Can online learning lead to productivity gains through savings on campus facilities?

Apologies for the web site being down on November 10, due to a domain registration problem with CIRA which has now been resolved.

This is the last but one post on the theme of productivity and online learning.

This is a continuation of the discussion on whether online learning can increase educational ‘productivity.’ Previous posts in this series include:

• Technology, teaching and productivity: the need for theory
• Is there a link between flexible access and ‘productivity’ in higher education? 
• Book review by Sir John Daniel: Higher Education in the Digital Age
• A review of the HEQCO report on productivity and quality in online learning in higher education
• Tom Carey’s reflections on the HEQCO report on online learning and productivity: 1-Catching a teachable moment
• Tom Carey’s reflections on the HEQCO report on online learning and productivity: 2 – What we left out – and why.
• Towards a theory or model of productivity for online learning: outcomes, scale and design
• How online content development and delivery could improve the productivity of post-secondary education
• Alternative ways to improve productivity through online learner-content interaction
• Improving productivity in online learning: can we scale the ‘learning that matters most’?

There is a CIDER webinar presentation on the HEQCO report available from here

In this post I want to explore the opportunities for increased productivity through online learning replacing campus-based activities.

Publicly-funded campus-based universities

Can campus-based institutions increase productivity through online learning reducing their costs of campus-based activities (or more realistically, through expanding activity at a lower marginal cost through online learning)? This might be done in a number of ways, for example, by:

• handling an expansion of student enrollments through online learning, instead of building extra campus facilities to handle the increase
• more intensive use of existing facilities, such as science labs or lecture theatres, for instance, by students spending more time on simulations or remote labs and less on hands-on labs, or reducing demands on lecture halls through blended learning.

How much scope is there for such campus-based economies? Certainly in Canada, as demographics change and a greater proportion of the student population is made up of adult or lifelong learners, the pattern of demand on campus facilities will change. Married professionals with full-time jobs are less likely to want to use the sports facilities or the student union, for instance, (but may demand child care facilities), but more particularly, more students working either partly or wholly online will have knock-on effects on a very wide range of campus facilities, such as reducing the number of cars coming on campus (one university president told me that this was the best argument she had heard for online learning), the demand for on-campus residences, food services and many other areas. Some of these, of course, such as parking and food services, are run as either cost-recovery or profit-generating activities, but many others, such as the heating and maintenance of buildings, are a large drain on resources.

We can see the implications of this if we look at the publicly stated operating budget of one of Canada’s largest universities, the University of British Columbia’s Vancouver campus.

UBC’s Annual Operating Budget, 2012/2013 (from: 2013/14 Budget: Presentation to the Governors, pp. 42-48). Because of rounding, totals may not add to exact numbers.

It can be seen that operating costs associated with campus facilities constitute about 10 per cent of the total budget. IT Services spends another $4 million on classroom technologies each year, for a total of almost $100 million a year. Even a 10 per cent saving on facilities’ operating costs would save $10 million a year. If, as likely, UBC adds another 10 per cent of students over the next 10 years (6,000) and just half of these were fully online, that would be 3,000 students not using or requiring facilities on campus. There are also environmental benefits (less traffic pollution, less use of physical resources) although these need to be offset a little by the environmental impact of students working from home, using electricity and their own computers, etc.

The impact on capital costs will be even higher, but much harder to calculate. In essence, most new university  building development is paid for from long-term government loans (or donations), and is usually in a totally separate budget from the operating costs. Nevertheless there is a real cost in constructing new buildings, which has to be paid for in some way. Smart accountants or VPs Finance are probably already doing cost-benefit analyses of the potential impact on capital expenditures from an increase in online learning, and how potential savings could be transferred to improving teaching and learning – and if not, they should be.

On the other hand, it is clear that there are also severe limits on increased savings from facilities through the use of online learning. Almost two-thirds of the operating budget comes entirely from the cost of faculty and senior academic administrators. We have discussed earlier that though there are certainly ways to improve faculty productivity through online learning, there is a danger of reducing the human element in university-level teaching, particularly if the aim is to develop the higher order learning skills needed in the 21st century. Nevertheless there appears to be more scope in looking for ways to increase faculty productivity through online learning than through savings on facilities, but nevertheless there are possibilities.

Open universities

Institutions that do not require students to come to a campus at all, such as open universities, do not have to worry about the cost of campus facilities for students. This can result in some dramatic savings and/or increases in productivity. During the late 80s and early 90s, the UK Open University (UKOU) was ranked in the top 10 per cent of universities in the U.K. for teaching, and in the top third for research. It is currently third on student satisfaction. During the 1980s, the Open University in Britain was turning out undergraduates at approximately half the cost of campus-based universities, although if the OU’s generally lower or slower graduation rate (around 40% over seven years) is taken into account, the differences are less marked. However,  in 2012 the U.K. government removed its subsidy to the U.K. Open University, which as a result now has fees of £5,000 (C$8,000) per year for the equivalent of one year’s full-time study (although most OU students are part-time, so take fewer units and longer to graduate than full-time campus-based students). This fee probably reflects the real cost of the OU’s operation. OU tuition fees though are still much lower than tuition fees in the English campus-based universities, which are in the range of £9,000 (C$14,500) a year.

Especially for economically developing countries, large open universities such as UNISA in South Africa, Universitas Terbuka in Indonesia, the Anadolu Open University in Turkey, and Indira Gandhi National Open University in India, all with well over 250,000 students a year, are likely to remain a major means by which to meet the rapidly growing demand for post-secondary education, because their unit costs are so much lower. However, they have been ‘productive’ not because of the use of online learning, but through massive economies of scale achieved through broadcasting and printed material. Furthermore, the most successful, in terms of graduation rates, still have to invest very heavily in local student support. More than 25% of the OU’s operating budget goes on regional services, almost twice what they spend on the BBC broadcast programs. Merely adding online learning to the existing course development process may indeed increase their costs. It will take major structural changes for online learning to bring major cost savings to large open universities and indeed the culture and the organizational requirements may well make this impossible.

Virtual universities

There are still surprisingly few publicly-funded fully online universities in the world. The oldest and possibly still the strongest is the Open University of Catalonia in Spain, with close to 50,000 students. In 2008, the Open University of Portugal converted all its courses to online. The Open University of the Netherlands is now mainly online. However, the legacy investments in print and broadcasting have made it difficult for even open universities such as Athabasca to go fully online.

I find the lack of publicly-funded online universities very strange. Governments have been incredibly timid over the last 20 years in this respect, especially given the rhetoric of how online learning is going to save the world. Given what we know now about the costs of online learning, and the conditions for success, it should not be difficult to create a highly cost-effective, more ‘productive’ online university, by building it from scratch. It would be an opportunity to really explore the best way to leverage the productivity of online learning. However, it will be important to not only take some risks, but also to have those risks balanced by a careful analysis of current best practices in online learning. Any government ministers listening?

For-profit universities

For-profit universities that have at least part of their operations fully online, such as the University of Phoenix, also have been able to achieve major productivity gains (even if these productivity gains have often been used to boost profits rather than reduce costs to students – in 2011, the University of Phoenix made a profit for its shareholders of $1.2 billion, as much as the total operating cost of a large tier 1 public university such as UBC). Again, though, these productivity gains have as much to do with standardized content, an absence of any research activities, lower cost instructor contracts, and some nimble footwork around federal financial aid for students, as with the use of online learning, although savings on facilities will have played at least some role in the productivity of its online operations. Unfortunately though the University of Phoenix does not provide a breakdown of its operating costs for the public, so we can only speculate on the productivity gains from online delivery, compared with its campus-based operation. Maybe other for-profits, such as Kaplan or Laureate, might be more forthcoming.

Consortia

Many attempts have been made to create virtual universities through consortia. In such models, existing campus-based institutions get together to create a ‘virtual’ university, which has no campus, and where students take online courses from a range of member institutions in the consortium, usually with a student gaining a qualification from their ‘local’ member institution. Probably the most successful such consortium to date is Open Universities Australia, an educational organization owned by eight of Australia’s leading universities, although there are altogether 20 universities offering courses through the consortium. This makes a profit for its members through the sharing of courses. The University of the West Indies and the University of the South Pacific are two other consortium-type distance education universities that have been running for over 25 years, although they also depend heavily on local campuses for technology delivery of the distance programs as well as face-to-face teaching. The Virtual University of the Small States of the Commonwealth (VUSSC) is a relatively new consortium covering 32 small island states, enabling them to share courses and offer a wider range of online programs than would be possible on their own. (I will be writing more about this project in another post).

However, there are more failures than successes in getting effective online university consortia to work, including Universitas 21 Global and Fathom, to mention just a couple. Those that have succeeded also have a very strong and important campus component.  Nevertheless the potential is there for  online consortia, and it will be interesting to see if VUSSC and the newly-formed OERu are successful – I sincerely hope so.

Summary and conclusions

• first, there appear to be opportunities for modest but still significant productivity gains through more effective use of existing facilities through online learning
• where these facilities-based productivity gains have occurred on traditional campuses it has been unintentional rather than planned and almost certainly not yet measured
• nevertheless, government, university and college planners should be taking into consideration the potential of productivity gains from a greater use of online learning, particularly when considering the expansion of systems. To take one obvious example, expansion of university and college places in the outer suburbs of Toronto might be more cost-effectively addressed by existing institutions increasing their online offerings rather than building satellite campuses across the region – but the analysis remains to be done
• building new institutions from scratch, based on what we now know about how best to combine online and campus-based activities, should enable major productivity gains (more learning for less cost) – but it remains to be tried with this goal in mind, rather than as a political activity
• much more research, involving online learning specialists, financial specialists, and key policy makers in both institutions and government, is needed if this potential is to be achieved.

Next

I will be doing one last post in this series, in which I will try to summarize the discussion and comments across all the posts in the series. The aim is to identify the factors where online learning could have the strongest chance of improving productivity in higher education. All I can say at this stage is that if it was a statistical factor analysis, no one factor would score higher than .3 – but added together, there is a chance to make a significant difference.

In the meantime, some questions:

• am I dreaming in thinking that online learning could result in better, more cost-effective use of physical facilities? If so, can you provide examples?
• even if there was a strong case for using online learning rather than building new facilities, is this likely to happen? After all, Presidents love to open new buildings
• have I missed an important fully online, publicly funded university? If so, how did this get started? Was it based on faith or a cost-benefit analysis (stop laughing.)