From the issue dated October 5, 2001
|
|
|
Expectations Evaporate for Online MBA ProgramsEnrollments are small and business deals are falling throughBy 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. "So far, the online programs are not stealing students from traditional programs," says Milton Blood, director of accreditation for AACSB International-the Association to Advance Collegiate Schools of Business. "They're creating new students -- those who wouldn't have the time, or be in the right place, to enroll in a traditional program." 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. The motives behind such alliances vary. 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." http://chronicle.com Section: Information Technology Page: A31
|
Copyright © 2001 by The Chronicle of Higher Education