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on the use of e-learning in Europe in 2001 and 2002 (Massy, Harrison, et al., 2002). In 2002, 638 organisations involved in training (538 from Europe) responded to the survey. As many as 83% of the European respondents reported that they have used e-learning in some way as part of their training. Although organisations with an interest in e-learning will be more inclined to respond, this indicates that experiences with e-learning are widespread in Europe among institutions involved in training.

It must however be emphasized that the study by Alphametrics focuses on institutions involved in training. The penetration among private companies in general is much lower. For instance, only 6 out of 27 SMEs included in an Austrian survey use e-learning as part of their training (Attwell, 2003).

According to the survey prepared by Alphametrics in 2002, 45% of the time employees in the EU spent on training was spent in the classroom,

12% was spent on e-learning following Model A or Model B outlined above, and 15% was spent on blended solutions following Model C.

One interesting result is that the share of nonusers is about the same in small and large organisations. This contrasts experiences made on diffusion patterns from a number of other new ICT-basedapplications,wherelargeorganisations dominates the population of early adopters, while SMEs dominate the population of late adopters.

This indicates that e-learning is not only a technology, which provides economies of scale for large organisations, but also a technology which can benefit small organisations. The survey indicates that classroom training is used less in small enterprises (37% of total time spent on training) than in middle sized (51%) and large enterprises (44%).

Although experiences with e-learning are widespread this does not indicate that the market for e-learning has matured. First of all, the above-

ICT Impact on Knowledge Industries

Table 1. Ranking of uses of e-learning by time spent on e-learning as % of total time spent on training (Source: http://www.eurolearn.net/docs/ CEDEFOP_ELEARNING.PPT)

mentioned survey only includes organisations involvedintraining.Butthepotentialofe-learning goes far beyond such organisations. E-learning is a flexible tool that can be used by any company or organisation in their daily business.

Secondthereisapotentialtoamoreintenseuse of e-learning among those organisations already using this technology. And third, there is room for qualitative changes in the technology and the opportunities it offers.

An indicator for the growth potential of e- learning is the growth in expenditures related to e-learning. According to the Alphametrics/Bizmedia survey users of e-learning report that their growth in e-learning expenditures was more than 70% in 2001 and just under 50% in 2002. Suppliers of e-learning are reporting even higher rates of growth. This may be due to more optimistic market expectations than on the user side, but it may also be an indicator of increasing use of e-learning outside the traditional population of training organisations.

Connectivity is an important precondition for use of most types of e-learning, and provision of infrastructureandequipmentwasthefirstaction line of the EU eLearning Action Plan (CEC 2001).

Since then, much work has been done to ensure connectivity to educational institutions.

Use of e-learning is not equally widespread among industries. According to a survey conducted by the Danish Technology Institute, e-learn- ing is used most intensively in business services includingconsultancyfirms,auditors,andtraders in real estate, while usage is least intensive in the buildingindustry(“E-learninginpractice,”2003).

A similar conclusion can be drawn from a later study made by E-learning Circuits (Ellis, 2005).

Accordingtotheirsurveyfinanceandinvestment management is the largest user. However, there is a clear trend towards increasing use in other industries, for example, healthcare.

Looking at the subjects in which e-learning is used, all surveys indicate that e-learning is used most intensively for training in IT and computing, whileotherimportantareas areteachingtechnical (non-IT) and teaching in languages. E-learning is mainly used by professionals—particularly IT professionals—and technicians, while blue collar workers’ use of e-learning still is very limited. However, e-learning tools are also developed in these areas, for example, a training programme for shop stewards offered by the trade union, but these kind of e-learning progammes are of less interest to the universites as they build on other types of qualifications.

In general the European market for e-learn- ing is a very segmented market split into a large number of regions. One reason for this is language andculturaldifferences.Thereare,however,signs of change particularly in working-place related e-learning, where the market is becoming more international oriented.

A preliminary study prepared by the Danish Technology Institute in cooperation with Alphametrics indicate that the majority of suppliers of e-learning are small businesses or even micro businesses without cash reserves and with limited growth potentials. There is however also a small number of large suppliers, mainly with a U.S. parentage (e.g., publishers, universities, and

Figure 5. E-learning scenarios for universities

Self-service teaching programmes offered to external students

Distance learning teaching programmes using video conferencing and e-mail

ICT Impact on Knowledge Industries

Self-service e-teaching programmes supplementing traditional teaching methods aimed at internal students

E-based teaching facilities supporting traditional teaching methods

broadcasters) providing their services in several countries.

A number of university institutions like CICT are engaged in providing e-learning to external students. Many of these institutions are teaching subjects related to ICT, as they are the ones having the technical capability to set up e-learning facilities. However, others are very reluctant to go into this business. They lack both funding and short term economic incentives. This is one of the reasons for setting up public funded e-learning programmes, as it is done in a number of countries. The organisation of university teaching using e-learning can take different forms (see Figure 5).

As described in the previous section, e-learn- ing does not necessitate increasing codification of learning processes. Videoconferencing, podcasting, and e-mail can be used without changes in course content. On the other hand, use of e- learningwillstimulatecodificationasthebenefits become more obvious.

E-learning can be used both for supporting existing teaching activities and as an enabler for newtypesoftraining,wheretheflexibilityoffered by e-learning is important. When e-learning is used to support the existing teaching activities, it may improve efficiency and performance, but it will not directly affect the overall organisation of the market for university teaching.

ICT Impact on Knowledge Industries

E-learning may however help universities to broaden their range of courses into new areas outside their core competences, as they can rely on input from other sources by the use of complete e-learning course packages through the combining of reusable e-learning objects (Muzio, Heins, et al., 2002). Publishing houses offer already e- learning material supplementing their textbooks (see Box 3). This trend may develop to provision of complete course packages either by publishing houses or other international institutions. By use of such facilities, it becomes easier to develop teaching programmes covering a wide range of disciplines.

Themostobviousopportunityforexpansionby use of e-learning is in the market for postgraduate training. But in the long term the international market for provision of university degrees may be moreimportantthanthemarketforsupplementary training. In particular, English training institutions have offered distance learning in the form of correspondencecourses.Useofe-learningenables the use of the same concept for more intensive education,inparticularifcombinedwithintensive seminars provided at regular intervals.

It will be easier for students to follow courses and take degrees in other countries. This may lead to a higher degree of specialisation among universities. Utilisation of the market potentials offered by e-learning will in particular benefit universities with special capabilities in certain areas.

On the other hand it may become less important for each university to cover all subjects, as students with particular interests are able to follow courses or a full programme elsewhere. CICT provides an example of a centre aiming at broadening the geographic coverage and in this way—in spite of a limited home market—attract sufficient resources to maintain world class expertise in a specialised area.

conclusion: e-leaRning at univeRsity institutions

E-learning offers a wide range of possibilities for universities. These relate to course content, teaching methodologies, as well as extension of the population of students. Particularly in supplementary training flexibility is important.

Moreover e-learning has helped in the shift from a teacher-centred model (i.e., lecture, notes, examination) towards a learner-centred model (i.e., problems, literature, information, investigation, discussions). This paradigm shift started before the introduction of e-learning, however e-learning supports this change of direction.

Flexibility offered by use of e-learning tools can be used to offer supplementary training to students located either abroad or in other parts of the country. The most important lesson from the experiences learned so far is that although substantial part of the learning can be done by use of ICT, it is essential for the students to meet occasionally. Once personal contacts to students and fellow teachers are established, interactive learning by use of online communication can be performed much more efficient.

Another experience is that preparation of an e-learning course demands substantial resources, even if the technology is in place. This limits the useofe-learningforspecialiseduniversitycourses with a limited target audience.

A third experience is that technology plays an important role. The quality of video and sound is more important than expected in order to ensure efficient learning.

There is a fast growing market for supplementary training also in areas where universities possess the relevant competences. However, substantial resources are needed if this potential is to be utilised. If successful, universities can use this opportunity, not only to expand their business, but also to upgrade teaching of their regular students.

In the long term e-learning used for teaching of university students may become an important market for universities. Self-service teaching programmes may be developed and help universities toimproveefficiencyandproductivity.Thismay lead to more specialisation between universities, as it will become easier for students to follow an education at a university in a different region or country. It may however also enable small universities to broaden the teaching programme, as they can rely on the use of e-learning material to supplement their own teaching.

Such trends will be most visible in areas where it is possible to make use of codified teaching methods, but electronic communication such as videoconferencing and e-mail can be used to support other teaching methods as well.

futuRe diRections foR ReseaRch

E-learning offers new opportunities for universities, but more research is needed to develop the right business models for how universities can apply e-learning. One problem is whether university teaching should be made publicly available at the Internet. Concerns have been raised on a possible negative impact of this on the quality of the teaching, but no studies on this impact have been made so far. Another aspect is the use of e-learning as a tool for distance learning. To what extend can distance learning be used, and to what extend is local presence necessary? So far distance learning has been applied in different contexts, but experiences in the use of distance learning in regular bachelor or master programs are limited. Further research on the potentials in this area is needed.

RefeRences

Attwell, G. (2003). The challenge of e-learning in small enterprises: Issues for policy and practise in

ICT Impact on Knowledge Industries

Europe. Cedefop Panorama Series, 82. Luxembourg: Cedefop Office for Official Publications of the European Communities.

Attwell, G., Dirckinck-Holmfeld, L., Fabian, P., Kárpáti, A., & Littig, P. (2003). E-Learning in Europe results and recommendations: Thematic monitoring under the LEONARDO DA VINCIProgramme. Bonn, Germany: Nationale Agentur Bildung für Europa beim Bundesinstitut für Berufsbildung.

Baark, E., Falch, M., Henten, A., & Skouby, K.E. (2002). The tradability of consulting services.

New York/Geneva: UNCTAD.

Beardwell, I., & Holden, L. (1994). Human resourcemanagement:Acontemporaryperspective.

London: Pitman Publishing.

CEC. (2001). The eLearning action plan: Designing tomorrow’s education. COM(2001)172 final

Christensen, L. G. (2006). E-service: Knowledge services,entrepreneurship,andtheconsequences for business customers and citizens. Lyngby, Denmark: CICT DTU.

Derntl, M., & Motsching-Pitrik, R. (2005). The role of structure, patterns, and people in blended learning. The Internet and Higher Education, 8, 111-130.

E-learning in practice. (2003). Aarhus, Denmark: Danish Technology Institute.

Ellis, R. K. (2005). E-learning trends 2005. Learning Circuits. Retrieved April 18, 2008, from http://www.learningcircuits.org/

Haukness, J. (1999). Services in innovation: Innovation in services. Oslo: STEP Group.

Massy,J.,Harrison,T.,etal.(2002.).TheEuropean e-learning market. London: BizMedia.

Miles, I. (1994). Knowledge intensive business services. Manchester: PREST University of Manchester.

ICT Impact on Knowledge Industries

Muzio, J. A., Heins, T., et al. (2002). Experiences withreusableobjects:Fromtheorytopractice.The Internet and Higher Education, 5, 21-34.

Perspectives for competence development: Report on e-learning. (2003). Copenhagen: Danish Ministry of Science and Innovation.

Sundbo, J. (2006). Customer-based innovation of e-knowledge services. E-services - knowledge services, entrepeurship, and the consequences for business customers and citizens (pp. 1-19). Lyngby, Denmark: CICT Technical University of Denmark.

additional Reading

Bang, J, (2006). eLearning reconsidered. Have e-learning and virtual universities met the expectations? Retrieved September 17, 2007, from http://www.elearningeuropa.info/index. php?page=doc&doc_id=7778&doclng=6

Bang, J., Dalsgaard, C., & Kjaer, A. (2007).

Beyond blended learning! Undiscovered potentials for e-learning in organizational learning.

Retrieved September 17, 2007, from http://www. elearningeuropa.info/index.php?page=doc&doc_ id=7778&doclng=6

Cordon, O., Anaya, K., Gonzalez, A., & Pinzon, S. (2007). Promoting the use of ICT for education in a traditional university: The case of the virtual learning center of the University of Grandada.

Journal of Cases on Information Technology, 9(1), 90-107

Dalsgaard, C. (2006). Social software: E-learning beyondlearningmanagementsystems. European Journal of Open, Distance and E-Learning. Retrieved September 17, 2007, from http://www. eurodl.org/materials/contrib/2006/Christian_ Dalsgaard.htm

Falch,M.(2004).Astudy on practical experiences with using e-learning methodologies and coop-

erative transnational development methodology

(working papers). Lyngby: Technical University of Denmark, Center for Information and Communication Technologies.

Falch, M., & Tadayoni, R. (2006, August 23-25).

Practicalexperienceswithusinge-learningmeth- odologies at CICT (e-service working papers No. 10). Paper presented at the Digital Learning India 2006 Conference, New Delhi.

Fidas, C., Kapsalis, V., Tranoris, C., & Avouris, N. (2006). Developing a blended-learning community in a university of setting. Campus-Wide Information Systems, 23(3), 138-148. Emerald Group Publishing Limited.

Gunga, S. O., & Ricketts, I. W. (2007). Facing the challenges of e-learning initiatives in African universities. British Journal of Educational Technology, 38(5), 896-906.

OECD. (2005). E-learning in tertiary education. Where do we stand? Author.

Perez, M. J. V. (2007). E-learning university networks: an approach to a quality open education.

Journal of Cases on Information Technology, 9(2), 2-25. Idea Group Publishing.

Sherman, W. H., & Beaty, D. M. (2007). The use of distance technology in educational leadership preparation programs. Journal of Educational Administration, 45(5), 605-620. Emerald Group Publishing Limited.

Volpentesta, A. P., & Frega, N. (2007). Developing a blended-learning community in a university of setting. International Journal of Web Based Communities, 3(2), 134-150.

endnote

1 http://www.eservice-research.dk/

intRoduction

One of the reasons that distance learning (DL) is alluringly attractive to some educationists at least is that it lends itself capably and economically to reach higher education to a very large body of students on a scale inconceivable for a campus-basedinstitution.Thenumberofstudents in such a modern DL facility runs into hundreds of thousands. In 1971, Walter Perry, the first administrator of the UK Open University ignored

the advice of several experts to start DL on a pilot scale and let it prove its merits before expanding it into a large educational unit. In the stimulating words of John Daniel (2003), “Walter Perry ignored this advice. I believe he had two reasons. Even in those early days he understood that one of the great virtues of distance learning was the potential to operate at scale. He could already see that starting an open university required a big investment, but he could also see that if it were able to operate at scale the marginal cost of serv-

Economies of Scale in Distance Learning (DL)

ing each additional student could be lower than in conventional institutions. He knew therefore, that if he started with a small pilot project of a few hundred students the cost per student would be enormous and people would ridicule the whole idea.” That is a fit and functional elucidation of the economies of scale in DL.

Fixed costs as well as variable costs to a lower extent tend to decline as the volume of output expands. Such costs keep falling up to an optimum point beyond which the costs start climbing due to diseconomies of scale. The classic long run average cost curve (LRACC) is parabolic, although on account of the dynamics of current production systems, there are LRACCs that are not U-shaped but are L-shaped. Distance learning is a service industry and it would be interesting to explore if sucheconomiesaresizeableandthenatureofsuch economies. The Appendix at the end shows the LRACC curve for a DL facility and it is L-shaped. We will discuss the implications later.

When up-front investment costs are spread over a larger output, average total costs, average fixedcostsinparticular,aswellasmarginalcosts tend to decline. In terms of a DL facility this assertion would mean that as the number of students (or student credit hours) enrolled in distance education increases, the per student (credit hour) costs wouldkeepdecliningatfirst,remainsteadyatthe optimum level with further increases in enrollment, and eventually start rising slightly as still more students enroll. This fact is brought out in the estimates of the economics of a hypothetical DL unit at a southernlocation presented in Table 1.

Notethesignificantchangethattheeconomies of scalemakebetween 6,000credit hours and30,000 credit hours to both the costs and the net revenues. The data therein are of ex ante planning value, but not all encompassing to include social cost benefitanalysis(SCBA),environmentalbenefits, and other topics beyond the scope of this study.

Also such an analysis is location-specific. It is undertaken after the all conjectures and numbers are firmed up. Because of the economies (spread

offixedcostsoveralargernumberofcredithours) in Table 1 the break-even for such credit hours is slashed substantially from 15,800 to 5,300 credit hours. Also observe that semivariable costs (also calledsemifixedcosts)suchasmarketing,student support, faculty salary, and such others constitute as much as 67% of total costs at 30,000 student credit hours, going up from 55% at 6,000 credit hours. Whereas fixed costs decline from 41% of total costs at 6,000 credit hours to 23% at 30,000 credit hours. The dramatic fall in cost per credit hour is obvious. This evidence validates the presence of economies of scale in DL. In Table 4 as well, the same proof is available.

Economies of scale in DL are a hot issue in contemporary higher education, notably where thereiscapitaldeepeningbymakinguseofheavyduty IT infrastructure consisting of cutting edge technology to deliver DL and otherwise manage it. Economies of scale and heavy investments work in step and style with each other. And in order to meet the “exploding demand” for DL courses, many universities have already launched DL programs or are contemplating them. Enrollment increases are in the range of 20 to 30% per annum (Carnevale, 2006).

The Secretary of Education, Margaret Spellings, thinks that “nearly two-thirds of all highgrowth, high-wage jobs created in the next decade will require a college degree; a degree only onethird of Americans have” (Spellings, 2006). This vast hiatus between demand and supply cannot be bridged by mortar and brick institutions alone and DL has a role cut out for it in this milieu.

The government repealed early last year the federal rule mandating that colleges provide at least one half of the instruction on campus. The repeal would further augment enrollment in the online environment. According to an estimate by Eduventures in Boston, by early 2008, 1 out of 10 college students is expected to be enrolled in an online degree program. The demand for online programs will outstrip supply during the next 5 years. (Golden, 2006)

dl viRtues and conceRns

The UNESCO portal listed in the reference section (UNESCO, 2007) of this chapter provides a description of a mega university (MU) as institu-

tions that have “enrolments in excess of 100,000 learners per year” and “provide a combination of media to accommodate learners.” The term “mega university” was coined in 1993 by the

Vice-Chancellor ofthe UK Open University,John

Economies of Scale in Distance Learning (DL)

Daniel (Daniel, 1996). Initially it meant any institution that had a DL component in an otherwise regular brick and mortar school. Later the term came to mean a predominantly DL unit, with a teaching campus, if any, merely of secondary importance, like it happened to UKOU. In this chapter the term is used only in this expansive sense in tune with the UNESCO (2007) portrayal as any institution that provides distance learning primarily, and only incidentally, has a brick and mortar campus learning facility. Fine tuning of thisconceptisdifficultinviewofawiderangeof both on and off campus education made available by institutions under DL. Also the MU could use any communications technology, including the humblesnailmailtoqualifyasaMU.AllamaIqbal OU in Pakistan is considered the world’s largest DL facility with 1.8 million students, including mainly the off-campus students in both graduate andundergraduatecourses(Vice-Chancellor,UK Open University, 2007)

Student enrollment in “mega iniversities” is massive. UK’s Open University, dedicated to delivering online learning, has over 150,000 undergraduate students and 30,000 postgraduate students. Some 10,000 students of the university suffer disabilities. China and India have millions of students, in aggregate terms, in “open universities” (OU). During 2005, India alone had 11 open universities and some 70 distance education units in that many universities with hundreds of thousands of students in each. In America, the for-profitUniversityofPhoenixhas145,000online students seeking online degrees. University of Maryland has 51,450, Troy University has 19,000, University of Massachusetts (UMass) has 9200, Pennsylvania State University has 5,700, and so forth. (Data for number of students in different universities are published in issues of Chronicle of Higher Education and Inside Higher Educa- tion-Daily Updates).

OUs are now commonplace in about 50 countries around the world. UMass experienced a quadrupling of its 2001 enrollment. DL appears

to be so accessible, affordable, and versatile that increasing faith is being put into it to meet the demand for higher education and for “cyber scholars.” It is also flexible in the sense that students can learn at their own comfortable pace and just-in-time. Online colleges turned out to be resourceful and inventive in the delivery of educational courses to Katrina victims and provided continuity in education.

What is not common in the enrollments at the various American and non-American distance education providers is that with the exception of a few eminent DL schools such as the University of Phoenix, it is not unreasonable to suggest that by and large the enrollments are originating in the same state where the DL facility is located. More often the students are in the same town, if not the same zip code area. This fact has a bearing on scalability. A single city or county or even a state by themselves are not likely to fill the e-seats of a mega university that can service 100,000 or more students. And DL facilities, as a result, will not lend themselves well for being scaled up. In the case of the UKOU there was a phenomenal growth from 25,000 to 40,000 in just a year and by 1980 the total student number was 70,000 and there were 6,000 graduations a year (UK Open University, 2007.) One of the features that helped this growth was the fact the UKOU was only one of its kind, a virtual monopoly in the UK and with a strong presence all over Europe and elsewhere. Some of these propitious circumstances may not be available in the USA. There may not be any takers for the e-seats, at least in the initial phases of the facility. This does not suggest that scale-related economies cannot be realized by nonmega units. The nifty advances of modern management do enable the setting up of viable, but reasonably efficient size units that could attain 60 to 70% the economies of scale (Louisiana Department of Education, 2003), if not 80% or more as a mega unit would.

Profitabilityisafunctionofrevenuesandcosts. Onlinecollegesthatarefor-profitarenownumer-