THE Question of the Future of Ellucian... and all ERPs
Coming from a former higher education CIO perspective, I believe that Ellucian is in the same situation as many of its competitors. Ellucian management has to look at the changing landscape of higher education and adjust its goals and objectives. The U.S. ERP market in higher education is saturated. That means that the only way that ERP companies can grow is through sales of new products and services and to convert other companies’ customers to theirs. Ellucian has been losing some of its market share in both their Banner and Colleague products to newcomers to the market... but all is not lost.
So… to finally answer the question.
In the short term, Ellucian must do a few things to insight change inside and outside of the organization. I believe Ellucian has to cap annual cost increases to 4% or lower (3% for contracts terms longer than 7 years) for maintenance and support for both product lines to stem the tide of small and mid-sized institutions shopping for other products. Secondarily, Ellucian should look at lowering the cost of new products and services to boost their sales volume and build back some of their customer loyalty and confidence. Third, the Board of Directors at Ellucian have to see these early signs (shrinking Banner sales and customer defections from Colleague) as the tip of the iceberg. TPG Capital and Leonard Green Partners (holding companies of Ellucian) must lower short-term earnings expectations for long-term stability and growth. Even though Ellucian has invested some significant funding in product development, more money must be made available to Ellucian for these short-term changes and longer-term investments, especially for cloud-native solutions. Lastly, they need to simplify their billing and contracts process through the use of cooperatives and consortia to lower their overhead and get better long-term industry projection data. Using these will help Ellucian move to a single contract vehicle and lower the overhead involved in their sales and marketing efforts.
The necessary long term investments are more complex but are crucial to Ellucian’s future success. I believe that the days of ERP companies with two or more similar product solutions may be numbered as cloud computing becomes more prevalent. Ellucian currently has two completely separate software solutions, Banner (generally for larger institutions) and Colleague (for small and mid-sized institutions). Staff for development, support and sales for two separate products is very expensive and add to long-term overhead growth in a shrinking higher education marketplace. Ellucian must quickly develop a 6-year plan to blend the best of both products into a single, cloud-native solution that is scalable and affordable to all higher education institutions, large and small.
Possibly most important, Oracle licensing for Banner’s database platform is strangling Ellucian’s pricing elasticity. If Oracle is unwilling to lower the costs for their database platform to Ellucian customers, I believe they will be forced to start looking at other, less expensive database platforms (like Microsoft SQL Server, IBM Informix or even open source database platform options). This process is tremendously difficult and costly but as Oracle continues to gain ground with their Student Cloud product, they have the ability to control the long-term affordability of Ellucian’s Banner product. This puts Ellucian in a very difficult position in the market for the long-term.
Ellucian has strong management leadership in higher education. If Ellucian is able to move quickly and effectively, I strongly believe they could continue to lead the market and gain ground with institutions with other solutions. All of this with a new dynamic and visionary leader will definitely move them in the right direction for the future.
Thanks for reading my thoughts and have a great day!