Saturday, 24 July 2021

MIS MARKET UPDATE (Summer 2021): SIMS dip below 70% market share

Disclaimer: I have past and present commercial relationships with many MIS vendors, including an ongoing involvement with Compass, an Australia-based MIS that is launching in the UK  Nonetheless I aim to write this blog impartially, from the perspective of a neutral observer. This matters to me - it's basically the blog I wish had existed back when I was a MAT MIS commissioner trying to get a handle on all things relating to MIS and edtech. I also now provide MIS market datasets and reports as a service and offer free, informal consultations on MIS procurement to schools and MATs.  If you would like to discuss any of this, contact me on Twitter or LinkedIn.   

No time for small talk this term - I'm going to get straight to the point. I've just got hold of the latest termly data on the School Management Information Systems (MIS) used by state schools in England. Here are the headlines:

  1. SIMS dipped below 70% market share when measured by number of schools. I now have eleven years of MIS market data. SIMS' market share peaked in 2012 at 84%. This summer they dropped below 70% (69.6% to be exact). It's higher when measured by pupil numbers (74.6%), but still, the direction continues to be downwards however you cut it.
  2. 528 schools switched over the past term. That's high by historical standards. We don't have exact data for 2020, because there was no summer census (damn you, COVID, for messing up my beautiful term-by-term dataset), but my educated extrapolation is that the figure for the equivalent period last year was 480-490, and in 2019 the summer term number was 430. That follows a strong number the previous term, which leads me to estimate that there will be c. 1,000-1,050 switchers in the full year to autumn 2021 when we get next term's numbers. That would be a historic high since (my) records began in 2010.
  3. Wins are still dominated by Arbor, Bromcom and ScholarPack. This isn't news, but there are some interesting subplots to the story. On which note...
  4. Arbor and Bromcom are neck and neck with secondary wins. Bromcom remains the dominant challenger with secondaries - they have 299 schools compared to 135 for Arbor. However, Arbor now match them when it comes to new wins. In 2019, Bromcom won four new schools for every school joining Arbor. But over the past term, 29 secondaries joined Arbor, compared to 22 joining Bromcom. Why the change? Well, United Learning had a lot to do with it, accounting for 17 of Arbor's wins. But still, something seems to have changed: over the past four terms, the two have been more or less equally successful with secondaries (Bromcom has 87 wins to Arbor's 84). 
  5. MAT schools are still more likely to switch, but LA schools are catching up. Around 45% of English state schools are academies, but academies (most of which are now in MATs) represent 62% of the switchers. That said, LA schools are increasingly getting in on the switching act: in Q1 of 2018 they represented just 14% of switchers, whereas last term 38% of switchers were LA schools.
  6. Pupil Asset (now sold as Juniper Horizons) won more schools than SIMS over the past term. It's been a quiet few years for Pupil Asset, so the Juniper team will be heartened to see 25 schools come their way over the past term. That's not at the level of the "big three" challengers, but it was more than SIMS managed to win over the same period (they had 18 wins). Aside from bragging rights for the non-trivial number of ex-SIMS employees now at Juniper, this also points to how  SIMS hasn't (yet) found a way of winning schools away from the challengers. Having said that, new owners Montagu have only just had their merger with ParentPay confirmed, and so it feels too early to judge the impact of the new owner's strategy on the long-term prospects of the business.
As always, here are some pretty charts which you can use to explore for yourself:

Saturday, 19 June 2021

MIS MARKET UPDATE (JAN 2021 DATA): Churn, Baby Churn.

Disclaimer: I have past and present commercial relationships with many MIS vendors, including an ongoing involvement with Compass, an Australia-based MIS that is launching in the UK  Nonetheless I aim to write this blog impartially, from the perspective of a neutral observer. This matters to me - it's basically the blog I wish had existed back when I was a MAT MIS commissioner trying to get a handle on all things relating to MIS and edtech. I also now provide MIS market datasets and reports as a service and offer free, informal consultations on MIS procurement to schools and MATs.  If you would like to discuss any of this, contact me on Twitter or LinkedIn.   

I feel sorry for local news organisations. I grew up in the south west of England, and occasionally stuff happened, but more often that not the local news sounded like: 

Something something council business, bla bla squirrels are hurting trees, yadder yadder oh look a royal came to the County Fair... 

You get the idea.

Nonetheless, those dutiful regional news teams still had to put out their obligatory half hour of programming, or an unfoldable broadsheet newspaper, or whatever. They had to pretend that everything that they reported on was a big deal. The temptation to arrive on camera and just fess up to the absolute chasmic absence of news must have been overwhelming. "It's 9pm, thanks for joining us, but honestly you really shouldn't have bothered. Make your dinner and come back when Tomorrow's World will be reporting on a curious new invention called the internet." That's the kind of content I'd have respected. 

I felt a bit like that when I was preparing this blogpost. Don't get me wrong, there's some good stuff below (e.g. more schools are switching!), but at the same time, if you caught my December 2020 update on the MIS market, you're unlikely to be blown away by the newsiness of it all. Still, you're probably committed to at least a quick skim at this point, so let's get into it.

I recently received school MIS market data from January 2021. I've been requesting the termly files for a couple of years now, so I was able to combine it with data stretching back to October 2018 to analyse termly trends. What follows are my five key takeaways, accompanied by some charts, where I think they'll help to emphasise a point.

So, here we go.

1. SIMS churn is at an all time high; challenger churn is at all all-time low

The most important number for all MIS market participants is churn: that is, losses over the past twelve months divided by the number of schools twelve months ago. For established players, you want this to stay low to protect your position. For challengers, you want it to be high.

I've blogged before in my annual blogs about how SIMS churn has grown steadily since 2014 when it was under 1%. The term-by-term data shows this trend continuing. The following chart shows annualised churn using a rolling average of the three previous data periods for the five leading MIS. What you see is:

  • Overall churn has been hovering around 4% for a couple of years, and is showing signs of ticking upwards. 
  • SIMS churn hit 4.5% in Jan 21, the highest rate over the period (and the highest since at least 2010, when my main annual dataset begins).
  • There are two clear groups when it comes to churn: the two largest MIS (SIMS and RM), who both churn around 4-5% with churn ticking slowly upward; and the three main challengers (Arbor, Bromcom and ScholarPack), who have been churning at 0-2.5%, with churn ticking notably downwards, particularly in the most recent data set.
That last point is particularly key for those trying to understand where the market is heading. In summary, it's good for challengers! They're keeping their schools while seeing an ever-expanding pool of switchers to fight for. In an ideal world, the challengers would of course love overall churn (which for a while will still mostly mean SIMS churn) to tick up closer to, say 10%. But in the meantime, they can probably live with 4-5% of schools being up for grabs every year, particularly if their own customers staying loyal.

Another way of seeing how churn is changing is to look at the last three years of Oct-Jan switching data only, and compare like-for-like volumes. What you see is that wins are at a three-year high over that period (196 in 2021 vs 191 in 2019 and 145 in 2020). So, while there's no dramatic change, the signs do point to continued growth in switching.

2. The Key and Bromcom continue to be the destinations of choice for switchers.
Arbor, Bromcom and ScholarPack continue to be the big 3 MIS in terms of winning over switchers, so there's nothing new there. However, what is new is that Oct 20-Dec 21 was the first period I've ever seen where SIMS was only the fifth best MIS for new wins (Pupil Asset managed to win 5% of schools, compared to 4% for SIMS). Now this could be a blip - SIMS were acquired by Montagu during the period in question - and that kind of transaction is bound to lead to some short-term disruption. Nonetheless, the new management team at SIMS will no doubt be doing all they can to reverse this trend in future periods. Conversely, the Pupil Asset team (who have recently rebranded to Juniper Horizons) will be cheered to see those signs of growth after a comparatively quiet previous year or two.

Another thing to note is that, as with overall market numbers, it makes a difference whether you're looking at schools won, or the number of pupils in schools won. Bromcom won 16% of schools in the period (3rd place for wins), but 25% when measured by pupils (2nd place for wins).

3. Secondaries have (at least) two non-SIMS cloud options.
For at least a year now, Arbor and Bromcom have together accounted for c. 75%+ of secondary switchers, with a fairly even split between the two.  That's a significant change from 2019, when SIMS were stronger and Arbor had less success with secondaries. 

That's surely good news for schools, who will be increasingly aware that they have (at least) two cloud options. 

4. That said, there are plenty of other people trying to shake up the market 
Of course, that doesn't mean things won't *ever* change. The last year has seen huge upheaval in the market: as well as The Key buying Arbor, IRIS bought iSAMS and Juniper bought Pupil Asset. Faronics have been looking to grow a market presence for a few years now, and Go4Schools also have an embryonic MIS. Keep an eye on ET-AIMS, which has recently entered the market too. And of course, as I mentioned in my disclaimer, I'm also now helping Compass (an Australia-based global MIS vendor) to launch in the UK. That's a lot of additional energy being expended on trying to shake up the market...

5. You now have a choice for your MIS market analysis! 
I sometimes mention how I was inspired (and helped greatly) to get started with MIS market by Graham Reed, who was the first to produce publicly available MIS market stats, and still cranks out interesting MIS analytics in Power BI. Well, now The Key have gotten in on the act, with their very own Tableau-powered MIS market analysis

What I'm saying is: we're basically now our own sector. Perhaps someone will start a blog to analyse our market share of MIS market page views? And it can surely only be a matter of time before we get our own BETT award category?

Anyway, given this new competitive landscape, I feel the need to provide at least a couple of interactive charts as a thank you for making it all the way to the end. So to close out the blog, here is the full term-by-term picture from Oct 2018 to Jan 2021 (both by school and pupil numbers):

Saturday, 20 February 2021

In edtech, AI is only the answer if you know the question

There's much talk these days about how Artificial Intelligence (AI) and Machine Learning (ML) can transform education. Century Tech have just announced Century APIs, which moves them from being a learning platform to being also a form of middleware, providing partners with access to their AI technology as a service. Sparx have been busy building a personalised learning experience for schools (though they prefer to describe their approach as "Intelligence Augmentation" rather than full AI). And Quizlet (an edtech "unicorn") have a service called Quizlet Learn, which uses ML to provide an adaptive learning experience. 

Now, I'm not an expert in the area, so this blog isn't going to be a rigorous analysis of what AI/ML is, or who's doing it best. But I am an edtech entrepreneur, and I hear lots of other edtech entrepreneurs considering whether to use AI/ML, so the purpose of this blog is to propose a way of answering that question.

Or, to put it another way, I'm asking: "what problems should AI be trying to address?". I've seen too many business plans which can be summarised as: "we're a bit like other things, but with AI, so better"; and that might be true... but why? 

Let's examine the question by using the following wildly simplistic anatomisation of the learning process:

  1. Content (knowledge, facts, ideas, skills etc) is created in the form of lesson plans, videos, worksheets, quizzes and such.
  2. That content is shared somehow with a student.
  3. The student attempts to absorb the content using the materials provided.
  4. A teacher (or software) marks the student's work.
  5. (Sometimes) the student revises or revisits that content.
  6. (Sometimes) there is a final test to assess whether the content was correctly learned.

So, how could AI help with each of those steps?

Starting with point 1, I don't think many people are using AI to create content, so a pretty key point is: did you create good content for the AI to have fun with in the first place? And this is my first anxiety: 

If you're an AI-powered product, and you don't have a good rationale for why your content is better than someone else's, then why should I believe your AI is going to change that? 

AI can't (yet) turn a bad module into a good one: it's not rerecording videos with better analogies, or more succinct summaries, or whatever. Some might argue that AI can help pick the preferred content type for the specific student, but that sounds a lot to me like learning styles, and I've read enough Daisy Christodoulou to be highly sceptical as to whether that's a thing.

Moving to point 2, I guess you could make a case for AI somehow informing the sharing process, but I don't see that happening anywhere in practice. Rather, people build software, and they make tonnes of choices that are then hardwired into the learning experience, which may end up mattering more than anything their AI does. Stuff like: 

  • how you log in
  • what the user interface looks like
  • how quickly pages load
  • how many clicks are needed to move between pages

Why does that matter? Well, in a recent conversation about Carousel (the quizzing platform I've co-founded) recently, an esteemed academic made the excellent point to me that the biggest difference we can make is to get someone who previously wouldn't have attempted a task to attempt it. Until then, I hadn't spent enough time thinking about how taking a student from "didn't bother" to "learned a thing imperfectly" is perhaps a more profound change than going from "learned a thing imperfectly" to "learned a thing well". And maybe the best way to do that is to make it so easy to use that even easily distracted (or low-resilience) learners give it a crack. 

So, the point is:

If you're an AI-powered product, by all means spend money on the AI, but don't forget to make the product good in all the non-AI ways that may end up impacting the learning experience too.

OK,  time for points 3 and 5. The reason why I'm lumping these together is because it's actually pretty important - and not always clear - as to whether an AI-powered product is intended to be a full curriculum product, or a revision / homework / supplementary learning tool. Now, just from a sales perspective, I think it's much easier to sell a revision/homework edtech tool than a full curriculum product, at least for the time being. But also, from a design perspective, your focus here makes a big difference to what you'd ask your AI to do. A full curriculum product is likely to significantly more complicated, with more types of content and tasks, each of which needs deep and careful thinking about how AI might help. On the other hand, if you're just a revision / homework tool, maybe your main "thing" is just questions (or videos, or pods, or whatever).

Either way, at this step the only things I can think of that the AI can do is:

  • sequence content differently
  • select different types of content (Learning styles!) 
Now sure, I can see a value in AI for sequencing... but is it transformationally better than a traditional, well-designed curriculum? I'm not convinced, yet. I guess the complexity and popularity of a course are  factors, too: there are some pretty great and well-thought-through primary maths curricula out there, so maybe AI can't add a tonne by suggesting a different sequencing. On the other hand, perhaps there's more fertile ground with more complex and less-universal areas such as A-Level Physics, for example. In any case, my point is:

If your AI is focused on sequencing content or selecting different types of materials, you need to be able to explain why this makes you more effective than a decent teacher.

Finally, let's think about points 4 and 6. Here's where I see the most potential for AI/ML. So much edtech revolves around multiple choice questions, because they're easy for a machine to mark, so I can see AI playing a major role in expanding the range of assessment types that computers can handle. Startups like Progressay (essay marking) and Lexplore (reading dyslexia assessments using eye tracking) interest me: the appeal is that I recognise the problem, and can understand - and therefore believe in - the role of AI. 

Another angle that AI/ML can help with is spaced repetition (i.e. how frequently, and at what interval, questions are asked and re-asked to help embed knowledge). This is something we've been thinking about a lot at Carousel, and we expect to introduce innovations in this area over the next year or so. This is something that really isn't intuitive to teachers; and even if it was, it's hard to have the discipline to remember to re-quiz students on a subject when you have so much new ground to cover. So I can see AI/ML playing a really useful role in the revision and embedding process. But, at the risk of repeating myself, this will only work if the content is well-designed, and your product is designed in a way that students actually want to interact with.

Finally, it's worth remembering that many of the Big Technological Leaps Forward we need to make in edtech can be achieved without AI/ML. I'm also co-founder of a MAT assessment platform called Smartgrade, built with input from the legends at Evidence Based Education. Smartgrade uses a bunch of algorithms to standardise common assessments, and also to feed back on how well designed they are. That's not AI/ML; but it is clever use of technology to automate and improve assessment accuracy. AI isn't the only way.

So in summary, I'm not saying AI can't help with edtech. Rather, I'm saying:

Your theory of AI will be most compelling if you can articulate which part of the learning process it tackles, and why that bit needs AI in the first place.

Monday, 18 January 2021

I now sell things

If you're a regular reader of my blog then you're probably here either because you're professionally involved in edtech in some way and so feel obligated to keep abreast of the sector, or because you just like niche stats and charts about school information systems. Either way, I now sell products and services which may interest you.

To be more specific, I offer bespoke sector research and consultancy via my company (Edtech Experts Ltd), and also license two products:

  1. The English state school Management Information System (MIS) dataset that underpins my blog. I now have eleven (count 'em!) years of data on MIS market usage broken down by schools. The data includes a row per year for each school, with a flag whenever a school switches, plus information on the school's phase (e.g. primary/secondary), pupil numbers, postcode, type (e.g. academy/LA), MAT affiliation and MAT size (if relevant). 
  2. A jam-packed, 50 page report on the UK MIS market, which includes: 
    1. A recap of the past year, including a summary of the major acquisitions (and hoo boy were there acquisitions in 2020).
    2. A tonne of analysis on MIS market stats which goes well beyond the blog. This is my favourite bit to write so I really go to town.
    3. NEW customer satisfaction data, including some fascinating and NEVER BEFORE SEEN customer satisfaction headline data from the lovely people at Teacher Tapp, who also collect and license some very valuable data on the MIS market. Oh, and vendor app review data which is also intriguing.
    4. A taxonomy of what's in a MIS, which is a surprisingly philosophical question.
    5. Analysis of the big players in the market and their range of products / module coverage.
    6. Vendor profiles for the major MIS.
    7. Information on UK MIS procurement, including how MATs / LA schools buy a MIS.
Get in touch if you're interested in any of the above. Prices are reasonable I swear, and I do hefty discounts for MIS vendors (because they're nice people and the report is better for having them in the loop) and researchers / smaller companies (because I've been there). I'll also gladly do free, no-obligation sneak previews of both products on a call, if that helps you understand what I've got. 

Oh, and more reports are coming soon covering other areas of edtech, so watch this space!

For more information, give me a shout on Twitter, LinkedIn or via email.

Wednesday, 16 December 2020

MIS Market Moves 2020: COVID didn't stop schools switching away from SIMS

My usual disclaimer: I have past, present and (hopefully) future commercial relationships with many MIS vendors. Nonetheless I aim to write this blog impartially, from the perspective of a neutral observer. I also now provide MIS market datasets and reports as a service and offer free, informal consultations on MIS procurement to schools and MATs. If you would like to discuss any of this, contact me on Twitter, LinkedIn or via email.

I made three bold predictions about the MIS earlier this year:

  1. In January, when talking with a colleague at the BETT Awards, I wagered that one or more MIS would be bought or sold this year.
  2. Around the same time, I bet a MIS founder that there would be under 1,000 switchers this year; he reckoned it would be over that number.
  3. In a July blog I went further and said I expected MIS switching volumes to be down on the previous year. That meant I expected under 850 switchers in 2019/20.

So, yeah, I scored a Meatloaf.

Taking those predictions in order, (1) sounds charmingly cautious when reflecting back on the MIS meat market that has been 2020. There have been three major deals, with ArboriSAMS and SIMS all changing hands. But still, a win's a win. As for (2), well I win that one as well, but in fairness to the founder, COVID was almost certainly a break on switching. So I'll still smugly claim my pint when this is all over, but he gets the moral victory.

As for (3), I was just plain wrong. As you'll see from what follows, 2019/20 was the biggest switching year since (my) records began in 2010, with 901 schools changing MIS provider. That's newsworthy: it means that even while a pandemic was raging, schools cared sufficiently about their choice of MIS to change their setup. Moreover, the activity wasn't just confined to primaries, where it's relatively well-established now that switching needn't be a hassle; there was more secondary switching activity than ever too. 

So let's get into it, as there's plenty of good stuff in the latest batch of English state school MIS data. As ever, I've blended the data released by the DfE with a bunch of other current and historical datasets to drill down into what's really going on. Below are the charts I found the most revealing as I was crunching the data; my analysis of what it all means follows immediately after.

Here are the headlines:
  1. There were more switchers than ever before, with 901 schools changing MIS. That just pips 2017, when there were 899 switchers. That's somewhat surprising: like I say, switching was down in the first term of 2019-20, and that was before COVID. That will hearten the new MIS owners, who'll hope for further increases in years to come, particularly as schools with locally hosted MIS reflect on how their lives would have been easier during this dumpster fire of a year if they hadn't had to access a MIS that was hosted in a school server room.
  2. Arbor is the preferred choice of schools switching MIS. I'm going to give Arbor their own bullet point this year, because they clocked up 413 wins, which is more than any other MIS has managed in a year in the 11 years I have data for. That takes them to 1,065 schools overall - a 1.9 percentage point (p.p.) increase. They were also the clear winner when measuring growth by pupil numbers gaining 1.8 p.p. overall. Bravo, team Arbor!
  3. Bromcom and ScholarPack also did well. Bromcom grew by 0.8 p.p. when measured by # schools, and by 1.1% when measured by pupils. That matches their growth rate from the previous year, and makes them the third largest vendor by pupil #s with a 4.4% share (behind SIMS and RM). They also won more secondaries than anyone else for the third year running, though Arbor is catching up (2019: Bromcom 57, Arbor 14; 2020: Bromcom 58, Arbor 52.) So hats off to Bromcom too. ScholarPack also have something to cheer: they won 190 schools, taking their market share to 6.4% by number of schools, maintaining their place as the third place vendor when measured by number of schools.
  4. Nobody else has much to shout about. Pupil Asset has recently been rebranded as Horizons following their sale to Juniper earlier this year, so it's perhaps understandable that their market share stayed flat at 2%. They'll be hoping for better days in the coming year: their strategy of combining a MIS business with their leading position in the primary tracker market needs to start bearing fruit to justify the considerable investment being made. RM Integris dropped a bit for the fourth year in a row (2019: 9.7%; 2020: 9.2%), which will be cause for considerable head-scratching in their Oxfordshire office. They're the vendor I find hardest to get a handle on: there's nothing disastrously wrong, but somehow they can't translate their position as the largest cloud vendor into a growing business. Advanced slipped back again (2019: 1.6%; 2020: 1.5%), and honestly it's hard to see any signs for cheer for them, given the dramatic declines they've suffered since they had an 8% share a decade ago. And SchoolPod have stagnated at 0.6%, so there's not much to report on there. 
  5. SIMS continues to slide, with its market share down to 72.3% (from 75.1% in 2019) when measured by number of schools. Most concerning for imminent owners Montagu will be a record number of losses overall (692), with a notable rise in secondary losses too (2020: 90; 2019: 58; 2018: 36). That's not ideal for the new parents - while SIMS has been losing market share at primary for some years, the hope has been that the secondary business would be more resilient. This will only add to the urgency to get good SIMS cloud products out there for all phases, but of course that's no small feat.   
  6. The Key is now the second largest vendor, with a combined 11.2% market share when measured by number of schools, leapfrogging RM, who have 9.2%. They're also the biggest by # pupils (8.3% compared to 6.4% for RM).
  7. Larger MATs are the most eager to move away from SIMS. In 2014, 79% of schools now in the largest MATs (30+ schools) used SIMS. Just 41% of those same schools now do so. While the declines are slightly less pronounced in other MAT size categories, they're still meaningful, and SIMS has just 63% of the MAT market overall when measured by school numbers (down from 84% in 2014). As I blogged about earlier in the week, SIMS needs a new MAT strategy, and fast.  

To finish, I'd like to zoom in on SIMS's churn (i.e. their losses as a percentage of prior year school volumes) from 2014 to 2020:

Now I love a nice, snug trend line, and they don't get much snugger than that! For six years, SIMS' churn rate has increased inexorably, and if things continue on that trajectory they'll be churning 5%+ in a year's time. This will no doubt concern the incumbents and cheer the challengers: in many ways, SIMS churn is THE important number, since the market can't meaningfully move without SIMS giving up schools to the competition. 

PS a note for the fellow data-crunchers: I've done quite a bit of work to my dataset in the past year, and in the process I've "found" some more switchers that I wasn't previously reporting. That means you won't necessarily achieve an exact reconciliation of these figures with previous blogs. 

Tuesday, 15 December 2020

What the acquisition of SIMS by Montagu means for the sector

My usual disclaimer: I have past, present and (hopefully) future commercial relationships with many MIS vendors. Nonetheless I aim to write this blog impartially, from the perspective of a neutral observer. If you have questions about this analysis, or any other blog, contact me on Twitter, LinkedIn or via email. I also now provide MIS market datasets and reports as a service - get in touch for more info.

Capita today announced that it has agreed to sell Education Support Services (ESS), the division of Capita that contains SIMS, to “Tiger UK Bidco Limited”. They describe that as “a newly formed company established by funds advised by Montagu Private Equity”. Tantalisingly, they go on to say “Montagu has also agreed to invest in ParentPay (Holdings) Ltd (‘ParentPay’), a provider of education technology. Following successful completion of both investments, ESS will become part of the ParentPay Group.” The press release also references the need for the deal to achieve “regulatory approvals”.

In other words, unless the Competitions and Markets Authority (CMA) kiboshes the whole thing, SIMS (leading provider of school MIS) and ParentPay (leading provider of school payments and comms solutions) are merging, and Montagu will be the new owners.

That’s news. While Montagu’s interest has been widely trailed, the involvement of ParentPay had not previously trickled into the public domain. Here’s what I think it means for the sector:

1. The CMA are going to be busy

Capita has history when it comes to justifying its size and business practices to regulatory authorities. In 2003, following a protracted legal dispute with Bromcom, SIMS managed to escape intervention from the authorities by making “voluntary assurances” that they would encourage third parties to interface with its product. This led to them developing APIs that were accessible to all to be able to access the data held within SIMS, on the basis that this would facilitate a health market, including competition with SIMS and its various modules.

SIMS may have lost a little market share since then, but not a tonne, and when you combine them with ParentPay (who also own the popular “SchoolComms” product), you end up with leading MIS, payments and comms solutions all under one roof. You’d expect some of their competitors to object to that, so I anticipate the CMA getting calls.

2. This deal isn’t necessarily about creating value by cross-selling products...

Typically when deals like this are engineered, there’s a rationale for increasing enterprise value by cross-selling across client lists, or making products stronger by having them under one roof. I think this is perhaps less likely here than normal though: both groups already work with a majority of UK schools, so I can’t imagine there are many customers of one who haven’t heard of the other! Equally, ParentPay and SchoolComms already have tidy SIMS integrations, so I don’t see that much room for product enhancements by being under the same roof. I guess international expansion could be an area for cross-selling, but even then it’s a stretch: ParentPay have traction in Germany and the Netherlands, and it’s not easy to move a MIS into a territory that speaks a different language. 

Indeed, there’s even a case for some value destruction, since SIMS have competing products (SIMS Pay and SIMS InTouch). One rationale for buying SIMS might have been “upsell bolt-ons like SIMS Pay and SIMS InTouch more aggressively to increase average revenue per customer”, but you'd imagine that’s off the table now SIMS is under the same roof as ParentPay and SchoolComms, since they’re the main business you’d be trying to win customers from! 

3. ...But management may be a major motivator for the merger.

ESS has lost a lot of people over the last couple of years. A bunch of the former SIMS team have ended up at Juniper; others have drifted off into other sectors. That creates a problem for the buyer: how do you ensure that there’s high quality management across the business? To be clear, I’m sure there are plenty of capable people at ESS; but it’s hard to hire when your parent company is cash-strapped and the future of a division is uncertain, so my default assumption is that there will also be gaps in key roles. 

ParentPay, on the other hand, has a reputation for competent management and savvy use of private capital to support expansion alongside organic growth. This Megabuyte article helpfully describes the the key acquisitions made with the backing of Lloyds in 2017 and 2018. Management has been further bolstered during 2020, with longstanding CEO Clint Wilson moving to be Group Corporate Development Director and Mark Brant (ex-PayPal) joining as Managing Director. 

What’s more, you’d assume that Local Authority support units (who could play a make-or-break role in SIMS’s future) will already have relationships with the ParentPay team and so the familiarity and capacity they offer to oversee both relationships could be very appealing to the new owners.

4. There’s more to MIS than ever before.

A surprisingly hard question to answer is: what is a school MIS? For sure, it’s where you manage your student and staff records, and track attendance and exclusions. For English state schools it’s also how you submit your school census return. For secondaries it’s where you store your Exams data. 

Beyond that though, the picture is fuzzier. There is a large bunch of functionality that is frequently purchased by schools, and which is at the very least MIS-adjacent. Timetabling, ePayments, comms, assessment and behaviour all fit into the category of modules where the MIS competes for market share with third party vendors. Safeguarding, finance and HR have historically been further away from the MIS, but they’re getting closer, with MIS vendors starting to release solid solutions in these areas.

So I think a big macro story of 2020 is that the owners of all the main MIS now see the addressable market in the broadest possible way. The six main vendors are Montagu (owners of SIMS), The Key (owners of ScholarPack and Arbor), RM, Bromcom, Juniper (owners of Pupil Asset, now rebranded as Horizons) and IRIS (owners of iSAMS). All of them have a strategy that combines selling a core MIS alongside modules covering an ever-expanding array of extended functionality. 

That wasn’t a given five years ago: ScholarPack originally grew fast because they were simple, and didn’t try to do too much; and Arbor’s early strategy involved promoting their read-write API and the community of apps it enabled. So there was a point when I thought that a Salesforce-like ecosystem would emerge, with MIS vendors sticking to core functionality and best-of-breed partners doing the rest. I guess that’s partly happened - there are more bolt-ons out there than ever - but it no longer looks like the MIS vendors’ preferred model. From now on, assume that if there’s a popular module to be offered, the MIS vendors want to sell it to you.

5. Capita won’t be overjoyed about the price - but market watchers aren’t surprised.

When Capita announced the proposed sale of SIMS, they were reportedly after a valuation of £500m+. Instead, they’re having to make do with £355-400m. This breaks down as £298m on competition, £57m of liabilities transferring, and £45m extra if the tie-up with ParentPay gains approval. 

Now, since none of us get to see the magic spreadsheet that arrives at this valuation, it’s hard to speculate on whether it’s a good deal for the buyer or seller, but what it is possible to say based on Capita’s own statements is that when they embarked upon the process they hoped for a better outcome than 7-8 times trailing earnings. (As I mentioned in my previous blog on the SIMS sale, ESS had profits of around £50m in the most recent reported financial year).

Why has this happened? My guess is that it was becoming harder and harder to spin a “growth” story for SIMS. As I’ve blogged about previously, SIMS has seen increasing declines in market share in recent years. There’s not been any dramatic freefall, but still, churn in English state schools has risen from 0.1% in 2012 to 3.6% by the end of 2019, and the imminent 2020 data is unlikely to offer much reassurance. The rollout of SIMS 8 (the cloud version of the product) has also been slow going, and so without being able to point to strong numbers in that new cloud business, it must be hard to paint a very rosy picture of SIMS’s future without considerable management attention. 

6. Schools will be hoping for improved execution on SIMS’s strategy.

I don’t think it’s controversial to say that there has been some frustration amongst school MIS commissioners with SIMS’s strategy in recent years. The frequently-delayed move to the cloud has impacted on the trust that is afforded to them by their customers. High turnover of school account managers also hasn’t helped. So the new owners of SIMS need to get their strategy right to meet the needs of their customers, and deliver on their commitments. 

The change of ownership also presents an opportunity for SIMS to reconsider the LA-focused business model that served them so well for so long, but which needs updating to reflect changes in the market. Increased appeal to MATs should be a part of this, and getting that right requires tailored functionality; not just relationship building.

7. Private equity deals have unintentionally funny names.

Look, I know this isn’t the main point here, but the “Tiger UK Bidco Limited” bit of the press release made me smile. I mean I get it: it’s a vehicle set up to facilitate a transition prior to the hoped-for ParentPay merger; but still, it’s fun to speculate as to what the new name means for SIMS staff. Will they have to call customers to say “Hi, we’re delighted to tell you that SIMS is being bought by Tiger UK Bidco Limited (new structure pending)?” Will they get Tiger UK Bidco Limited added to their business cards until ParentPay join the fold, perhaps alongside a hastily-designed wild cat logo? Will they call their HQ the Hot TUB? (Please tell me they’re calling their HQ the Hot TUB.) I shall be tracking future developments in this area with particularly keen interest. 


Wednesday, 2 December 2020

What the acquisition of Arbor by The Key means for the sector

My usual disclaimer: I have past, present and (hopefully) future commercial relationships with many of the UK's MIS vendors. Nonetheless I aim to write this blog impartially, from the perspective of a neutral observer. If you have questions about this analysis, or any other blog, contact me on Twitter, LinkedIn or via email. I also now provide MIS market datasets and reports as a service - get in touch for more info.

The Key have just announced the acquisition of Arbor, meaning that the businesses of ScholarPack and Arbor are now under the same roof. So what implications will this have for the sector? Here are my thoughts.

  1. In many ways, it means less than you might imagine. My understanding is that there are no imminent plans to merge the brands. Since both products are already growing nicely independently from each other, it would be a surprise if dramatic changes were made early on. Moreover, I suspect there’s less crossover in customer base than you might think: ScholarPack markets to primaries on its simplicity and ease-of-use, whereas Arbor is increasingly going for all phases and types of schools, and promotes its breadth of modules and workflow improvement features. So I think it would be wrong to assume the deal heralds a dramatic short-term change in strategy for either brand. Of course, deals like this can come with a management reshuffle, but even that may not alter much, as the cultures and management styles of the two organisations seem to me to be quite aligned. It's also a good sign that The Key's press release talked about welcoming "James Weatherill and his team" to the group - that's the kind of language you only use if you're expecting them to stick around.

  2. There’s a decent case that they’re stronger together. Arbor and ScholarPack were both already looking strong individually; together they could be formidable. Between them they’ve accounted for over half of all “MIS switching” schools in each of the past three years (see chart below). That said, they’re not without chinks in the armour: Arbor has been consistently loss-making, and ScholarPack focuses exclusively on primaries, so has a limited addressable market. Together, however, they can serve all phases (including secondary and special, where Arbor is starting to make inroads) within a profitable corporate structure. That’s non-trivial - a recent line of Bromcom marketing has been to point to their robust financials and contrast that with their peers, referring to the government’s Economic and Financial Standing (EFS) guidance. I’m not convinced that it matters as much as some think - give me a fast growing loss-making MIS over a rapidly declining profitable MIS anyday - but still, there may be some people inside of Arbor who are relieved not to have to fend off this line of attack any more.

  3. The sector now has two chunky challengers, each with 8%+ of English state schools. Since 2010, SIMS have been the undisputed sector leader with at least three quarters of English state schools (2010: 82%; 2020: 75%), followed by RM Integris out on its own in second place (2010: 7.2% market share; 2020: 9.6%). In all that time, nobody else has risen above 6%... until now. Combined, ScholarPack and Arbor share 8.9% of the market when measured by schools in Oct 2019 - and it’ll no doubt be more when the Oct 2020 data is released shortly. I think that matters - while nobody can dispute SIMS’s continued dominance; it’s also now impossible to argue “there are no other real choices”. Close to a fifth of schools opt for systems developed by two strong, profitable challenger companies (Arbor-ScholarPack and RM). When you also factor in the continued growth of Bromcom (with 2.3% of the market by number of schools but 3.4% when measured by pupils) and the increased investment being thrown at Pupil Asset by new owners Juniper (2% of schools), it’s clearer than ever that this is no longer a unipolar vendor world.

  4. There is long-term potential to do cool stuff together. While I don’t think the two companies will rush to bash their core products together, I can imagine that they’d start producing joint bolt-on modules fairly early on, perhaps as a first step towards a long-term merged platform. MAT analytics might be a good candidate for this: both have already been investing heavily in this area, but analytics really isn’t the kind of feature you “solve” in a single release. So I’ll be interested to observe whether some crossover modules compatible with both products emerge on the roadmap in the coming months and years. 

  5. Don’t rule out another entrant. One side effect of this closely watched merger (together with the ongoing SIMS sale and recent iSAMS sale to IRIS) is that the profile of UK school MIS has been raised across the board. It’s a cash-generative business with a potentially vulnerable dominant vendor, and that’s an attractive set of fundamentals for private equity in an uncertain business climate. So I wouldn’t rule out a US or Australian vendor making an appearance in the UK market in the next year or two. 

  6. Capita really needs to crack on and sell SIMS. It has been well documented that SIMS is up for sale, with recent reports suggesting that Montagu is now in exclusive talks to acquire ESS (the division of Capita that contains SIMS). Capita has also been open about needing cash to service debts, with the most recent half-yearly results talking about disposal proceeds being used “to strengthen the balance sheet by reducing net debt and pension liabilities”. That makes it seem likely that a sale will proceed. The problem for the eventual buyer though is that the market isn’t standing still while they close the deal; and the fundamentals of the SIMS business are unlikely to be improving in the meantime. So while the challengers are fizzing with ideas and flush with new investment, it’ll be difficult for the current SIMS management to do a lot to address the threat until their own sale goes through. And of course if a deal doesn’t happen, it’s not like the parent company can be relied upon to stump up new investment. So while I’m sure Capita won’t sell at any price, if anything the ScholarPack-Arbor merger adds even more urgency to the deal.