Tuesday 20 October 2020

What IRIS's purchase of iSAMS means for the school MIS market

IRIS today announced their acquisition of iSAMS, the leading MIS provider with independent and British international schools. The news itself wasn't a surprise - Education Investor scooped the mooted sale in early September and the likely buyer in early October - but now it's all confirmed it seems like a good time to reflect on the impact on the UK MIS market. Here are my thoughts:

1. The English secondary state school market should become more competitive

I've blogged extensively now about how the English MIS market has opened up in recent years, with ScholarPack, Arbor and Bromcom all taking share away from SIMS. However, when you look beneath the overall decline of SIMS (from 83% in 2015 in to 75% at the start of this year), you see that almost all SIMS's losses were with primaries (particularly primary Multi Academy Trusts, or MATs). Indeed, SIMS's share of English state secondaries is actually up since 2015 (from 85% to 87%). Bromcom have amassed 6% of that market, and Arbor are showing signs of building a presence too, but Advanced's dramatic decline (from 16% in 2012 to just 4% today) has meant that SIMS has continued to consolidate with secondaries even as those challengers grew. 

One reason for this has been the comparative lack of choice - primaries these days can choose between six or seven decent and full-feature primary cloud MIS, but the pickings to date have been slimmer at secondary. Moreover, with SIMS still very early in their rollout of their cloud product to primaries, their progression to cloud MIS for secondaries is surely a year or two away yet. That creates a significant (but time-limited) window for challengers to woo those secondaries who are starting to wobble about sticking with their locally-hosted SIMS. And iSAMS are well-placed to grow with English state schools - they already have 24 (mostly secondary) customers, meaning they already have some pre-existing knowledge of what this portion of the sector wants.  

So, while IRIS doesn't have to push iSAMS towards English state secondaries, I'd assume that growth in that sizeable and lucrative market is part of their plan.

2. All the cool kids want to own a challenger MIS.

OK, so by cool kids I mainly mean "private-equity backed edtech portfolio companies", but if you accept that definition then the point stands. After all, Juniper has already snapped up Pupil Asset this year, while The Key have acquired one MIS (Scholarpack in 2018) and are reported to be in advanced discussions to merge with Arbor with CBPE Capital taking a minority stake in the new company. It's also sometimes overlooked that Community Brands own SchoolPod, a MIS focusing on special and AP schools.

So why are MIS so "hot right now"? Well, one reason is that they are in some ways a trojan to use to sell just about any form of administrative edtech to schools. Or to put it differently, the core of a MIS is a relatively thin proposition (pupil and staff records, attendance, exclusions, census returns, some reporting, end of list); but by offering that piece of the jigsaw you're well-placed to upsell a bunch of other stuff (assessment, behaviour, comms, multi-school reporting, finance, HR, cashless catering, ePayments etc). Challenger MIS are already well aware of this and are increasingly pushing their customers towards packages that incorporate extended functionality - Bromcom even have a pricing tier called "One Stop Shop"!

So, if you're IRIS, you already have a leading MAT finance system (IRIS Financials, formerly PS Financials), comms product (Parent Mail) and cashless cashless catering / ID provider (Biostore). And those are all good and fine, but you've no doubt also been eyeing up that lump of MIS software at the centre of all those systems, and thinking to yourselves "hey, if I had one of those I could knit all this together and cross-sell and life would be awesome!" You also might have been nervous about the new modules from MIS vendors that compete with your core business. 

There is a global playbook for this strategy, of course, in the form of PowerSchool, who are owned by Vista Equity Partners. Vista have spent over £1bn+ to bash together eight companies, making the current PowerSchool a broad and deep provider of school solutions in all kinds of adjacant areas.

Incidentally, I'm yet to be persuaded that there's quite as much cross-sell potential as some imagine. I see it working just fine in some areas (assessment or comms or multi-school reporting for example), but I'm less convinced when it comes to finance and HR. I get that schools (and school groups in particular) are looking to purchase solutions in all these areas, but I think the key thing for cross-selling is to be able to sell to the same commissioner. However, in my experience, school groups frequently leave MIS, finance and HR in the hands of different commissioners. And the MAT CFOs or HR Directors I know aren't exactly dying for the person who led the MIS procurement to come and tell them which system will meet their sector-specific needs. "Sure, woo, you're telling me I could sync salaries between both systems automatically, but what about support for multiple payscales?", I can hear a former MAT colleague saying...

3. Companies who want to own an MIS but don't yet are running out of options.

If you follow point 2 through logically, you'd imagine that the other school-facing edtech portfolio companies (e.g. Jonas, Parent Pay) will also have contemplated getting into the MIS game. Furthermore, there are a whole slew of investors who got interested in school MIS this year as high-profile companies were put up for sale, but who haven't (yet) ended up owning one. 

I'd therefore expect the owners of some "other" MIS will have been getting plenty of exploratory calls, not least because there aren't a tonne of options left to buy. That doesn't mean anyone else will be willing to sell, of course, but I wouldn't be shocked to see one or two more MIS deals done in the next 12 months.