LMS, A Zero Billion Dollar Market
Led by SumTotal Systems and Saba, the two public companies who consolidated much of the market since the dot-com bust, the learning management systems (LMS) market is a classic zero billion dollar market.
(Full disclosure: I was a founder of Silton-Bookman Systems, whose Registrar product, originally released in 1984, was instrumental in launching the LMS market. Silton-Bookman Systems merged with another LMS company, Pathlore Software, in 1999. I was COO of Pathlore when it was acquired by SumTotal Systems in 2005.)
A zero billion dollar market is a market whose total revenue potential is less than $500 million, so when you round it off to the nearest billion it is zero billion dollars. Without the potential for a billion dollars of revenue, a market is unlikely to support a company with a potential market cap of over $500 million. Thus it is also a zero billion dollar market for market caps.
Many tech start-ups find themselves in zero billion dollar markets, usually with a bunch of peer competitors who got into the market for the same trendy reasons. After a while, some fail, some exit the market, some are acquired by RBCs (really big companies), and some get rolled up in a consolidation wave. When the dust clears, though, the survivors are still stuck in a zero billion dollar market, where even the biggest still have zero billion dollar market caps. Such was the path of the LMS market from the dot-com boom, through the dot-com bust, to the present.
One sure sign of a zero billion dollar market is that the major players, who all sell widgets, claim they are really not in the widget market but that widgets are just their entry point into some other, larger market. Yet years pass and they are still mainly widget companies. LMS market watchers are familiar with this, as the major players tout human capital management, talent management, anything-but-learning-management, as their "real" businesses. Still, customers seem to just want really good learning management, and the other stuff is mainly a distraction. Instead of focusing on running profitable LMS companies, the search for the key to a larger kingdom is a constant distraction.
The stocks of SumTotal and Saba have been beaten down considerably during the current economic meltdown, but even in good times the LMS market was a zero billion dollar market. What is happening now is that investors are getting feed up with the seemingly unending path to profitability (as in, "we are still getting there," even after all these years).
A note to entrepreneurs: A zero billion dollar market can be great if you are a privately and closely held company. Sure, the VCs and investment bankers will sneer at you and call you (shudder) a lifestyle entrepreneur. But you can do quite well for owners, employees and customers in markets under $500 million. You can even get rich. But be sure you have owners, not investors. You can tell the latter, they have billion dollar stars in their eyes.
(Full disclosure: I was a founder of Silton-Bookman Systems, whose Registrar product, originally released in 1984, was instrumental in launching the LMS market. Silton-Bookman Systems merged with another LMS company, Pathlore Software, in 1999. I was COO of Pathlore when it was acquired by SumTotal Systems in 2005.)
A zero billion dollar market is a market whose total revenue potential is less than $500 million, so when you round it off to the nearest billion it is zero billion dollars. Without the potential for a billion dollars of revenue, a market is unlikely to support a company with a potential market cap of over $500 million. Thus it is also a zero billion dollar market for market caps.
Many tech start-ups find themselves in zero billion dollar markets, usually with a bunch of peer competitors who got into the market for the same trendy reasons. After a while, some fail, some exit the market, some are acquired by RBCs (really big companies), and some get rolled up in a consolidation wave. When the dust clears, though, the survivors are still stuck in a zero billion dollar market, where even the biggest still have zero billion dollar market caps. Such was the path of the LMS market from the dot-com boom, through the dot-com bust, to the present.
One sure sign of a zero billion dollar market is that the major players, who all sell widgets, claim they are really not in the widget market but that widgets are just their entry point into some other, larger market. Yet years pass and they are still mainly widget companies. LMS market watchers are familiar with this, as the major players tout human capital management, talent management, anything-but-learning-management, as their "real" businesses. Still, customers seem to just want really good learning management, and the other stuff is mainly a distraction. Instead of focusing on running profitable LMS companies, the search for the key to a larger kingdom is a constant distraction.
The stocks of SumTotal and Saba have been beaten down considerably during the current economic meltdown, but even in good times the LMS market was a zero billion dollar market. What is happening now is that investors are getting feed up with the seemingly unending path to profitability (as in, "we are still getting there," even after all these years).
A note to entrepreneurs: A zero billion dollar market can be great if you are a privately and closely held company. Sure, the VCs and investment bankers will sneer at you and call you (shudder) a lifestyle entrepreneur. But you can do quite well for owners, employees and customers in markets under $500 million. You can even get rich. But be sure you have owners, not investors. You can tell the latter, they have billion dollar stars in their eyes.
Labels: eLearning, Learning Management, LMS, Saba, SumTotal
posted by Phil Bookman at 11:33 AM
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