Moodlerooms is on the move

In the fast-growing market of online learning tools, Moodlerooms Inc. is both start-up and upstart.

Founded five years ago, Moodlerooms has grown to 37 employees and plans to add another 60 over the next 18 months once it moves to new offices in Baltimore's Sharp-Leadenhall neighborhood in June.

Moodlerooms is an upstart because it is trying to challenge pricier online learning software with lower-cost alternatives. The company now has more than 700 customers and supports more than 750,000 users of its software services.

"It's a really exciting time," said Martin Knott, the company's chief executive. "We're a start-up. No question about it."

Moodlerooms is the latest start-up to grow up and "graduate" from the city's business incubator, the Emerging Technologies Center. It is based in the ETC's offices in the 1100 block of E. 33rd St., in the old Eastern High School building.

Since 1999, Baltimore's technology incubator has helped 127 companies grow and expand beyond its facilities in Canton and Better Waverly. Of those, 85 percent are still in business, according to Ann Lansinger, the ETC's president. Local technology companies such as Millennial Media, Social Solutions and Salar Inc. all graduated from the ETC, which now has 69 start-ups under its wing, Lansinger said.

Lansinger remembers Moodlerooms starting up and needing assistance from the ETC's advisors.

"With this particular company, they needed a whole lot of help early on," Lansinger said. "But as the years went by, they needed less help, particularly as they brought in more expert management."

The company sells a customized version of an open-source online learning platform called Moodle, while many of its larger competitors sell software based on proprietary systems. Open-source software is typically developed in a decentralized way through peer-group collaborations, and it can be freely appropriated by developers who wish to modify it.

Commercial software, on the other hand, may be created by companies in their own closed processes and can only be modified by its creators.

By building atop an open-source platform, Moodlerooms says, it can offer the same or better software and services to higher-education institutions and corporations at a fraction of their competitors' cost.

With Moodlerooms, teachers can conduct online classes with a broad range of tools at their fingertips, such as groups, blogs, testing and surveys.

The heavyweight in the field of online learning management systems is Blackboard Inc. Blackboard, a Washington-based company, sells its own software systems to companies and institutions. The company made nearly $8 million in profit on revenue of $377 million last year.

Moodlerooms, by comparison, is not yet consistently profitable from month to month, according to Knott. But the company expects steadier profitability later this year, he said. It has struck partnerships with Microsoft, Cisco, Oracle and Dell.

Being privately held, it does not release sales and income levels. Thus far, it has received just under $2 million in start-up funding from investors — and the company expects to raise more money to help it grow, Knott said.

Sterling Auty, a software technology analyst with J.P. Morgan Securities in New York, estimates that the online education market is approaching a billion dollars in the United States. He said that open-source solutions like Moodle, and another called Sakai, have lured some institutions and companies away from commercial vendors like Blackboard. But their impact is still small.

"While open-source may have a dampening effect on Blackboard's opportunity, it does not appear to have a detrimental effect," Auty said.

"There will always be a certain percentage of the market that wants the comfort of a commercial vendor with a lot of expertise about their industry, standing behind the customer to support them," Auty said. "On the flip side, there's always going to be a certain percentage of the market that always identifies with open-source [such as Moodlerooms] because of low cost and the ability to customize."

Moodlerooms is chasing the higher education and corporate markets with gusto because they know schools and businesses have been looking to save money during the recession.

Customers in Maryland include public school systems in Cecil, Charles, Frederick, Prince George's and Wicomico counties. The company also sells its software services to several private schools in the Baltimore area.

Knott is quick to point out that his company is staying in the city, without any special economic incentives offered by city leaders.

"The ETC has been very good to us," Knott said. "We feel an obligation to stay in the city."

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