Wednesday, 21 December 2022

MIS MARKET MOVES WINTER 2022: What Did The SIMS Spreadsheet Say?

Disclaimer: I have past and present commercial relationships with many MIS vendors, including an ongoing involvement with Compass. I'm also a co-founder of two assessment startups - Smartgrade and Carousel - that exist in markets adjacent to the MIS. 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 senior leader trying to get a handle on 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.

As a startup founder, here's the rough model I use for how to build a successful business:

  1. Build an innovative minimum viable product.
  2. Listen to your customers and their suggestions for how to make your good idea into a truly great product.
  3. Market your company in a way that is warm and appealing to your customers and partners.
  4. Find the optimal price that allows you to become profitable while also offering great value to your customers.
But it's not the only way! In fact it's not even necessarily the *right* way to run a well-established business, at least from a "maximising shareholder value" perspective. So established companies sometimes adopt very different strategies from startups. Those methodologies may look a bit weird and unfriendly from the outside, but that doesn't mean they're wrong in terms of profit maximisation. For example, the owners of 118118 had declining turnover every year in the decade to 2018; but still made a £2.4m profit and withdrew a £64m dividend that year. So sometimes the best way to run a company (from the perspective of shareholders) is to find ways to limit the decline and maximise revenue from the customers that remain. That may not look cuddly to customers, but it might work out just fine financially.

So there was a world where I could be writing this blog and reporting on SIMS declines after a year of contract tussles and CMA investigations, and the headline could still be "SIMS will probably be happy with that". My guess is that SIMS has a spreadsheet that was crafted sometime in 2021, and that spreadsheet predicts declines in their market share, while also setting a range for those declines which would be considered acceptable. So to evaluate the past year for SIMS, what we're really trying to do is guess what level of churn they could live with.

Well, I imagine it was lower than this:

To summarise, over the past year SIMS lost 18% of their market share. 2,734 English state schools took a look at what SIMS was offering and decided to move elsewhere. To put that in context, almost 3 times as many schools left SIMS over the past year compared to the previous 12 months (2022: 2,734; 2021: 942). 

The above chart also shows the churn rates for the leading challengers. Both Arbor and Bromcom have churned at under 3% for the past 4 years now, and Arbor has been at under 1% for the past 3 years. 

So does this mean SIMS are toast? Well, not necessarily. If you're SIMS you're really hoping that the three year contracts you've enforced mean that at least the the exodus stops now. You're also keeping your fingers crossed that customers will like your new "Next Gen" product once they see it. And you're no doubt cooking up other strategies to keep customers with you.

So in some senses the MIS market data for the next year tells an even more important than this batch of data from the past year. 2022 was about seeing how big the decline was; but we've known for some time that a decline was inevitable. The big question now is: can SIMS stop the bleeding and return to a relatively stable market share? Come back next Christmas to find out!

Anyway, SIMS aren't the only story in town, so let's move on to the full market picture. Here are my usual charts showing the latest MIS market share of English state schools.
And here are my key takeaways:
  1. RM gave me a new story to tell! Last time out I joked that the RM story always seems to be the same: "they didn't lose that many schools, but they didn't really win anything either". Well, they sure did call my bluff, because while their market share is almost unchanged, they recently dropped the bombshell that Integris is being acquired by The Key. So in other words, RM somehow managed to both trot out exactly the same story and change the narrative at the same time. It's a bit like when Eminem covered that Dido song and the chorus was the same but suddenly there's a thrilling new meaning to everything.
  2. Ian Armitage take a bow. The most important person you might never have heard of in MIS-land is Ian Armitage, shareholder and Chairman at The Key. Having first bought ScholarPack in 2018, and then Arbor in 2020, The Key has now announced its intention to acquire the division of RM that includes Integris. Once the deal goes through The Key will have 7,189 schools in their portfolio - a 33% market share. Looking at academies specifically, The Key have a 38% market share vs 45% for SIMS. To build a portfolio like this takes a really long-term investor horizon and some smart manoeuvring. So hats off to Ian and all those who made this happen. Of course, what they do with Integris post-acquisition is another question altogether: will they move the schools to the Arbor platform, or keep them on Integris over the long term as they've (mostly) done with ScholarPack? That's another one I'll look forward to digging into next year.
  3. Arbor are the winningest MIS. It feels a bit mean of me to bury the lede that Arbor climbed to a 16% market share after gaining 1,887 schools over the past year, but hey, there's been a lot of other stuff to talk about! Anyway, that's over double their share from a year ago. Their position as the leading challenger to SIMS is cemented. 
  4. Bromcom also had a strong year. Let's not lose sight of the fact that Bromcom had a banner year too. They also nearly doubled their number of schools (2022: 1,688 schools; 2021: 885), and their market share measured by pupils is up to 10%. Of the other vendors, only Arbor and SIMS are in double figures. 
  5. Ed:Gen were the next fastest grower. IRIS products (Ed:Gen and iSAMS combined) jumped from 18 to 86 schools over the past 12 months a net gain of 68. This compares with a net increase of 36 for Juniper products (Pupil Asset and Horizons combined). So technically that makes them the fastest growing MIS (though I appreciate that's a bit like saying "standup paddleboarding is the fastest growing sport in the country"; it may be true in percentage terms, but that doesn't mean it's replacing football in the national pscyche just yet...) But in all seriousness, that's significant growth, and IRIS are entitled to give themselves a pat on the back.  
  6. Oh, hello, Compass! If you read the disclaimer at the top you'll know I'm an advisor to Compass, so I take particular pleasure in welcoming a major new player to the English school market! Compass is an Australian company with 2,000+ schools in Australia, Ireland and now England too, serving all phases and types of school. Now they're on the board, it'll be fun to track how they grow in the coming year.
  7. If you're buying SIMS, expect to receive a very personalised sales service. Over the past year SIMS won 23 schools. I checked on LinkedIn and found 26 people with the words "Sales" or "Business Development" in the job title at ESS. Now of course some of them may have left and not updated LinkedIn, and I'm sure others work across customer success / operations / international markets etc... but still, if you're a new SIMS customer you can assume you'll have a very attentive salesperson looking after you. 
  8. The switch from ScholarPack to Arbor has started. One thing I've been keeping tabs on is whether The Key move schools from ScholarPack to Arbor now they own both. The answer until now has mostly been no, but this past year there are signs that a switch has started. In total 43 schools left ScholarPack, of which 34 went to Arbor. 
  9. Others are coming. Satchel recently announced that they're building an MIS. ET-AIMS and Go4Schools are either in the MIS market or looking to enter (I assume ET-AIMS has some independent schools; I'm not sure if anyone is live with Go4Schools yet). So it's fair to say that we can expect further new entrants over the coming years.