Proprietary software used at Universities

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The problem is that the instructor was using a proprietary IDE (Rubymine) that I have never seen a Rubyist/Rails programmer use.

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RubyMine is a Jetbrains product, and their software is pretty well-respected and widely used. I use PyCharm occasionally, which has both a paid and free version, not sure why the inconsistency with RubyMine there.

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How do colleges decide on the platforms used for teaching?

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I think they are usually given the products for free (or maybe they are even paid to use them) in the hopes of producing a class of future paid users of the software.