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'Ivy League Spring' debated: is free, online education financially viable?

'Ivy League Spring' debated: is free, online education financially viable?

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The Udacity of hope: new online programs offer free courses to hundreds of thousands of students, while the business model still gets worked out.

Are tuition-free, global online courses financially sustainable? We saw the rise this year of the "Ivy League Spring," in which leading universities, bowing to the growing disruption of higher education economics, agreed to open up some of their courses, for free, to online, global audiences of students.

Stanford, which embraced the revolution. Photo: Standford University

Some powerful and well-connected online programs have emerged. Coursera, for one, has partnerships with four universities: Stanford University, the University of Michigan, the University of Pennsylvania and Princeton University. Udacity, launched by a Stanford professor, offers online courses geared toward the IT sector. edX, started earlier this year, is a joint online venture between Harvard and the Massachusetts Institute of Technology.

Free, online classes are the polar opposite of the current business model of the higher education industry, which is already seen as overpriced and bloated -- running more than $50,000 a year. Now that the higher education sector is starting to feel the effects of a massive disruption in their business models, the question about long-term sustainability needs to be asked. Even the leading proponents of these programs from the educational sector are not certain how the business model will evolve.

Anant Agarwal, president of edX, ia leading proponent of open access to all for the best education, told NPR's Tovia Smith that it's yet not  a sustainable business model. There will be efforts made to generate revenue in non-traditional ways, he says, including charging for certificates, or developing career placement services.

Plus, Jason Wingard, vice dean at The Wharton School of the University of Pennsylvania, cautions that schools offering free or inexpensive online alternatives may "dilute their brand." As he puts it: "There becomes a disconnect where the customer doesn't understand the difference. All they understand is that they're giving it away for free over here and they're charging money for it over there."

Nevertheless, a new report in Knowledge@Wharton is bullish on the future of online courses in higher education -- particularly the free offerings now emerging from many quarters. The Wharton report calls these offerings MOOCs, or massive online open courses, which offer an way to address the skills gap that can pull un- or underemployed workers closer to the large number of positions going unfilled that require technical savvy.

While it's unclear how impressed employers will be by online certificates, the NPR report observes that these online courses may work well for upgrading specific skills in demand, such computer programming and quality control.

Wharton's report cites a projection from Global Industry Analysts that the global e-learning market will reach $107 billion by 2015. as mentioned above, much of this income will come from ancillary services -- a fremium model if you will -- that offer certificates, transcripts, and career placement.  Eventually, donations from online alumni may also make a difference.

There is also financial support from foundations that can be counted on. For example, MIT just announced it has received a $1 million grant from The Bill & Melinda Gates Foundation to go towards developing an introduction to computer science course and partnering with a postsecondary institution that targets low-income young adults to offer this introductory course in a “flipped classroom” setting.

Not mentioned in either the NPR or Wharton reports are the additional cache some universities may gain from new markets around the globe. A popular online professor, for example, may draw new students on campus within traditional enrollment programs.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure