Back in January, Mike and I sold Rustici Software to a British company called LTG. One thing I “learned” in that process is that recurring revenue is very valuable to a company (or its owners). As a business, we sell several products on term licenses, either through our Cloud offering, which is SaaS, or our on premise products which require term licenses as well. Our recurring revenue and high retention rates meant that LTG had to pay a premium over what they would have for a services business.
Take a look at the impacts of aaS on the valuations of several software businesses.
This valuation premium that SaaS gets can be seen more precisely, when we compare cloud software companies to the more traditional on-premise software providers. SaaS companies get higher valuations at all levels of revenue growth rates. For example, looking at the charts below, the median revenue multiple for on-premise software companies that grew their annual revenue 30-40% is 5.1x, while the same multiple for a SaaS companies that grew revenue at that same 30-40% rate is 9.2x.
This group of companies was worth 80% more than their non SaaS brethren.
We’ll talk more about Netflix in a subsequent blog post, but they’re a perfect example of a Content as a Service business from outside the elearning world. And they are recognized for their ability to generate recurring revenue and retain customers.
It’s time for elearning providers to do the same. Find a customer, serve them well, provide updates, control the content. And if they do it well over a period of time, both the company’s revenue and value will rise.
I can’t think of a single LMS that handles language support elegantly. Yes, many of them have a setting whereby a person who speaks another language can reconfigure the interface to reflect their preferred language. But very few LMSs allow a learner to switch the courses offered to them from a default language to their own. Some allow an administrator to make efforts to manage this, but it is incredibly difficult as reports don’t understand that “Basic HR Training (French)” earns the same credit as “Basic HR Training (English)”.
LMSs often assume that the content itself can handle this, and some pieces of content do. They embed multiple voiceover tracks, or language resources, and allow the learner to make a choice from within each course, switching to their preferred language. But this is hard to do in a single piece of content, and the reality is that almost no content vendors bother.
Truthfully, this is the kind of thing that content providers are better suited to than LMSs and their administrators. Content providers are invested in learners’ ability to grasp the material. Content providers have reason to make their content better than their competitors, whereas LMSs have less incentive to do so.
These are my beliefs:
- LMSs should not have to understand that different courses in different languages fulfill the same requirement.
- Learners should be allowed to take their training in the language with which they are most comfortable.
- Content providers care more about content and its applicability than LMS vendors.
- Content providers need to be able to use their preferred authoring environments and tools.
We built Content Controller to accommodate these beliefs. When a learner launches a course from their own LMS, Content Controller offers the learner the choice amongst the supported languages for that course. Their LMS knows nothing about the fact that there are multiple supported languages, just that it needs to launch the course.This means that the content provider can create the course using whatever tools they wish. Then, they create an equivalent in Content Controller that relates all the language variations of a course with the respective languages. The learner makes a choice during their initial launch, which can be persisted in the application, and that choice determines which variation of the course is delivered to them. The magic here is the LMS never knows any of this is happening, just that the learner has fulfilled the requirement. Meanwhile, the content provider can guarantee for their customers that their learners are taking courses in the language they understand best.
This capability in Content Controller has shifted the responsibility for learner-course/language association from the LMS, which never does it well, to the content provider, who has the ability to offer multiple languages of the same course and manage it effectively. Better for the learner, better for the LMS administrator, and better for the content provider.
We see two distinct ways to innovate learning standards. One is to push the community forward by developing and evangelizing emerging standards. We do this all the time. The other is to create and deploy new approaches around existing standards.
Our SCORM Engine powers content launch for the vast majority of LMSs in the world. Our SCORM Driver is used by all but one of the largest rapid authoring tools and countless content creators.
Today we’re announcing Content Controller. We believe that content providers have been underserved. Limitations imposed by SCORM have discouraged innovation that can help them realize the value of their compelling content.
Many industries have transitioned to “as a Service” models. Software as a Service is quite familiar, and Infrastructure as a Service and Platforms as a Service are well on their way too. In each case, customers are able to leave more of the problems to their providers, and providers are able to iterate much more quickly and proficiently than their customers. Providers are also able to generate long term recurring revenue by this model.
In the elearning world, content has long been deployed physically, as digital assets, from content provider to customer. While this has long been required by SCORM’s architecture, it also created real issues.
LMSs are prone to have duplicate and out of date content.
Customers are liable to use content well beyond its licensed period and/or licensed number of learners.
Content providers are blind not only to the utilization of their content, but to the value of it.
Content Controller addresses all of these issues by allowing the content provider to host their content centrally while deploying it for use by their customers. Built on top of our existing SCORM Dispatch product (meaning this is well vetted), Content Controller circumvents SCORM’s limitations to allow both provider and customer to have what they need. This allows Content Controller customers to offer Content as a Service (CaaS).
Content Controller provides version management, license management, content analytics, and sophisticated equivalencies that allow content owners and their customers to do things they haven’t previously.
I’m really excited about this product personally because I think some of the best creative work in our industry is being done by content providers. This will allow those companies to take proper advantage of their unique abilities. We’ve developed this initial version of Content Controller in conjunction with four customers, and the first of the deployments are live and have already delivered tens of thousands of launches. This is just the beginning.
Welcome to week one of the post-acquisition Rustici Software world. I just thought I’d take a moment here to discuss one of the reasons we agreed to sell Rustici Software to LTG, because it’s not all about the money.
Mike and I were seeking investment funding for Watershed, but we really weren’t on the lookout for anything related to Rustici Software. It was a profitable business, I know very well how to run it, and we have several sets of work that give us cause for optimism. LTG, however, saw the value in both Watershed from an investment point of view and Rustici Software from a market and profitability point of view.
After LTG’s first visit, Mike and I asked ourselves two questions.
- Did we believe that we would be able to maintain our strange and highly-valued culture through an acquisition? Having a place we want to come to work has always been a fundamental requirement for us.
- Did we believe that we would be able to serve our customers in the way we always had?
Throughout the negotiations, due diligence, and these two long days as an LTG company we’ve consistently believed that we could do both of those things and still do. LTG is not an LMS provider like some of our prior suitors have been. We always used to worry that an acquisition of that sort might include aggressive interactions with our customers. With LTG, we’re going to continue to be agnostic, supportive of the standards, and generally the same company we always have been. We’re excited about it, and excited about continuing to support our customers and the industry in general in exactly the same way.
Today, I want to share a piece of news that’s really exciting for us. As of this morning, Rustici Software has been acquired by Learning Technologies Group plc (LTG), a publicly listed learning technologies agency made up of specialist digital learning businesses. As a part of LTG, we’ll have the opportunity to work with the other Group companies in creating the next generation of technically-focused learning solutions.
LTG has a great deal of learning expertise and serves organizations worldwide. LTG’s portfolio includes LEO, a pioneering learning technologies firm, the multi-device authoring tool gomo learning, games with purpose company Preloaded, and Eukleia, an e-learning provider to the financial services sector.
As part of LTG, we’ll continue offering exactly the same services we do today to an ever larger group — not only will we provide our world-class e-learning standards support to LTG companies and their customers but as part of the Group, we’ll also have the platform to reach new global audiences.
For our Rustici Software customers, the story is simple. The very same people will be providing to you the very same services in the same way. Our ability to serve our customers in the way we always have is something we feel really strongly about.
We’re excited to have the opportunity to work with the fine folks at LTG, and to continue to serve the e-learning industry in an even bigger way than before. We’re also excited because we’re spinning off Watershed at the very same time. Watershed will continue to push forward with their exploration of learning analytics and LRSs, and has also received a significant investment from LTG as part of Watershed’s Series A funding round. Mike and I, as CEO of Watershed and CEO of Rustici Software respectively, are both excited about where the two companies are headed.
If you have any questions or need more specific information regarding the acquisition, please let us know. Any inquiries or requests for additional documentation should be sent to email@example.com.
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