From the issue dated November 23, 2001
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Too Close For Comfort?Some experts fear that ties between Microsoft and Blackboard could diminish colleges' choicesBy MICHAEL ARNONE Redmond, Wash.
Charlene A. Douglas isn't surprised that Microsoft wants to get into the booming business
"It has always been a given that Microsoft would get into the e-learning arena," says Ms. Douglas, director of dot.edu, a computer-support department of the University of Wisconsin System that provides server-based software for online education. "Why not? They do everything else. It's the last frontier." Ms. Douglas's attitude is common among information-technology officials. So is her concern about what the deal will mean for Blackboard customers and higher education in general. In what the two companies call a "preferred relationship," Microsoft will promote Blackboard to its education customers and Blackboard will suggest that its clients use the Microsoft Windows operating system to run Blackboard on their servers to take advantage of special features available only to Microsoft users. Ruling the Market Microsoft more or less rules the desktop-software market in academe with its operating system and assorted applications, such as Microsoft Office. Even institutions that run their back-office, portal, and network operations on Unix and Linux, the two other most common network-operating systems, usually use Microsoft on their desktops. Through the partnership with Blackboard it formed last April, Microsoft is going after the crucial market for portal and server software. Blackboard customers are anxious about what the deal means for them, says Donald Z. Spicer, associate vice chancellor for information technology and chief information officer for the 13-campus University System of Maryland. He is one of a number of campus-computing officials who are casting wary glances at the seven-month-old agreement. They are wondering whether Microsoft will increase its presence -- and power -- in academic computing and possibly limit their ability to choose among viable alternative software packages to run at their institutions. They're also concerned about whether they will have to allot more resources to support Blackboard software run on the Microsoft Windows platform, and whether they will have to pay more for the services they use. "If [Microsoft] has the desktop and owns the back-end Web servers and Web serv-ices, that's a substantial expansion of influence," says John S. Camp, associate vice president and deputy chief information officer at Wayne State University. "There's a lot of apprehension about partnerships by Microsoft by everyone because it's so big," Mr. Spicer says. "Does [Blackboard's] getting in bed with Microsoft mean that the only way to get Blackboard is to buy Microsoft?" So far, the answer appears to be no, but that hasn't stopped Blackboard users from wondering what role Microsoft will play in their future. "Neither one has been very forthcoming on this," says Ms. Douglas. An Offer Institutions Can't Refuse? Blackboard users are abuzz about the company's closer relationship with Microsoft, says Nancy J. Mustachio, director of application development at Seton Hall University. She attended the first meeting of a new Blackboard users' group at last month's conference of Educause, the academic-technology consortium. Blackboard users are concerned that the deal will push them toward using more Microsoft products whether they want to or not, she says. The general consensus is that Microsoft's move into the education software market through Blackboard won't affect most institutions' choice of operating systems,but that some colleges might feel more inclined to use Microsoft products to get the functions they need at the price they want. "People are afraid of not having choices. At least in the learning-management-system space, there are several companies that look viable for the foreseeable future, and they are all offering products on multiple platforms," says Mr. Spicer, of the University System of Maryland. He has served more than two years on Microsoft's higher-education advisory board. Right now, campus IT professionals believe sufficient choice exists in the marketplace among Blackboard, WebCT, and other sellers of course-management software. There is also healthy competition among Microsoft's Windows platform, Unix, and Linux for network operating systems. Many institutions run multiple platforms at once, with different departments, schools, and instructors all using their platforms of choice. An institution picks its operating system according to its needs, says Ms. Douglas, of the University of Wisconsin. By and large, Microsoft's operating systems are cheaper to run than Unix and Linux, university computing officials say. The software is easy to set up and operate, and finding Microsoft-certified technicians to supervise it is easy. It also handles small institutions' needs well. Security Hazards Unix and Linux, though, are more powerful, reliable, and adaptable systems that scale better to large institutions, says Thomas W. Horn, director of information technology at the Cleveland Institute of Art. He worries that if more institutions use Microsoft software, academe will become more vulnerable to security hazards such as the Nimda viruses, which exclusively attack Microsoft Internet Information Server software and have caused millions of dollars' worth of damage. On the other hand, larger institutions might switch their Blackboard operations to Microsoft because they already run so many other Microsoft products, says Mr. Spicer. At institutions that switch to Microsoft, the arrangement will affect information-technology professionals the most, says Mr. Horn, as they have to deal with setting up and maintaining the systems. Instructors might have to redo their online courses in a new format. Students aren't likely to see much change in the portal software they use to access their course and registration information. But they might experience the inconvenience of more frequent server crashes, he says. Despite its emphasis on Microsoft products, Blackboard will still write versions for Unix and Linux, says Matthew S. Pittinsky, chairman of Blackboard. All versions will have the same set of basic features, although Blackboard for Microsoft will eventually have more features than Blackboard for Unix or Linux, he says. "It will be more feature-rich to run Blackboard out of the box on Microsoft" than on other platforms, Mr. Pittinsky says. System administrators will have more options for configuring the Microsoft version of Blackboard than the non-Microsoft versions. End users will notice a difference between systems run on Microsoft and those run on other platforms, he says. It will be easier for users to incorporate documents from any Microsoft applications in Blackboard's online courses. They will have just one log-on for all Blackboard and Microsoft software through Microsoft's Passport technology. Blackboard will also work more seamlessly with .NET, Microsoft's new technology for making all of its products interact using XML, or extensible markup language, a more powerful and flexible successor to HTML, the ubiquitous Web-coding language. "We chose Blackboard because they're committed to adopting the .NET platform," says Mark V. East, worldwide general manager for the education-solutions group at Microsoft. Blackboard is the first education-software vendor to integrate .NET into its software. For its part, Blackboard sees .NET as the quickest way for it to expand, Mr. Pittinsky says. Blackboard has reorganized its entire business around the arrangement. ".NET is critical to Blackboard strategy," he says. A key part of .NET strategy is a move from selling individually licensed copies of software to selling software subscriptions to institutions, which will put the software on a server from which multiple users can use it. Mr. Pittinsky says that this model will ultimately lower user costs. Both Mr. East and Mr. Pittinsky say their companies aren't changing their pricing or licensing agreements because of their partnership. But some Blackboard users disagree. Microsoft is trying to become a service provider through .NET, says Mr. Horn, of the Cleveland Institute of Art. Microsoft is redesigning its licensing fees to reflect that, moving to an annual-subscription model. He says the change will cost his institution more money. "We're small so we won't be able to take advantage of volume licensing agreements," he says. Some institutions will see their costs for Microsoft software increase 33 percent to more than 100 percent, he says. Conrad P. Dietz, vice president for information technology at Creighton University, says that the cost of Microsoft's new licensing agreement will be "significantly higher" than for previous agreements. Instead of buying a license for software his institution can use for two or three years, he instead will pay for a yearly subscription to use the software. If his or any other institution doesn't pay the annual fee, it can't use the software. Under the new academic-pricing plans Microsoft introduced last summer, some institutions will see the prices they pay for some software jump between 10 and 60 percent. In August, Deborah Sanders, licensing marketing manager for Microsoft's Education Solutions group, said that the company recognizes that the new price plans will mean higher costs for nearly all institutions. She defended the increases by saying that software prices haven't increased since the program began. Customers Look to the Future Ms. Douglas doesn't believe that Blackboard's increased emphasis on Microsoft will persuade many colleges to switch to the Microsoft operating system. Colleges choose operating systems based on their budgets and their specific needs, not what platforms their course-management software uses, she says. But speculation abounds about why Blackboard and Microsoft forged the agreement. Ms. Mustachio, of Seton Hall University, thinks that Blackboard tightened its ties to Microsoft because Microsoft has a sound infrastructure and experience in handling large-scale operations of the kind that have caused Blackboard some trouble, she says. Ms. Mustachio and Robert M. Bender, the faculty liaison for information- and access-technology services at the University of Missouri at Columbia, think Blackboard will have difficulty in maintaining full-featured products for both Microsoft and non-Microsoft platforms. If Blackboard can't, they foresee Blackboard moving exclusively to .NET. Mr. Camp, of Wayne State University, is concerned that Blackboard might concentrate on its Microsoft versions and put less effort into its Unix and Linux versions. He remembers "screaming and pulling" to get Macintosh versions of Microsoft Office from Microsoft. Little doubt exists that Microsoft is cementing its own place in the industry, but people wonder whether the move is a prelude to Microsoft buying out Blackboard. "I would be willing to bet that they're going to be bought by Microsoft," Mr. Bender says. Analysts following providers of course-management software say they would make the same bet. "Most people feel that the ultimate validation of these platforms will be acquisition by enterprise software makers," says Trace A. Urdan, an equity analyst with W.R. Hambrecht & Company. But Microsoft says it has no interest in buying Blackboard or creating education software per se, according to Mr. East, the worldwide manager of the company's education group. Microsoft only wants to handle the enabling software, he says. The arrangement also fits well with Microsoft's general operating strategy, says Paul DeGroot, an education analyst with Directions on Microsoft, an independent monthly trade publication that offers insider information about Microsoft. Microsoft's primary business goal is to sell software and software licenses, he says. Its secondary aim is to watch out for competitors that could build significant businesses in areas that threaten an existing Microsoft franchise. The key to selling licenses and thwarting competitors is controlling standards in the software industry, he says. "Microsoft really hates having other people setting the standards," says Mr. DeGroot. By working with Blackboard and other companies that market online-learning software, Microsoft wants to get the benefits of setting standards for the academic software market and deriving income from it -- without the effort of creating its own system, he says. Let's Make a Deal Microsoft and Blackboard formally agreed to cooperate last April. The decision was "almost a no-brainer" because Microsoft has financed and worked closely with Blackboard since Blackboard's creation in 1995, says Mr. Pittinsky, the company's chairman. The companies agreed that Blackboard will write all future versions of its software to operate best on servers running Microsoft's Windows operating system. Microsoft has given Blackboard $10-million in venture capital and has stationed Microsoft employees within Blackboard to help with product development. Blackboard is getting its staff members certified in Microsoft technologies, and Microsoft will also post technicians at Blackboard's client institutions if they request it. Microsoft's decision to ally with Blackboard has one overarching goal, observers say: The software giant wants to use Blackboard's network of institutions to ensure greater penetration of Microsoft products into higher education. "As we see the evolution of the industry, we need to capitalize on ways to make money for the company," says John Held, business-development manager for the education-solutions group at Microsoft. Another reason that Microsoft is interested in working with Blackboard is that Blackboard is one of the leading companies in the booming market for e-learning software. As institutions put a range of items, including courses and class registration, online, the market has grown from nothing in 1995 to $4-billion today, according to data from Eduventures, a consulting organization that tracks online-learning businesses. That figure could reach $11-billion by 2003, according to Eduventures. "Learning could take over from e-commerce as the number-one use of the Internet," says Mr. East, of Microsoft. That is enticing to Microsoft, says Mr. DeGroot of Directions on Microsoft. "What Microsoft wants is to own the educational-software market," he says. Microsoft already has strong ties with many e-learning companies. eCollege exclusively uses Microsoft Windows on its servers, says Robert S. Haines, senior vice president for marketing and product management at eCollege. WebCT also has also worked extensively with Microsoft on its products, says Chris Vento, chief technology officer at WebCT. Microsoft expects to boost its sales through Blackboard more than would be possible than through Blackboard's competitors because neither eCollege nor WebCT has Microsoft's massive marketing operation actively plugging its products. Part of Microsoft's goal in working with all the major e-learning software providers is to gain ground against Unix, the software platform the majority of colleges prefer for running their administrative and academic programs, Mr. DeGroot says. "It's a no-brainer that Microsoft wants to get into the higher-education business," says Mr. Bender, of the University of Missouri at Columbia. "The preferred server on campuses is a Unix server. It's what techies like to work with." Mr. East denies that usurping Unix's lead is one of Microsoft's goals. "We're not trying to move Unix," he says. "The customer must decide what product they want to use." 
http://chronicle.com Section: Information Technology Page: A27
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Copyright © 2001 by The Chronicle of Higher Education