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The Online Education Market:
A Crossroads for Higher Education & Business

By
Greg Eisenbarth, Executive Director
Online University Consortium


Introduction
While much hyperbole has surrounded the Internet and e-learning during the last five years, online education remains one of the most viable applications on the web. And, given The University's role in its history and creation, it seems that these Institutions should be in a solid position to benefit from its growth. However, for universities it hasn't always been a smooth ride down the Information Superhallway.

In the 60's, during the Cold War, ARPANET (i.e., predecessor to the Internet) was created by the US Government as a better alternative to physically mailing magnetic tapes back and forth between agencies. At the turn of the decade, with the intensity of Cold War lessening, ARPANET started to lose its financial backing from the US Government; and the government moved that science organizations and universities use the Internet for their own purposes and absorb a proportional cost. Many universities were early adopters, using the Internet and in its formative years. In doing so, universities were among the first group of organizations and users to see application of the Internet in education.[1]

But universities are a conservative lot. Although they played a central role in its initial funding, formation and application; universities let for-profit education businesses take the lead on widespread adoption of the Internet. As a result, companies such as the University of Phoenix have an early lead in the online education market. And while many in academia openly question the value and intent of the University of Phoenix, their acceptance is indicated by the fact that their distance learning division alone generates $327 million in annual revenue.[2]

According to one source close to major corporations, "Around 10% of all tuition reimbursement money companies spend on an annual basis is now captured by the University of Phoenix." [3]

Commerce aside, The University of Phoenix Online currently has 60,000 students and its' online degree programs are growing at 60% a year.

Times Are Changing
Once slow to embrace the Internet as part of their school's strategy on distance learning, now hundreds of universities are offering online degree programs. As a benchmark, in 1989, five MBA degrees were available on the web. Today, AACSB--International (Association for the Advancement of Collegiate Schools of Business) recognizes some 450 accredited online business degree programs with as many as a quarter of them being the MBA.[4]

An indication of quality growth is the number of fully accredited online degree programs from traditional schools that the Online University Consortium (OUC) now represents. OUC has seen growth rates jump from a handful three months ago to a number in excess of 220 as of June 2003. And, had OUC not controlled growth by qualifying institutions, this number would have easily been 50% higher.

According to a study conducted by Eduventures.com, about 350,000 students are now enrolled in online degree programs. This represents 6% of the full-time students enrolled in four-year institutions.[5]

The majority, some 54%, of all college students on campus today are adult learners over the age of 23 years old. The number of online learners is 11% percent of this student population. (Note: this total does not include students in graduate or more advanced degree programs.) Factoring in growth, which most studies indicate is between 30% and 40% [6], even at the more conservative rates, one is anticipating a large constituency of online students in the very near future. This compares to a student growth rate of 2% at a regular university campus.[7] With growth rates of online education 15 to 20 times greater than on-campus enrollments, universities have much at stake.

In Reality A Much Larger Market
What's not always carefully factored into the demographic analysis is the role other factors will play in the growth and formation of the online education market. Markets are both demand-and-supply-driven; also, worldwide distribution of the web itself can quickly, and fundamentally, change the market.

Demand
When considering demand it's important to note the following factors:
  1. Baby boomers have been, and will continue to be, near term, the largest market for adult education. They, and more specifically their employers, will drive online enrollments. Employers are going to need to develop their workers as never before and they're increasingly using the web to do it. For example, 60% of IBM's existing classroom content has now moved online.[8]
  2. More working professionals who are interested in, but had been unable to pursue a first or second degree, will migrate online. While gradual at first, this movement will pick up both momentum and numbers as comfort with learning online translates into more understanding, acceptance and approval of online degree programs.
  3. A younger generation of learners has grown up, and is growing up, with both computers and the Internet. They fully expect to continue using computers and the web in the process of getting an education. According to Training Magazine, Miami High School seniors can now take over 65 classes in art, math, social studies and physical education through Florida Virtual School via the Internet.[9] There's sufficient reason to believe, with the mass investment in K-12 technology and the current education budget crisis hitting most states, that more degree-credit academic courses (like those now offered in Florida) will take place online.
  4. The short history of the Internet has shown us that ubiquity of the web makes both geographic boundaries obsolete and hyper-growth very much possible.
  5. Unknowns that could cause exponential growth to happen include:
    1. Government – It makes sense for all U.S. federal, state and local governments to align with universities, not for handouts, but as a way to get the best online degree programs/certificates and also ease state budget shortfalls now experienced in Higher Ed. It remains to be seen whether or not this will happen.
    2. Subsidies – Governments in other countries, such as the UK, are currently subsidizing universities that provide online degree programs[10]. The United States should consider subsidizing universities, or offsetting costs to build expensive infrastructure, in the U.S. education system for competitive reasons. Also, subsidies could be considered a reciprocal payment to universities for their early role and involvement in creation of the Internet. Because there would be no Internet as we know it today without universities.
    3. Worldwide – With the best Higher Education on the planet, demand from students throughout the world could drastically accelerate growth for online university degree programs in the U.S. and Europe. After all, it is called the World Wide Web for a reason.
Supply
We've shown that demand exists as adult learners at company sites, along with younger students, increasingly need qualified online degree programs that are delivered by quality universities. As previously mentioned, accelerated growth in supply of university-provided online degree programs is currently underway. OUC's growth in degree programs, from a few three months ago to 220 now, seems noteworthy. But what makes this growth rate even more fascinating is that it comes at a time when universities are reeling from budget cuts. To us, as it should be for most in Higher Ed, this further indicates the importance of online education to traditional university systems.

Faced with increasing tuition structures and little growth potential in traditional students seeking an on-campus education, few schools will have reason to hold back. Factor in the need to maintain and build infrastructure to house, transport and educate those students on campus and you'll begin to see universities forced into finding a better balance of web and classroom to educate a more diverse student population.

When student customers increasingly find out that real colleges and institutions are offering full-degree programs online, they'll be more willing to accept the idea. As universities officially support and promote that they offer online degree programs, and are able to more closely tie web delivery to campus instruction in a blended learning environment, there's no guessing how much more growth will occur. As you can see the online degree and education market are at a crossroads for Higher Education. If leadership can steer clear of the stigma that often accompanies opportunity in education and drive toward their institutional goals of educating all qualified students, they'll have a legitimate opportunity to intelligently educate more communities of learners.

Issues for Higher Education
The three most important factors for traditional universities to further penetrate the online education and degree market are accreditation, assessment and reputation for quality.

1) Name & Reputation Matter, Quality Drives Enrollments
Studies show the name of the educational institution backing online degree programs is critical to learner acceptance and future education success. Findings from a recent survey conducted by Online UC[11] further support this perspective. Human Resources (HR) professionals attending the Society for Human Resource Management (SHRM) 2003 Conference were asked the following question:

If you had to hire, or promote, an employee that earned an online degree from a traditional school such as the University of Southern California, or that had matriculated at the University of Phoenix, whom would you choose?

The majority, 50%, of HR professionals said they'd select a job candidate with an online degree from a traditional school such as USC or University of Michigan over a job candidate with a degree from an organization such as the University of Phoenix. Only 22 percent said they'd select candidates graduating from for-profit schools like the University of Phoenix. When asked which employee they'd be more likely to promote – a graduate from a traditional university versus University of Phoenix – the results were identical. Some industry participants believe that the name and reputation of the education provider is even more important than the medium used to delivery the education program.

According to Vicky Phillips, CEO of Geteducated.com, "The issue is not whether the degree is earned at a distance, but whether or not the student is familiar with the name of the institution granting the degree; the name takes precedence over the method." Phillips clarifies this by saying, "Respondents in studies of opinions about online degrees will rate a degree from Stanford the same whether it's earned online or on-campus, because they recognize the name of the institution granting the degree." [12]

These data reinforce our earlier claim that supply of online degree programs by top name universities will drive both current demand and future market growth. Online degree programs offered by top name schools such as the University of Florida, University of Texas and the University of Illinois (all involved in Online UC) have a built-in trust factor that schools-for-hire have not earned. For-profit schools neither possess a reputation as an established educational university nor the expertise of having educated and delivered learning experiences to millions of students. Their programs are perceived to be void of academic rigor, fraught with faculty turnover and incapable of preparing students for the demands of future work and challenges of leadership. This is where for-profit schools are the most vulnerable.

However, the reality of the online education market now is different because universities haven't consistently stepped up and addressed these shortcomings. How much longer these for-profit schools can benefit from getting to market early and riding the success of their enrollment networks depends upon the response of universities.

While name and reputation of the education provider are more important than the delivery method, the quality of online degree programs is by far the most critical success factor. At the Online University Consortium, we currently have enough critical mass, at 220 online degree programs, to generate widespread interest and activity. But both corporations and adult learners consistently tell us that size is only a reason to get dialogue on education started. As this market advances, we know that quality will prevail and be a key decision factor in driving student enrollments. Top name educational institutions and reputable online degree programs are the very foundation of our consortium, but value to the student customer is preserved only if we maintain, and improve, this quality level of providers and programs through qualification.

By qualifying universities, prior to membership and participation, we are able to determine levels of accreditation and education value of online programs before learning ever begins. While OUC accepts programs and member institutions, it also restricts entrance and membership. For example, we recently denied membership that would have added another 120 online degree programs to our education portfolio. Again, size matters, but quality takes precedence over sheer quantity.

2. Accreditation, Compliance & Certification
In a recent poll on areas of satisfaction with online learners, 44% of those surveyed said accreditation and quality of education was a necessity in their receiving an online degree. Another 22% said the student experience was most important.[13] While these results indicate that two-thirds of all learners place value on accreditation, and equate accreditation with quality, neither corporations nor adults truly understand what "accreditation" means.

Part of the confusion is caused by the accrediting bodies themselves. For instance, AACSB International grants both membership (i.e., open to all educational institutions) and accreditation status. Accreditation is legitimately earned "…as a process of voluntary, non-governmental review of educational institutions and programs."[14] However, misunderstanding occurs when many non-accredited education organizations illegitimately tout AACSB membership as accreditation. Therefore, accrediting bodies must go out individually, and collectively, to educate large constituencies of adult learners and the corporations they work for about their standards of accreditation.

Accreditation is extremely important and represents an issue Online UC emphatically supports. We currently have a Special Task Force on Accreditation, Standards and Compliance that will outline, and continually update, our position as a consortium of universities on accreditation standards of online degree programs. We will work hard to inform all involved in the online education market of its importance, observance and practice. Yet with so many online education providers now offering accredited programs, and more scrambling to get accreditation, we feel it is becoming critical that universities move beyond the basic conversation of having regional and program accreditation. Our broader objective at OUC is to comprehensively define accreditation and comply with multiple standards of learning. As such, we are working with various organizations that have set other relevant criteria for success of online learning.

In addition to the requirements of accreditation established by the six regional education bodies and a host of other organizations that accredit program-specific degrees, it's important to know that there also are multiple standards of learning set by business, industry and government. For instance, another area of compliance is the government sector, which is currently a very active buyer of e-learning programs. In the government market, there are four primary initiatives that matter with respect to online education:
  1. E-Gov;
  2. The President's Management Agenda;
  3. 508 Compliance; and
  4. GOCO - Government Owned, Contractor Operated.

To those in government interested in online education, these compliance standards are as important as accreditation of university and degree program. When universities comply with other standards of learning they will be able to attract what should be a significant amount of education from business, industry and the government.

Certification of online instructors comes up in conversations we've had previously with organizations that are involved in corporate education for adult learners. Part of the University of Phoenix Online's success can be attributed to the fact that they have set up some basic professional development programs for their online instructors. But initiatives by industry associations such as the National University Telecommunications Network (NUTN) may go further. NUTN has taken particular interest in faculty development and quality assurance of online degree programs. Their association maintains that quality assurance requires increasing attention to professional development and involvement of faculty and professional staff throughout the entire education process, which begins with instructional design and curriculum development.

In an online learning environment both the role of the instructor and the degree of student control changes relative to the classroom. Online learning is two-way and often happens through professor lectures, facilitation, observance, assessment and mentoring. Existing professional development practices and standards for the classroom will no longer apply to the world of online education.

Both regional and program-specific accreditation bodies have the resources and reputation required to certify quality online instructors. It remains to be seen which credible organizations will act decisively with conviction and substance, but faculty standards for online instruction will start to appear and become a factor. When they do, overall quality of online degree programs will improve.

3. Assessment
Assessment is a critical part of the process of education. Without assessment there would be no measures to determine levels of current knowledge or whether the learning objective was accomplished. While the role assessment plays in the process of education is well documented, it's not totally understood. In Higher Education assessment is not always successful. A partial explanation for this lack of success is because high profile entrance assessments, such as ACT, SAT and GMAT, are often separate from the institution providing the education or degree program. Universities do not develop assessment in these situations and there is also rarely any promotion of the assessment that actually happens. Therefore, students are not always sure what role assessment plays in the process of, or application for, further education.

Assessing Students' Ability to Learn Online
The need for assessment in adult education is apparent. No matter how convenient e-learning is not all adults have the ability, nor want, to learn online.

Placing first-time students in an online education environment without first assessing their propensity to learn online is problematic. In Higher Education there exists a definite bias toward assessing competencies during the education process and a lack of regard for learning styles and motivation-level assessment prior to commencement of learning. There exists a noticeable void in this area of assessment and we feel the process of online education for adult learners and companies is incomplete without it.

Web-Based Assessment
The potential for assessment in online education is unlimited. On the web, you can go immediately from diagnostic to prescription to remedy without ever changing the delivery medium. This solves perhaps the #1 challenge that universities have always faced – separation of assessment from the actual degree program. Assessment prior to online education would also allow schools to set up a diagnostic tool and properly deliver a remedy, or learning solution, to accommodate the various education needs of students.

Assessment on the web allows companies to set learning objectives before education begins and pre-assess things like delivery, insuring that all students will have the greatest likelihood of success.

Return on Investment (ROI) of Degree Programs
What many universities may not know is that degree programs can provide some measures of ROI which adult learners and companies are looking for. Earning a degree is certainly a tangible type of learning outcome. However, the completion of the degree program inside of companies is more commonly considered a stipulation to getting tuition reimbursement and is frequently associated with recruitment and selection, rather than development. But degree assessment alone is often not enough.

Corporate Assessment
The need for assessment in corporate training is even more critical because a lot of education is closely tied to HR development funding and training budgets. Here assessment not only proves that knowledge is attained and advancement has occurred, but more importantly allows companies to set up and prove ROI in the context of work (i.e., skills and competencies) and performance. The difficulty comes in trying to demonstrate and quantify ROI. The ability to track ROI is an Achilles heel for most organizations that deliver education. According to a recent survey of 500 HR Directors by EduVenture, 90% of the companies studied offer tuition reimbursement, but only 5% track ROI.[16]

More than ever corporations are committed to tracking ROI on education. According to Edcor, a company that provides tuition processing and services to Fortune 500 corporations, "Companies now want to more closely track tuition reimbursement's value to the business."[17]

Tools that allow companies to track online education are not only readily available, but also lend themselves to ROI analysis. Organizations like the ROI Consortium of

E-Learning has identified a year-by-year continuum of ROI that spans from cost savings to revenue enhancements. The ROI Consortium has proven that companies can measure online education and track its tangible impact on the business.[18]

Learner Profiles
Aside from proving knowledge and ROI were attained, data from assessments can be used to profile learners. This is perhaps the most refined use and application of assessment data. Companies can build and track key initiatives such as developing employee yellow pages of skills and competencies; targeting development of both high potential leaders, and learners; and constructing a management pipeline used in succession planning.[19]

OUC is leading a university-backed effort in online assessment. If universities will accept, endorse and use a set of standardized assessments more institutions of Higher Education will be able to succeed in the online education market. Administration and delivery of progress assessments for classroom courses have been computer-based for years. If university standards are not soon put in place, the market for quality online education and degree programs will likely suffer and be difficult to sustain.
 
Not to be overlooked or given less priority on the list of what's necessary for online education to succeed, below are summaries of other critical factors universities must internalize and act upon. They appear in no particular order.

4) Interaction & Interactivity
In a LearnShare Seminar related to Online Education, students rated interactivity as more important than the delivery medium. Three years ago, interaction may have been considered an option that was nice to have. Today it's industry standard that comes integrated with curriculum and content delivery. Universities must take the lead in two-way facilitation of instructor-to-student and student-to-student interaction. They also must dynamically produce instructional curriculum that immerses students and instructors with content that's interactive, engaging and immersive. But most of all curriculum content, instruction and learning environment must drive a valuable learning experience and better-than-expected outcome.

5) A Declining Price Point
Earlier in this article we suggest that the web can have a lower cost structure, and thus lower tuition structures for campus-based degree programs.

Universities must figure out this cost structure and drive online enrollment costs down below costs of comparable degree programs that are delivered in class, on campus. We feel that sharing infrastructure and collaboration on instructional content development will help universities realize cost savings that can eventually be passed on to adult learners and corporations.

6) Alliances
Alliances will govern and rule the day for those universities who are serious about delivering high-quality online degree programs. Here are three samples that are indicative of possible types of alliances:

  1. University to University
    Many of these alliances within the same university system have already formed. Examples include the University of Massachusetts Online and University of Illinois Online. The Arizona Board of Regents has taken this one step further and formed a university alliance with the 3 primary schools in their state – Arizona State University, University of Arizona and Northern Arizona University.
  2. University to Business
    More rare than U2U alliances yet in some ways more important, we see University-to-Business alliances happening on a more consistent basis once university online degree programs have built out and universities systems have fully organized.
  3. University to Government

Local, state and federal governments will take the lead on alliances when systems are organized and infrastructures are complete, fully tested and reliable.

7) Sample Online Learning
The ability to try, or sample, an online learning environment (or better yet learning experience) from a company's or student's perspective is of tremendous value. Trial usually happens via:
  1. Pilot Programs
    Many companies will request a learning pilot prior to paying for, or reimbursing, and employee's ongoing development and professional education.
    For universities who only have a linear perspective on learning and what some have called "semester schedule tunnel vision", this will seem like an unreasonable request. Our recommendation is to always have universities allocate and make available a few extra seats for every online classroom they deliver. Pilots are considered good practice, they allow prospective students to sample the learning experience and, if your programs are of high quality, it's an easy way to increase future enrollments in your online degree programs.
  2. Learning Bytes
    Also known as byte-sized learning or learning objects, these mini modules of content have been enormously popular with U.S. corporations and their employees. Byte-sized learning is a great way for adult and corporate learners to sample not only content, but also get a sense of the learning environment. We sometimes package static, 5-minute asynchronous development modules, or objects of byte-sized learning into email newsletters to those who qualify. As with learning pilots, it's a great way to initiate trial and drive subsequent enrollment of online degree programs.

8) Promotion
Just like assessment is part of the education process, so too is promotion. From kindergarten through graduate school, students are promoted to the next grade level when they demonstrate progress and proficiency. When learners complete an area of study, they then promote both their degree accomplishments and affiliation to the university that provided them with an education. If they are to effectively compete in the online education market, universities must learn that it's also okay to professionally promote their institutions, online degree programs, faculty, students, resources and classroom infrastructure. Promotion is the single biggest point of differentiation between for profit and non-profit institutions. But promotion isn't a sole birthright exclusive to for-profit enterprise. Many of the healthiest, growing non-profit organizations have learned to promote themselves effectively.

Conclusion
The online degree and education market represents a crossroad for Higher Education.

Although there are many perceptions, stigmas and controversies surrounding online education, there is more importantly demand for and supply of quality online education and degree programs. Universities have played an important role in the formation of the Internet and application of online education. The question remains will universities actively participate and lead this market or sit on the sidelines and watch yet another opportunity for education[21] to slip away. Universities must act now with clear and decisive leadership if the system of universities we all benefited from is to remain an influential force in our lives and the lives of our children.
 
Footnotes
(1) Adapted from Internet 101 – An introduction of the Internet's origin by Brad McClaws.
(2) Fast Company Magazine – March 2003
(3) According to Scott Smith, Director Tuition Assistance Programs, Edcor
(4) AACSB's website and Geteducated.com cited in Training Magazine May 2003
(5) According to American Demographics, last year there were 5.9 million full-time students in four-year institutions. Another 49 million people have earned bachelor's degrees.
(6) The same Eduventures.com study, quoted earlier in the paper, indicates that online degree programs are growing at a 40% annual rate. Using the MBA program examples previous given, a 30% rate of growth could be more indicative of what to expect. The study was conducted in September 2002.
(7) Eduventures.com
(8) According to an IBM Manager who was quoted as a presenter during a Learnshare Seminar.
(9) Training Magazine – June 2003
(10) According to Dr. Tom Abeles, Editor of On the Horizon
(11) SHRM SURVEY RESULTS
% Company HR pros who would hire or promote employees who had earned online degree programs from:
Traditional Universities - 50%
University of Phoenix - 22%
Split Opinions (either) - 13.8%
Makes No Difference - 13.8%
(12) Quoted in Training Magazine - May 2003.
(13) Learnshare Seminar, March 2003. This from an audience who was 75% students, 25% HR.
(14) From AACSB's website. International membership and accreditation definitions are as follows:
Membership in AACSB International is open to educational institutions, business organizations, foundations, professional associations, and non-profit organizations with strategic interests in shaping management education. Eligible educational institutions are collegiate institutions offering baccalaureate or graduate degree programs in business administration, management or accounting. U.S. institutions must have current accreditation by an authorized institutional accreditation association. Outside-U.S. institutions may include recognition and/or authorization by appropriate government decree or demonstrate approval of their academic programs through recognition by an appropriate professional or government organization within the applicable region or country. Membership does not confer AACSB accreditation and should not be interpreted as achieving accreditation.
Accreditation is a process of voluntary, non-governmental review of educational institutions and programs. AACSB accreditation represents the highest standard of achievement for business schools worldwide. Institutions that earn accreditation confirm their commitment to quality and continuous improvement through a rigorous and comprehensive peer review. AACSB International accreditation is the hallmark of excellence in management education.
(15) Novell's Certified NetWare Engineer (CNE) Assessment Disk. At the time there were fewer than 2,000 CNEs, within 3 years in excess of 100,000 professionals held CNE status.
(16) Eduventures quotes during a Learnshare seminar.
(17) Edcor. Fortune 500 companies such as JP Morgan-Chase Manhattan, Ford, AT&T, UPS and General Motors outsource processing and fulfillment of tuition reimbursement programs and services to them. Last year they handled over $300 million in education funding for their clients, who employ a minimum number of 5,000 employees.
(18) Courtesy of the ROI Consortium of Enterprise Learning. For more on ROI analysis of e-learning go to http://www.roiconsortium.com/ROI_Success_Kit.pdf
(19) Credit due to William Pilder, PhD, at KnowledgePool who took us under his wing for 18 months on an extensive leadership development initiative with Pitney Bowes called LEAD!. Much of this commentary is based upon work with this project.
(20) International Data Corporation tags "the lack of human interaction" as the most often cited reservation to Internet Based Training. It also lists "online mentoring and support" as one of the three top services to request when selecting eLearning providers. (Source: IDC – Are Managers Ready to Purchase Internet-Based IT Training? Results of Education Buyers Survey.)
Forrester cites, "lack of interactivity" as the #1 obstacle that limits online training. (Source: Forrester Report - Online Training Needs a New Course – 10/2000)
Also, Brandon Hall confirms this by listing "User-Instructor Interaction" as one of seven core benefits desired most by businesses implementing eLearning programs. (Source: Brandon Hall – Live E-Learning: How to Choose a System for Your Organization - 2000)
(21) In many of his books, Peter Drucker discusses how American Universities have missed golden opportunities to expand their education reach and influence.