Canvas is AGPL licensed. Moodle is GPL. Universities or anyone else can already contribute to big name LMS.

Canvas is used by Harvard, MIT, Stanford, Carnegie Mellon, CalTech, etc. If they each paid 10 FTE, they could set up a foundation that could govern the development of a top-tier LMS. Every tier-1 state institution could contribute 5 FTE. Even little JuCos could chip in an employee here and there. You'd pick up hundreds of capable employees at a fraction of what those schools currently pay to Instructure.

On paper your idea seems obvious. You take a bunch of institutions that actually teach students how to program and have them cooperate to build an open LMS that benefits them all.

In reality, universities always spin off anything that looks like it could generate revenue. It is very telling that you can't even get your college transcript from your college. You have to go to (and pay) some third party to get it. Some universities even outsource their "classes" like elderhostel to cruise lines and travel companies.

> rather than universities writing an open alternative they share with each other for free

That already exists [0], and is actually reasonably popular.

> the SaaSpocalypse is coming for them - it seems it is simply that LLMs will be used to exploit it first

I doubt it, because enterprise sales has nothing to do with how good your product is, how expensive it is, how easy it is to administer, how secure it is, etc.; it only depends on how good you are at enterprise sales. I mean, my university is Oracle-based, and I'm pretty sure that you could get 3 random undergraduates to write something better, so I don't think that LLMs writing better/cheaper software will make any difference here.

[0]: https://moodle.org/