Blackboard is definitely a really strong contender for the worst software I've ever had to use. When I was in uni, I went so far as to write an alternative that scraped the content from blackboard and published it on a site that I could actually browse sensibly.
They were paying exorbitant amounts of money for the license too.
Applications like Blackboard exist because of the genre of "Checkboxware."
A University must comply with Laws and Regulations X, Y, Z, P, D and Q and a host of other regulations the University never heard of and Blackboard went through the process to "comply" with those checkboxes. So, if you deploy Blackboard, you tick all the checkboxes automatically.
The fact that Blackboard was a garbage content management system and a terrible grade recording system was irrelevant--because the "better" systems wouldn't check the boxes.
(I say this as someone who, as a lecturer, had to manage the account logins, mailing list, and Subversion source control system for an entire class. I only ever put grades that needed to be "secure" into Blackboard. I did all that because I HATED Blackboard that badly, but it was a LOT of work. And I probably wouldn't have passed any significant security audit; although my accessibility ratings should have been excellent since everything was plain text and plain HTML)
It's not really regulation-driven. It's just what happens when the people buying software and the people using it are different. This is the standard problem of enterprise software is marketed to the IT department (which cares about cost, box-checking, vendor relationships, lock-in risk, bureaucratic turf wars, headcount preservation, SLAs, etc) with little or no regard for responsiveness to end user needs.
It is definitely true though that enterprise software for nonprofits (like education) sucks even harder than usual, because nonprofit IT departments don't even have the profit motive to align IT department and end user interests.
Users don't choose their university by how good that university's software is (just as we don't choose apartment complexes and power companies this way). This gives university IT no incentive to deploy software that doesn't suck.
Banks and cellphones also used to work this way, until they suddenly didn't, which was quite a shock to the existing players in the market.
Part of it is also that universities mostly already tried building their own bespoke software in the 90s using 90s era technology and development practices, and got bitten by ending up with legacy software that they couldn't afford to maintain.
They were paying exorbitant amounts of money for the license too.