Even in today鈥檚 gloomy business climate, market experts predict that the K-12 online education industry will continue to grow, albeit at a somewhat slower pace, as rapidly increasing enrollments in virtual schools begin to taper off and the country鈥檚 economic troubles persist.
鈥淏ecause the market is growing as fast as it has been, we鈥檝e had plenty of access to capital in a time when so many other companies are seeing diminished access to capital,鈥� says Caprice Young, the chief executive officer of the Portland, Ore.-based , a company that provides distance-learning programs for high schools. 鈥淎nd that makes it possible for us to build the kinds of high-quality products and services we provide to schools.鈥�
According to a September 2008 education industry report published by the Toronto-based BMO Capital Markets Corp., a financial-services company, 鈥渢he virtual school market, while still relatively new, has been growing dramatically鈥� and will likely continue to grow at a moderate pace. The report cited increased enrollments in K-12 virtual schools, as well as other factors, such as an increase in the number of home-schoolers and students interested in online-only Advanced Placement courses.
The economic downturn will likely slow the growth in the industry, says Jeffrey M. Silber, a managing director in New York City for BMO Capital Markets. But while state and district funding levels for students may flatten, enrollments in virtual schools will likely continue to grow, although not as quickly as in past years.
James Maher, a senior research analyst for the San Francisco-based investment bank ThinkEquity LLC, who specifically follows , a Herndon, Va.-based provider of online-learning services, agrees that the virtual school market is growing.
鈥淚 think the opportunity to use online delivery for at least some of the curriculum for K-12 [public education] is likely to be something that gets embraced more going forward,鈥� he says. 鈥淚t may be challenging right in the midst of budget difficulties, but over time it permits a school district to have more flexibility and capacity.鈥�
Plus, more districts may turn to private providers for online education services as a way to save money, says Terry M. Moe, a professor of political science at Stanford University and the co-author of a forthcoming book about technology and education called Liberating Learning.
鈥淚f the districts literally don鈥檛 have the money to have their own physics class, then private providers can come in,鈥� Moe says. 鈥淭he main cost in education is personnel, and it is a huge advantage of technology that it is cheap compared to the cost of the labor of teachers, and distance learning involves a much smaller number of teachers per student.
鈥淚f it鈥檚 done right, over time the cost will go down even more dramatically,鈥� he says.
But before districts decide to partner with private, third-party providers for online curricula or other services, it is imperative that school officials do extensive background research on the services and set up a system of continuous oversight, cautions William R. Thomas, the director of the Atlanta-based .
鈥淭here are some private-sector companies just out to make a dollar,鈥� he says. 鈥淭heir primary motivation is profit, so they will cut corners in terms of the teacher or the teacher鈥檚 qualifications, or the way that the course is designed.鈥�
As long as there is enough communication and evaluation, however, 鈥渙utsourcing to a third-party provider makes a huge amount of sense,鈥� says Thomas.
Barbara J. Dreyer, the president of the Baltimore-based Connections Academy, which provides virtual education services to 16,000 students in 14 states, argues that private companies have a strong incentive to provide high-quality, effective learning tools because their future depends on it.
鈥淲e have the students, we have the families, we have the teachers, we have the legislative community, and we have whatever regulatory authority is involved, and we have to try and give them what it is they want,鈥� she says. 鈥淚f we鈥檙e not giving them what they鈥檙e looking for, they鈥檙e not going to pay us anymore. It gives you a much more deliberate focus.鈥�
But while partnerships between private companies and school districts can be beneficial for both parties, districts should ask critical questions and do their research before signing any contracts, says Pamela H. Ice, the online-support director for the .
鈥淭hird-party providers are creating curriculum at a national level, so they鈥檙e trying to meet the needs of a whole nation,鈥� says Ice. As a result, 鈥渋ndividual states or districts must do their own alignment with their state standards.鈥�
Most companies have software programs that will align their curricula to state standards, says Ice, but even then educators should manually go through the materials, 鈥渂ecause there are going to be some holes.鈥� And while some companies allow school districts to tweak the curricula, others don鈥檛, she says.
Similarly, for districts or states that are considering using comprehensive virtual education services鈥攊ncluding curriculum, teachers, and support services鈥攕he says school officials need to take a hard look at the structure of the organization and make sure it fits with district and state policies.
鈥淲hen you sign a contract with a third-party provider, and it鈥檚 one of those turnkey solutions, they鈥檙e in control,鈥� Ice says. 鈥淵ou really need to have a clear idea and a clear understanding of what鈥檚 in your control and what鈥檚 not in your control in order to really make an informed decision.鈥�
Unlike most public school districts, which are required to balance their budgets every year, companies in the private sector can make bigger investments in research to create high-quality products, says Ron Packard, the chief executive officer of K12 Inc., which works with more than 55,000 students in 21 states.
鈥淭he amount of capital and expertise [in the private sector] is tremendous,鈥� he says, and that money can be leveraged from the private sector to improve public education.
Charles Thornburgh, the president of the Hollywood, Fla.-based , agrees that the budget constraints on school districts keep them from investing the money and time needed to start a program such as a virtual school and see the payback.
鈥淚t鈥檚 a cost-intensive process. That kind of investment is difficult for a school district to make when they have to balance their budget every year,鈥� he says.
Private companies can afford to take a longer-term perspective, he says, which allows them to earn back the investment over five or 10 years.
And after the curricula are created, companies can contract out to provide those services at a lower cost than if school districts were to build the content on their own, says Cheryl Vedoe, the executive director of the Seattle-based , which provides online curricula for students.
鈥淥ne of the greatest benefits of online education is that it has the potential to be a very cost-effective way for learning opportunities for students who otherwise wouldn鈥檛 be able to take those classes,鈥� she says.
But although contracting out services may be a cost-effective option for districts, Young, from KC Distance Learning, warns against turning to online education options solely to save money.
鈥淟ots of states are under the misperception that online learning is less expensive,鈥� she says. 鈥淏ut really, the investment is in a different place. Instead of investing in bricks and mortar, we鈥檙e investing in technology,鈥� as well as teacher training and one-on-one coaching, she says.
Another advantage of partnering with private companies, says Packard of K12, is the ability to scale instruction.
K12, for example, offers a range of services from providing learning assistance to a handful of struggling students in one district to supplying curricula, teachers, and operational support to entire schools, he says.
鈥淎lthough,鈥� he adds, 鈥渟ometimes the policies have not kept up with the demands.鈥�
One state policy that Young, from KC Distance Learning, believes legislators should avoid is capping the number of online education providers allowed in the state.
鈥淭hat鈥檚 exactly the wrong thing for them to do if they want to improve quality. That guarantees that the companies [that are already there] are not going to do any better,鈥� she says.
Private companies also have more flexibility to change, says Dreyer, from Connections Academy. 鈥淲e can see what鈥檚 working and what鈥檚 not,鈥� she says and quickly adapt to improve the program.
鈥淚t鈥檚 the difference between the speedboat and the aircraft carrier,鈥� Dreyer says. 鈥淚t鈥檚 not easy to change when you may have thousands of teachers involved.鈥�
Still, experts caution schools not to embrace the speed of change unless it clearly leads to improvement. Because online learning is still a relatively new development in education, especially at the K-12 level, researchers are just beginning to evaluate its effectiveness. As it is, there are no definitive studies proving that e-learning is more effective than traditional learning.
Experts such as Ice recommend that schools ask lots of questions upfront and avoid making hasty decisions about going in this direction. "[Third-party providers] really do provide some valuable resources, and districts just need to do their homework so that it can be an optimal education opportunity,鈥� she says.
Dreyer points out that if you look at higher education, online education started with private companies, and that movement continued to grow because of increased student demand.
鈥淭hat鈥檚 why, ultimately, even though [the K-12 sector] is much bigger, and it has the unions and bureaucracy, which makes it much harder to change than higher ed was, it was the student demand,鈥� she says, that was the catalyst in higher education, 鈥渁nd I think you鈥檙e going to see that same thing really kick in in the K-12 space.鈥�
