I’ve been reading a lot of articles about MOOCs and online courses versus good old fashioned classroom based learning. In a recent article this week in the Australian Financial Review, Brad Wheeler, CIO of the 110,000-student Indiana University was discussing the four models of online delivery:

• the “flipped classroom” where course content is available online but tutorials are face-to-face
• distance courses delivered online
• MOOC with tuition
• free MOOC

A very important point that he makes is that the decision to migrate to online shouldn’t be done by “just dabbling” it requires a clear strategy. He also recommends that universities collaborate to migrate online rather than going it alone because, as he states, universities “can’t afford to build the platform institution by institution.”

Another good blog post was recently published by Cathy Davidson (Co-Founder of HASTAC) titled “If MOOCs are the answer, what is the question?” http://hastac.org/blogs/cathy-davidson/2013/02/07/if-moocs-are-answer-what-question. Cathy highlights the polarizing nature of the current debate on MOOCs and there does seem to be some very passionate people out there for and against MOOCs. An important point that she makes in her article is that with the current popularity of MOOCs it highlights a desire that more people would like to participate in higher learning, which is a good thing.

I also recently had a comment against an article I posted in a LinkedIn group titled “Is the University Cost Model Broken” where he stated “Perhaps someone can help me out. I have trouble understanding how making lectures by subject matter experts available online as the primary course content and supported by appropriate teaching staff could be anything other than the lowest cost, totally scalable learning model. What am I missing?” which actually prompted this blog post.

I’m not going to advocate one method over another, to go online or to not go online. What I am going to explore is the information and data that is required to enable university management to make that decision, what do they need to support that “clear strategy” to move online, in various guises. What do you need to understand the FULL cost of moving online? Is it cheaper? What insights can be gained by modelling all these various scenarios to better inform the university decision making process?

Our expertise is modelling. We have built numerous cost, performance and predictive models for universities, military, financial services and oil/gas organizations across the United States, Australia, New Zealand, UK and Mexico. Our objective is to build very detailed enduring models using as much of the available source data as possible. I should stress the importance of enduring models, because a lot of the time large organizations will build one-time models as spread sheet exercises with all the problems associated with spread sheet modelling. Our models are updated regularly depending on the organization and business requirement e.g. it could be monthly for military models or annually for universities.

Our experience in the international university sector has shown that many factors need to be considered to determine the true cost, profitability and performance of a course or subject – whether the course is delivered physically in university buildings or online or, as in many cases, in a blended delivery option, as Cathy Davidson suggests they can both happily co-exist.

Our modelling, which assists in determining the full cost of delivering individual subjects or courses, uses data from a variety of systems, with subjects and courses attracting a variety of costs both direct (in the form of academic salaries, non salary expenses, teaching revenues and building usage), through to overhead costs from administrative and student support services.

Examining a course from one of our client universities shows that the cost to deliver a course or subject is made up of a variety of costs including, but not limited to:

• Overheads from administrative support functions such as HR;
• Student management functions including enrolment, management of graduations, academic governance and fees;
• Senior administration overheads from the President’s / Vice Chancellor’s office through to senior management in finance, HR and academic heads;
• Facilities management;
• IT costs that supply services directly to the course as well as overhead IT costs from the previously mentioned overhead costs;
• Building usage in the form of depreciation costs or leases;
• Building usage costs in the form of electricity costs, water and other associated building services;
• Academic salaries for both teaching and course preparation and exam marking;
• Academic support services and provision of facilities specifically to academic staff;
• Academic and administrative staff travel in support of university operations;
• Motor vehicle operating costs;
• Library Services

If we then examine the types of costs that we have modelled which make up an online course the list is equally as exhausting. Many of the same overheads remain and direct costs may be equally as demanding in the form of academic salaries. While direct facility costs in the form of classrooms and tutorial rooms may be reduced or eliminated (depending on the structure of the online course) the indirect facility costs of academic offices and support staff remains.

New costs, specific to online teaching, may however be incurred and become an overhead of an online course. To provide an effective online experience for students requires sophisticated software and hardware and all the management overhead associated with additional IT equipment, if developed in-house or management of contractors if outsourced.

Academic staff, who manage the online course, may find that instead of speaking to 300 students in a large lecture theatre for 2 or 3 hours, that they could be confronted with regular phone calls or emails from thousands of students seeking individual advice or coaching, in addition to the need to be ‘available online’ for nominated periods throughout the week.  This adds to their existing workload or requires additional academic staff to cover any shortfall.

Before making the decision to continue with the classroom, migrate to online or create a blended solution detailed analysis should be undertaken on these various options to confirm the financial implications and to inform the strategy advocated by Brad Wheeler.

In the short term, there may be no real savings in facility-related costs as existing classroom space remains part of the university infrastructure still attracting the normal costs. Unless these rooms are leased, then there are very few savings for a university in the immediate timeframe of establishing an online course.

Online courses certainly have their place in the University environment – the education net can be cast wider and deeper, and students can access their required course content more easily and at a time to suit them. Universities however, have to be very careful not assume that online courses will be cheaper to deliver.  Proper cost and performance modelling is the only way of determining whether an online course is, from a cost perspective, a better option than presenting a physical course in the classroom.

Then we have to consider all the non-cost related aspects – quality, retention, comprehension, employability etc. are all factors that need to be considered. As an aside, our US Navy client has a similar issue with live training versus simulator based training. They want to be able to deliver training in the most cost effective way but they also have to ensure a high quality of training because lives literally depend on it. The most effective training is live training, however it’s also the most expensive, so a combination of live training and simulated training is the “best bang for their buck”. We can start to see a similar outcome for universities, how classrooms and online can happily coexist to ensure the best educational outcomes for students in the most cost effective way.

There are a lot of doomsayers out there forecasting the demise of traditional universities as well as those who despise MOOCs. I avoid discussing politics and religion at parties, is it time to add higher education to that mix now? I think it’s time to stop making sweeping judgements on the future of universities. In reality, to support the university’s decision to move online and inform a clear strategy then they need to have a thorough understanding of the FULL costs of all types of courses/subject delivery, the projected revenues for each course or subject taught, the performance of each course/subject and be able to easily model those various scenarios.,

So are MOOCs or moving to online delivery a cheaper option for the university? Will they provide better margins than classroom based courses? Will students be better educated? I’ll use my standard consulting line of “it depends”, they might be but it does depend on a number of factors, described above, and it’s different from university to university. I can say, though, that this is a hot topic of discussion and analysis at the moment and a number of our existing clients are well on the way to discovering those answers themselves.