Tuesday, March 19, 2002

Pricing Changes by Blackboard and WebCT Cost Some Colleges More -- Much More By JEFFREY R. YOUNG Some academic-technology officials say they're experiencing sticker shock over recent pricing changes by Blackboard and WebCT, two leading providers of course-management software. Colleges that until recently paid a few thousand dollars a year for the companies' products -- which help professors build course Web sites and handle administrative functions -- are now being asked to pay tens or even hundreds of thousands for the latest systems. WebCT changed its pricing options about a month ago, and it announced a newer, much costlier version of its software on Monday. Blackboard substantially revised its pricing options about six months ago, when it released an updated version of its course-management product. For some colleges, the new pricing structures mean substantially higher annual fees. Both companies are moving toward selling institutions campuswide access to software, and toward setting prices based on the number of students each college enrolls. In the past, the companies offered licensing options that allowed colleges to pay flat rates based on the number of servers running the software, regardless of the number of students. In return for paying what are in most cases higher prices, colleges can integrate Blackboard or WebCT software with their existing student-registration systems -- a feature many administrators find appealing. The two companies say that the new prices for their course-management systems reflect the growing complexity of their products. And although both companies are trying to steer customers to their newer, more expensive products, they continue to sell cheaper, scaled-down versions of their course-management systems. But some customers worry that those cheaper options might not be around much longer. Course-management software has become a fixture on many campuses in the past few years. About one-fifth of all college courses now use such software, according to the Campus Computing Project, an annual survey of colleges' use of information technology. Until last year, prices for the products had risen only modestly each year, or in some cases held steady. But the companies are at a critical moment financially, according to Sean Robert Gallagher, an analyst for Eduventures, a consulting group specializing in education businesses. To become profitable, both companies need to persuade users to spend more for their products, he says. "One of the greatest challenges they have," says Mr. Gallagher, "is transitioning customers to a higher price point." Some colleges say they are willing to pay the higher prices now that they are expanding their use of course-management software to most of their courses. Others say, however, that the companies are jacking up prices now that colleges have trained faculty members to use the course-management systems. "This is a typical tactic of the large-scale software systems that are in use in education -- attracting our business with a product [at a low price] to prevent us from developing a product in-house, and then raising the price later," says James Hammond, associate vice president for information technology at Winthrop University, which has purchased software from WebCT for several years. Mr. Hammond and other college officials say that they are so frustrated by the recent pricing changes that they are considering other options -- such as building their own software or adopting a free course-management system that is under development by several universities taking part in the Open Knowledge Initiative. WebCT users seem to be complaining the loudest about the new prices. WebCT's software has long been cheaper than Blackboard's, which is why some colleges chose it. But WebCT's newest product -- called Vista -- will cost in the "six figures" for most colleges, says Karen Gage, vice president of marketing for WebCT. The company says Vista will let colleges easily reuse materials from course Web sites, and will also let institutions gather and analyze student information in new ways. The company's current software costs $3,000 to $30,000 annually, depending on the size of the institution and the level of use of the software. "There's no doubt that these are some big dollars," wrote Fred Estrella, chief information-technology officer at Northern Arizona University, in a posting to an e-mail discussion list for college computing officials. "I would imagine that most WebCT users will seriously start looking at other options. ... I know we will be." Some colleges are also complaining about WebCT's decision to drop a low-cost pricing plan called the "standard edition." But Ms. Gage, of WebCT, says that a similarly-priced option still exists -- with a different name -- as a low-end version of the company's "campus edition." The limited version of the campus edition costs $7,000, but it can be used by only 3,000 students per semester and it cannot be integrated with a college's other information systems. The full version of the campus edition ranges from $15,000 to $30,000, based on the number of students enrolled at the college. It can be integrated with other information systems. "Because we are changing the names of the product, there could be some confusion over what the new licenses are and what they entail," says Ms. Gage. "We had rather minimal price increases" for the limited campus edition. She says the company will continue to offer a low-cost version of its software. "We understand that people are at different places along the spectrum as far as their adoption of e-learning, and we want to serve the whole market," says Ms. Gage. Last year, Blackboard changed the way it charges for its software so that colleges pay based on the number of students enrolled, with a typical institution paying about $50,000 per year. For some colleges, the changes meant a substantial price increase, while others experienced little or no change, according to company officials. Matthew S. Pittinsky, chairman of Blackboard, says the price changes were necessary to cover research-and-development costs. He also argues that the price for Blackboard's software is still relatively low compared with other types of software that colleges buy, such as software systems that handle financial data. "There is no such thing as a free lunch," says Mr. Pittinsky. "As long as we innovate and deliver value, everybody benefits from a rational pricing environment." But some Blackboard customers say that the pricing changes mean they pay a lot more without getting much that is new. "The [Blackboard] price increase amounts to an 80-percent increase for us, without any increase in functionality," wrote Russell B. Merrill, vice president for information technology at St. Lawrence University, in an e-mail discussion. Some colleges are also worried that Blackboard will soon stop offering its cheapest product, says Joseph Georges, a director of the California Virtual Campus, which provides support for distance-education programs offered by the state's community colleges. That product, called Learning System Basic, allows limited use of the company's software without integration to other information systems. The price was raised last year to $7,500 per year from $5,000 per year. Mr. Pittinsky of Blackboard says that the company is "absolutely committed" to maintaining that product. And some college officials say that improvements in the companies' products justify the new pricing. Among them is Stephen G. Landry, chief information officer at Seton Hall University, which uses Blackboard's software. The university's bill for the software rose about 15 percent after the pricing changes. "The University's courseware system is one of our mission-critical systems, yet it costs a very small fraction of our overall IT budget," Mr. Landry said in an e-mail discussion. "In this context I again consider our current courseware system to be a good value for the University." Michael R. Byrne, director of computing and network services at the University of Alberta, agrees. The university has been a long-time customer of WebCT, and it is testing the new Vista system. Of course, he adds, "nobody is going to say that they would rather pay more." Background article from The Chronicle: Getting Ready for a New Generation of Course-Management Systems (12/21/2001) Easy-to-print version E-mail this article

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