From the Chronicle of Higher Education Online
Expectations Evaporate for Online MBA Programs
Enrollments are small and business deals are falling through
http://chronicle.com/free/v48/i06/06a03101.htm
By KATHERINE S. MANGAN
A few years ago, dozens of business schools were jockeying for position in
what promised to be a booming market for online M.B.A.'s. The Internet was
going to revolutionize business education, and any school that didn't act
fast would be left in the dust.
Millions of dollars and countless hours of study later, the dust has settled
on a less hopeful scenario. While some institutions have forged ahead with
Internet-based programs, many others have become discouraged and have either
scrapped or scaled back their efforts.
Many business-school administrators say they have been spooked not only by
the nation's economic downturn, but also by the collapse of high-profile
e-learning companies that had besieged deans with offers of technical
assistance and a share of the profits. They are also facing growing
competition from in-house corporate universities.
"The whole thing got off the ground with a tremendous amount of hype and a
great sense of urgency," says Gene Ziegler, a former administrator at
Cornell University's business school who is now a distance-learning
consultant. He is working on a contract with Corpedia Education, a
Phoenix-based company, to help develop online corporate-training courses.
Misreading the Market
"Everyone thought it was going to take off and if they didn't get into it
right away, they'd miss out," he says. "All of us, including me, misread
that market. It's going to happen, but it's going to be slower to build a
following."
Some experts predict that the recent terrorist attacks and ensuing economic
uncertainty may increase the appeal of online M.B.A. programs, which
students can take from their homes or offices.
"The popularity of online courses, including the M.B.A., should increase as
companies tighten their training and travel budgets," says Kris E. Turnbull,
director of corporate and technical training at Kennesaw State University,
which offers an online M.B.A.
In light of the recent attacks, he adds, "a lot of people are uncomfortable
with the idea of hopping on a plane and traveling cross-country for a
course. And many people don't want to give up jobs at a time like this to
pursue an M.B.A."
Internet-based learning has yet to sweep the nation's business schools,
however.
.....
But they're not creating as many students as had been predicted. Of the
total of 116,494 M.B.A. students who were taking courses at this time last
year, just 2.5 percent, or 2,967, were enrolled in online or other distance
programs, according to an AACSB survey of 320 business schools nationwide.
Many experts had predicted that the proportion would be at least 10 percent.
The survey data didn't include executive-M.B.A. programs -- designed for
working professionals -- which represent a growing portion of the online
market. It also didn't distinguish between programs that are purely online
and the far greater number of those that require students to spend a few
weeks every year -- or at least a few weekends -- meeting face to face.
Nor did the survey take into account the success of programs at business
schools that specialize in online learning. Enrollment in the University of
Phoenix's standard online-M.B.A. program grew 51 percent last year, to 2,008
from 1,328. The for-profit university has offered an online M.B.A. since
1989.
Problems for Traditional Schools
But things aren't going nearly so well for traditional business schools
trying to bring their programs into the homes and offices of potential
students. Some, like Harvard, Columbia, and Stanford Universities, and the
University of North Carolina at Chapel Hill, joined forces with e-learning
companies -- some of which have since collapsed.
.....
Some schools seek to take advantage of the companies' technical expertise
and infrastructure; others are eager to share in revenues when business
courses or lectures are sold to companies for corporate training.
A few schools, like Duke University's Fuqua School of Business and Babson
College's Franklin W. Olin Graduate School of Business, have formed their
own spinoff companies to deliver Internet-based courses, aimed primarily at
working executives. Such spinoffs give institutions flexibility in hiring:
For instance, they can offer faculty members bigger salaries, hire people
for short-term stints, and offer them equity in the companies.
Duke has developed several of the most successful Internet-based M.B.A.
programs. All three of its executive M.B.A.'s, including the
global-executive program, rely heavily on the Internet, although
face-to-face time is also required. Despite the global program's $95,500
price tag, Duke officials say they've received about 4,000 inquiries for the
class that begins in May 2002. Because of rigorous entrance requirements,
they expect to receive about 200 applications for 100 positions in the
program.
Other business schools, like those at the University of Florida and Indiana
University, decided to develop their online M.B.A.'s without resorting to a
spinoff or an e-learning company.
Finding the Right Model
Each of those models has proved challenging during a time of economic
uncertainty and inflated expectations.
When North Carolina, for example, signed an agreement with a Los
Angeles-based e-learning company to help it develop courses that could be
delivered partly over the Internet, it was in good company. The company,
University Access, was also working with the business schools of Harvard and
the University of Southern California, among others, as well as the
prestigious French business school INSEAD.
Despite having won the confidence of such heavy hitters, though, University
Access announced in August that it was pulling out of the M.B.A. market and
shifting its focus to corporate training under a new name, Quisic.
North Carolina moved its program in-house, where it's developing individual
courses using a mix of online and classroom-based materials that can be used
with its executive programs.
The business school's dean, Robert S. Sullivan, says too many competitors
jumped into the market when the demand for online M.B.A.'s was hot. Many
e-learning companies invested millions of dollars in technology and access
to well-known professors, only to find investors' wallets clamping shut with
the plummeting of the dot-com economy. E-learning companies "are very much
associated with the concept of a dot-com, and dot-coms are anathema today,"
he says.
Among those who have felt the frustration firsthand is Charles W. Hickman,
who, in November 1999 left a 21-year career with the business-school
association, much of the time as its chief spokesman, to become vice
president for academic affairs at University Access.
Start-Up Costs
About a year after he took the job, he and other employees were laid off
when the company shifted strategies. Mr. Hickman believes that, along with
other e-learning enterprises, it may have underestimated start-up costs and
overestimated short-term demand for courses.
"These companies had to put a lot of money up front and, in essence, bet the
company on a market that has matured much more slowly than many of us
expected," says Mr. Hickman, who now works as a distance-education
consultant. Officials at Quisic could not be reached for comment.
Another prominent competitor in the e-learning market, UNext, also appears
to be in trouble. Citing the need to operate in a "fiscally conservative
manner," the Deerfield, Ill.-based company cut its work force by 42 percent
this month, laying off 135 of its 325 employees.
Jennifer Karras, a company spokeswoman, says the nation's weakened economy
and the challenges of raising venture capital might force UNext to ask its
academic partners to restructure agreements that at one time promised to pay
each university up to $20-million. Those partners include Carnegie Mellon
University, Columbia University, the London School of Economics and
Political Science, and the University of Chicago. Their business schools
have helped to develop courses offered by UNext through its subsidiary,
Cardean University, in exchange for a share of the profits (The Chronicle,
May 4).
Despite the setback, "our partners will provide us with a strong base from
which we can grow and become self-sustaining," says Ms. Karras. "Our goals
and ambitions are very much intact."
At least UNext is still in business. Pensare, an e-learning company based in
Sunnyvale, Calif., went out of business in June, despite having negotiated
deals with Harvard's business school, Duke's Fuqua school, and the
University of Pennsylvania's Wharton School. The company, which planned to
use the Internet to sell business courses to corporations, discovered that
students simply weren't clamoring for online courses.
When Pensare went bankrupt, Fuqua's for-profit arm swooped in and bought out
the company's rights to a software platform for delivering courses,
developed at the business school (The Chronicle, June 15).
E. Allan Lind, a professor of management at Duke, teaches a course on
managerial effectiveness that he developed with Pensare. The company took
his lectures about cross-cultural conflict and jazzed them up with animated
Web presentations and other supplements.
In one exercise, a student playing the part of a Singaporean factory manager
can fill out a survey and compare his values with those of a typical
Singaporean employee. Mr. Lind says he's happy with the way the course,
which is taught partly online and partly in class, turned out.
Faculty Skepticism
Other faculty members aren't as receptive to high-tech tinkering. On some
campuses, faculty members have resisted partnerships that would require them
to give up control over how their courses are delivered. For instance, some
e-learning companies have insisted on presenting information in short,
snappy sound bites, which faculty members say would trivialize what they
teach.
Such concerns helped persuade the University of Florida's Warrington College
of Business to develop its online M.B.A. on its own. "Once you bring in a
third party, faculty are less committed, because they don't really control
things," says the dean, John Kraft. "The company is telling them how
material is going to be presented to students."
And some business schools just don't feel ready for an online program. Elisa
Lilly, student-services coordinator of the distance-M.B.A. at Colorado State
University's College of Business, says her program relies largely on
videotapes of campus-based classes, mailed to students in remote locations.
The program there enrolls 374 students from 47 states and five foreign
countries.
Colorado officials are considering offering more courses over the Internet,
but they are worried about the cost, among other factors, Ms. Lilly says.
"We don't want to outpace our students technologically. Part of the appeal
of our program is if you're stuck out in a small town in Ohio and don't have
a fast computer, you can still take the course."
Feeling Isolated
"Students who are learning from a distance are going to feel isolated
anyway," she adds. "If they're just sitting in front of a computer, they're
going to feel even more isolated." While a videotape of a class session
isn't the same as being there, she argues, it's closer than anything a
student can experience staring at a computer screen.
But as distance-education technology continues to improve, supporters of
online learning say they can, in fact, give students the feeling of being
part of a class. And like it or not, a growing proportion of M.B.A. students
won't be in a position to quit their jobs to spend two years taking
on-campus courses.
Despite the lukewarm acceptance for online programs and the setbacks that
some have suffered, many experts hold out hope that they will live up to
their early promise. "The demand for management education in this country
and the world far exceeds the supply available from large, research-based
institutions," says Mr. Hickman, the former AACSB spokesman.
"It would be a tragic mistake for business schools to conclude from this
early and mixed response that online programs don't hold promise."
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