Elearnity viewpoint on Saba/Centra acquisition
Saba's announcement of its intention to buy Centra is another significant step in the consolidation taking place in the learning technology market place. Here are some initial thoughts from Elearnity - positive and negative - on the implications of this move for Saba and Centra customers, and for the broader market.
Centra has been a leading player in the e-learning market since the early days. With a strong position in the corporate live collaboration space, especially their virtual classroom environment, Centra has an established base of many corporate customers, a proven technology platform, and good market awareness of their offering. But Centra has also struggled over the last few years, stagnating a little in the market as the competitive landscape changed, and suffering a series of internal leadership changes which have recently resulted in the return of Leon Navitikas as CEO.
But regardless of this, Centra's core strengths as a leading live learning platform provider will add value to Saba's proposition as it competes with the broader e-learning suite capabilities of SumTotal, and tries to slow the march of the ERP/HR vendors in the learning management space. Overall, if the price paid is reasonable, this strengthens Saba's broader market positioning and extends their customer base and revenues towards the $100m level that they and SumTotal have long viewed as the critical mass point for longer term sustainability. Given the acquisition is also cash-positive for Saba, that should help nicely too.
For Saba customers, Centra represents some added value, but with many already using Centra, maybe it mainly marginalises the risk and implications of someone else buying Centra. For those not running Centra currently, it strengthens the "suite" offering around Saba, and gives a stronger basis for competing with internal pressures to switch to an HR-centric learning platform.
For Centra customers, we think the future may be more profoundly interesting. Whilst Saba/Centra have announced the products will continue to be separate for the immediate future, the reality of the deal means that Saba needs to create a clear added value for Centra customers to move to the integrated suite over time, i.e. give them an incentive to adopt the Saba LMS. For Saba to really gain from the deal they have to extend their market for Saba, not just sell Centra to Saba customers and keep selling Centra independently. This may prove more challenging, and risks marginalising many non-Saba Centra customers in the medium to long term. Time will tell.
A couple of final points:
Whilst the acquisition of Centra increases the total customer footprint for Saba, it doesn't increase its LMS footprint. Saba has rigidly focused on the very top of the customer tree - large enterprise and public sector (following its earlier acquisition of THINQ) organisations. This is significant as the core of Saba's Human Capital and Suite based story is still the core LMS business. With its recent acquisition of Pathlore, SumTotal has significantly expanded its LMS footprint and whilst it has significant challenges to transition those customers over time to a common platform, it has a lot more LMS customers to work with. Saba's LMS footprint may prove to be too narrow a set of customers to maintain overall market success.
Secondly, both Saba and Centra are very dependent on service revenues, and are seeing declining software licences as a proportion of their overall business. This worries us, and we think should worry Saba, as we believe it reinforces as well as reflects the narrowness of their core LMS footprint. We see Saba's strength as their core LMS/HCM software platform not their service business. Whilst acquiring Centra expands their software portfolio, it does not address the potential weakness in the core of their business.
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Link to viewpoint on Elearnity Knowledge Centre:
http://www.elearnity.com/A555F3/research/research.nsf/ByKey/DWIN6GXEJQ
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