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Summary

Online learning platform (OLP) provider Instructure recently filed for an initial public offering (IPO). Although the number of shares to be offered and the price range for the proposed offering have not yet been determined, it is evident that Instructure is aggressively seeking the capital to grow its business and offer more by way of products and services for its current and future customer base. Ultimately, timing is everything. According to Ovum's ICT Enterprise Insights survey, 56% of institutions will replace, transform, or enhance their learning management system (LMS) solutions during the next 18 months. With a string of announcements over the past 12 months, including the release of Bridge and now the IPO, Instructure may well attract a significant amount of new business from institutions looking to partner with a successful and rapidly expanding company.

Instructure's customers – existing and new – will benefit from the filing

While there are both advantages and disadvantages to going public for any company, Ovum believes that in this case, the advantages are likely to outweigh the disadvantages because Instructure will be able to build on its accelerating growth and offer more to its customers. In the filing of what is known as an S-1 form with the US Securities and Exchange Commission (SEC), Instructure stated that it will pursue the following strategies to grow its business:

  • grow its US customer base
  • further maximize its existing customer base
  • continue to expand internationally
  • continue to innovate and offer new applications.

The company has excelled in maintaining its focus on its core product, Canvas, and on the simplicity of the user experience to encourage adoption. It is now likely that Instructure will invest more in research and development (R&D) to enhance its products – namely Canvas – and services. R&D can be expensive and risky, given that it is difficult to know beforehand what will work. However, the company's investments to date have successfully equated to revenue growth, which is impressive given that newer vendors often have fewer resources to put into R&D and the sales process. Furthermore, although Instructure has rapidly increased its LMS market share in the US, this has not been the case internationally. The IPO will most likely generate publicity for Instructure by making it known to a new group of potential international customers.

Conversely, Instructure should be mindful of the cost of complying with SEC regulatory requirements. These can be very high for smaller companies, as can additional costs such as producing financial reports and the audit fees that the company will most likely have to pay. Furthermore, there will be the added pressure of the market, which may cause it to focus more on short-term results rather than long-term growth. Having said that, when Instructure disrupted the market in 2011, it quickly realized that to be successful, it had to offer something different in the traditional LMS market. The company has not failed to achieve this, as evidenced by its rapid growth in the market.

Appendix

Further reading

Ovum Decision Matrix: Selecting an Online Learning Platform for Higher Education, 2015–16, IT0008-000245 (September 2015)

Enterprise Case Study: Increasing the Strategic Importance of Online Learning, IT0008-000239 (July 2015)

Author

Navneet Johal, Research Analyst, Education Technology

navneet.johal@ovum.com

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