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Investing in online learning: cost analysis and business models
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Investing in online learning: cost analysis and business models


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  • 1. Symposium on e-learning in What is e-learning? (Bates, 2005) education and training Victoria University of Wellington distributed 29 September 2008 blended learning learning Investing in online lap- mixed dis- learning: face- class- top mode tance cost analysis and to- room pro- (less face-to- face + e- edu- face aids grams learning) cation business models no e-learning fully e-learning 1 © Tony Bates Associates Ltd 2 © Tony Bates Associates Ltd Why do you want to know the costs of e- Factors influencing the costs of e- learning? learning Will it be more work? 1. hours spent teaching and learning Is it more expensive than face-to-face 2. no. of students in a course teaching? 3. teacher:student ratios What do we need to invest - what do 4. use of tutors/adjunct faculty we need that we donʼt have? 5. method of course design/ Will it save money? development/delivery What fees should we charge to cover 6. type of e-learning costs/make a profit? What market? 3 7. institutional financial administration 4 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 1
  • 2. Economics of technology-based teaching New models of course development 1. Individual professors Cost Web supplemented 2. boutique Face-to-face per 3. collegial materials student Fully online development No. of students per course 4. project management Print 20 100 200 2000 Instructor/student: 1:30 5 6 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Individual professors Boutique model of course design working alone main model everywhere • on demand technical support early adopters; essential for change • technology help not educational dedicated; no alternative design too much effort: no boundaries • high cost poor interface/graphics/more time than web professionals • difficult to manage idiosyncratic: no economies of scale • not scalable deter other professors; greater cost 7 8 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 2
  • 3. Collegial materials development Project management academics work together establish projects mainly learning objects, but also work in a team: professor(s) + courses (California), partnership, instructional designer + web designer consortia share materials (e.g. MERLOT, Harvey, schedules/budgets/product CAREO, Ariadne) funding linked to project management collaboration essential not popular with faculty depends on interests of individual Would project management work here? professors: ʻhit-and-missʼ 9 10 © Tony Bates Associates Ltd © Tony Bates Associates Ltd The continuum of design Estimating costs of instructors calculating salaries: cost per working day or hour: face- class- laptop research professor: cost per day = mixed distance salary/365, e.g. 100,000/365 = $280 to- room pro- mode education working days: 200: teaching = 40% face aids grams technical help time teaching: 80 days over 4 courses less change in methods more time per course: 80/4 = 20 days more up-front money cost per course per year = 20 x 280 = © Tony Bates Associates Ltd 11 $5,600 © Tony Bates Associates Ltd 12 3
  • 4. Key assumptions in costing e-learning Example: fully online course • how much time for development? Professorʼs time • how much time for delivery? 12 days for design/development (yr. 1) • instructor/learner ratio? 12 days for delivery (each year) use/payment of tutors/adjuncts? 3 days for maintenance (yrs 2-5) • how much time do learners study F2f = 20 x 5 = 100 hours per course or credit? Online = 12 + (12 x 5 = 60) + (3 x 4 = 12) • costs of alternative methods (f2f…) = 84 (but 4 more days yr 1) 13 14 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Main costs Main costs Fixed expenditures Variable expenditures: • prior planning + overheads • delivery (variable) • programme co-ordinator - instructors + tutors/adjuncts • production costs - materials - instructor + support staff time - support staff - media production - student administration • course maintenance (15-25%) - software license fees (e.g. LMS) • IT investment (e.g. LMS, network) 15 16 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 4
  • 5. Overheads/indirect costs Achieving economies of scale Costs that cannot be directly linked • lots of learners (but need many to programme, but must be paid instructors: support, assessment) e.g. Deanʼs office, IT infrastructure, • modularization: re-using modules building maintenance, VCʼs office, internally/externally; replacing one etc. module not whole course UBC: overheads = 53% • secondary marketing Negotiate, negotiate • partnerships/consortia (sharing) 17 18 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Partnerships and consortia Different markets, different needs Novice undergraduates from high 1. Joint development, separate school delivery (e.g. central online, local Experienced undergraduates hands-on training) Academic post-graduates 2. Separate development, e-network Career post-graduates for delivery (credit transfer) Part-time/full-time 3. Joint development and delivery Lifelong learners 4. National or international partners? 19 20 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 5
  • 6. Different markets, different needs The need for new business models All should have chance of state- Full-time, on-campus student funded post-secondary education On-campus student working part- Colleges designed mainly for young time full-time, campus-based students: Lifelong learner working full-time still this need, but more flexibility Tuition fees, scholarships, grants Workers need to go on learning New models of funding needed Professors donʼt want more teaching 21 22 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Lifelong knowledge workers: Profile of lifelong learners a major new market NOT the same market as traditional CE Graduates (already state-subsidized) On-going education/learning essential Working, often with a family for economic survival Maximum study time per week: 10 hrs, = 3 months training over five years Strong life/work experience, specialist In Canada, nos. = univ. entrants from knowledge school ʻVirtualʼ learning essential, from LLLs need access to best practice home/work They do NOT want traditional offers Learners/employers able to pay 23 24 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 6
  • 7. New programs for lifelong learners Building a business plan Modules, certificates, industry Why? accreditation leading to masters • cost-recoverable/for-profit program Inter-disciplinary, ʻtopic-basedʼ • compare different methods of New knowledge since they graduated teaching Flexibly delivered: • assist decision-making, future Part-time (evenings/weekends/half-days) planning Blended (campus + online) • to know the costs and benefits of Fully distant (home or workplace) what you do 25 26 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Developing a business plan Whatʼs in a business plan/budget? Develop a business plan Depends on institutional methods • revenues as well as costs Best strategy: 5 -7 year budget plan • project management Key assumptions: • track, allocate and project costs • academic and support staff time (including time) over several years • enrolments per course/semester • identify risks and options • student-teacher ratios • design strategy (course team) • evaluate after five years 27 28 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 7
  • 8. Whatʼs in a business plan/budget? Balancing the budget Possible revenue sources Calculating the ʻbreak-evenʼ point • government/training grant: allocated between revenues and expenditures resources (staff time) (instructors + (over six years): learnersʼ time) expressed as cash Break-even when revenue = • learner fees expenditure • special grants (e.g. for development) Fee = expenditures (- grants)/no. of students over length of programme • loans Margin for safety (15%) • marketing/sales externally 29 Useful even for 100% grant-funded 30 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Where e-learning has succeeded Where e-learning has succeeded (cont.) Profit in niche markets, e.g. Masters in Educational Technology University of Phoenix Online: 26,000 (for teachers - school or HE) students, vocational University of British Columbia (public) corporate e-learning (economies of scale) fully online; international MBAs (Queens, Athabasca, Canada) certificates + master Continuing professional degrees 4 ʻcoreʼ courses + 6 electives from 12 For-profit workplace training (SkillSoft) 31 32 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 8
  • 9. Where e-learning has succeeded (cont.) Where e-learning has succeeded (cont.) UBC Masters in Educational Technology certificates since 1996: masters Students choose known brands: opened 2002 e.g. UBCʼs MET degree 80 students a year: 250 graduates UBC on-campus students: 20% (2007) rest of province: 24% fee: $1,200 per course, $12,000 in total program financed as a loan rest of Canada 23% new research faculty funded from international (31 countries) 33% program: full costs recovered 33 34 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Where e-learning has succeeded (cont.) Implementation and evaluation Lessons: Measuring success: set targets different financial strategies for • enrolments (new profile?) different markets • within budget economies of scale are important • cost per student • high development costs • quality assurance process • lower delivery costs • programme accreditation quality matters • benchmarking • new designs to exploit e-learning 35 36 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 9
  • 10. Implementation and evaluation Focused e-learning e-learning a tool, not a panacea Measurements (cont.): need to identify where it will bring • student satisfaction most benefit • employer satisfaction depends on type of students, nature • student performance (better or of topic different learning outcomes) program teams to develop vision of • increased revenues teaching/learning + role of e- learning that drives funding • training cost savings 37 38 © Tony Bates Associates Ltd © Tony Bates Associates Ltd Is cost-benefit analysis possible? Further information Bates, A.W. (2005) Technology, e- Is this approach practical in your Learning and Distance Education organization? Why/why not? London: Routledge Public institutions expenditure OECD (2005) E-learning in Tertiary driven, not activity driven Education Paris: OECD Up-front investment needed Bates, A. (2000) Managing Technological Change San Francisco: John Wiley Cost recovery requires different Bates, A. & Poole, G. (2003) Effective methods of budgeting/admin Teaching with Technology in Higher General questions and comments Education San Francisco: John Wiley 39 40 © Tony Bates Associates Ltd © Tony Bates Associates Ltd 10