solutions.
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Education Market Report 2009-2014