August 2001

1. E-Learning Market Analysis Final ReportExecutive Summary for August 29, 2001 E-Learning Task Force Presentation Prepared for the Minnesota State Colleges and Universities August 2001 PwC

2. OVERRIDING MnSCU GOAL: In response to the opportunities associated with e-learning, the Minnesota State Colleges and Universities (MnSCU) have established the goal of becoming a national leader in the provision of online learning services to the public and private sector. To achieve this objective requires a close examination of the e-learning market. REPORT CONTEXT: MnSCU has funded a series of e-learning-related projects to better identify opportunities and determine MnSCU’s capabilities. MnSCU has accomplished much in the preliminary stages of its e-learning development. However, MnSCU recognizes that the next step will require a strategic move that synthesizes the knowledge acquired from prior MnSCU e-learning reports. PROJECT SCOPE: PwC was tasked to conduct an e-learning market analysis that includes identification of various target markets and their needs, determination of current e-learning activity with summary of organizational capacity, analysis of products and services, and identification of points of competition. REPORT OBJECTIVE: The objective of this report is to present the findings from our market analysis. With the information contained in this document, MnSCU has the background knowledge to proceed strategically with its e-learning initiative. The report does not provide quick answers on what MnSCU should do. Rather, it provides the information that, along with other studies, begin to build the map that will help guide MnSCU on a resource- and time-intensive journey. This report helps to identify market penetration, market richness, and market opportunities. The report guides the development of answers to such questions as: What is the market? Who is in the market? And what are the steps necessary to become part of the market? What was the context for this report?

3. What was the context for this report? REPORT FORMAT SECTION I.Distance Education and E-Learning: Delineates e-learning from traditional distance education and addresses the impact of the educational transformation taking place. REPORT METHODOLOGY The report is divided into four sections providing a wealth of information on the e-learning marketplace. Research was compiled from industry reports, educational statistics, best practices and benchmarks, and interviews with e-learning representatives. SECTION II.E-Learning Customer Segments: Divides the e-learning market into different learner segments and identifies the demand by programmatic area based on national and state-wide statistics. SECTION III.E-Learning Content and Service Providers: Describes the various products and services offered by successful e-learning providers, outlines strengths and challenges, and matches each provider against a set of e-learning capabilities. SECTION IV.E-Learning Foundational Considerations: Outlines additional points for consideration that are integral when developing a successful e-learning strategy.

4. What should MnSCU consider before developing an e-learning strategy? Through each of the studies commissioned by the Minnesota State Colleges and Universities related to e-learning, MnSCU is seeking answers to a series of important questions, the answers to which will provide the framework for determining the system’s strategic positioning for e-learning. This report addresses the following questions: • SECTION I: WHAT DOES E-LEARNING MEAN FOR MnSCU? Although distance education embraces e-learning, it is important for the development of a strategic plan to state the distinctions clearly and examine their implications. • SECTION II: WHAT IS THE DEMAND FOR E-LEARNING? WHAT ARE THE E-LEARNING NEEDS? Within and outside the state of Minnesota, a large population of learners are accessing courses online. Understanding this market helps MnSCU focus resources on the right mix of programs for a targeted set of learners. • SECTION III: WHAT ARE OTHERS DOING IN THE E-LEARNING ARENA? AGAINST WHOM WILL MnSCU COMPETE? • Due to changes in demand and improved technologies, e-learning is a “hot” market. New entries compete against a combination of traditional education providers, many of whom have incorporated innovative business models, and for-profit non-traditional providers who are aggressively launching well-funded e-learning initiatives. • SECTION IV: WHAT ELSE SHOULD MnSCU CONSIDER PRIOR TO DEVELOPING AN E-LEARNING PLAN? Identification of targeted programs and markets are just one element of a comprehensive strategic plan for e-learning tailored to MnSCU’s unique environment and strengths.

5. Section I: What does e-learning mean for MnSCU? • Section I of this report defines distance education and outlines the features of learning. E-learning is identified as a segment of distance education that is characterized by the unique features of the Internet and technology-enabled learning. There are advantages and disadvantages to this type of learning, but whatever those may be, e-learning has catalyzed a transformation in the education arena and institutions of higher education are beginning to align themselves with this new mode of education. It is important for institutions developing an e-learning strategy to understand and define e-learning for themselves. • KEY FINDINGS • There is a distinction between traditional distance education and Internet-based, online learning. Traditional distance education emphasizes the independence of the learners and the privatization of the learning process. However, online learning affords a certain degree of interactivity with others while at a distance. • Whereas distance education is delivered through a broad range of delivery modes and media, e-learning, as a segment of distance education, is narrowly confined to Internet-enabled learning. • E-learning provides students, faculty and administrators the opportunity to interact and collaborate in an efficient and effective manner; without requiring physical proximity, it allows for real-time learning activities and discussions as well as independent learning initiatives. • An IDC report states Web-based courses are the most widely-used mode of technology for distance education courses. • The percent of 2-year and 4-year postsecondary education institutions offering distance education has risen dramatically, with asynchronous Internet courses leading the way, followed by one-way prerecorded video and two-way video with two-way audio. • E-learning provides access to new ways to facilitate the learning process. In fact, the most significant difference between classroom based and technology mediated education is the shift from focusing on “teaching” to an emphasis on “learning.”

6. Section I: What does e-learning mean for MnSCU? • CONCLUSIONS • There are advantages and disadvantages to e-learning for students, instructors, institutions and society. The table to the right outlines those benefits and disadvantages. • As a mode for delivering education, e-learning has changed the educational landscape more rapidly than any other teaching and learning transformation. E-learning provides access to new ways of facilitating the learning process. • The most significant difference between classroom based and technology mediated education is the shift from focusing on “teaching” to an emphasis on “learning.” • Yet the implications go beyond the shift • from teaching to learning; also impacted is how educational material is packaged and sold, how libraries are used, the role of educational support personnel such as instructional designers, technology support staff, and marketing personnel, and the manner in which administrative support systems are expected to function. • Although the focus of this market analysis is on e-learning, the development of e-learning statistics lags behind the rapid pace of change; accordingly, in many instances this report must rely on distance education data. Until the e-learning data catches up, certain assumptions must be made about the correlation between distance learning developments and trends and the corresponding trends for e-learning.

7. Section I: What does e-learning mean for MnSCU? • IMPLICATIONS FOR MnSCU • For many, e-learning is limited to Internet-based education; for others e-learning embraces not only Internet-based delivery but also video cassette, video streaming, and other modes of technology-driven delivery. Determining the definition of e-learning is a necessary step toward the development of a strategy. • Whatever the definition of e-learning, development of an e-learning strategy requires focusing on the student as learner, whereby the student is provided with the tools, technology, and service support needed to successfully complete an e-learning course or program. • A learner-centric theme requires a different approach to content development and provision of services. • Understanding and communicating the unique attributes of e-learning, its strengths and weaknesses, and how it complements other distance education modes of delivery are fundamental to developing and selling an e-learning strategy.

8. Section II: What is the demand for e-learning? What are the e-learning needs? • Section II of this report provides information on the demand for e-learning through a market needs analysis. The first segment highlights key demographic, economic, and education data for Minnesota. The second segment breaks down the professional and distance education market by learner segment. Within each segment, market penetration data on national and state levels, key trends, and lists of competitors are included. E-learning is a resource-intensive endeavor, so strategic learner segment focus is imperative when considering e-learning opportunities. The information included in this section should help MnSCU hone in on a target audience. A learner segment is a distinct group within the entire population of learners. Each learner segment has unique reasons for pursuing learning opportunities. In addition, many of the segments can be subdivided depending on their preferences for a community experience and their preference for a degree. CORPORATE LEARNERS work for corporations and are seeking education to advance their careers. The purchase decision is made by the corporation and not by the individual acting alone. Corporate learners demand a broad range of educational services. Targeting these learners would likely require targeting corporations and industries. PROFESSIONAL ENHANCEMENT LEARNERS are seeking to advance their careers or shift careers. They are interested in advanced (masters, doctorate) degrees or non-degree work that furthers their career. Professional enhancement workers may be employed full- or part-time. DEGREE COMPLETION ADULT LEARNERS are seeking to complete a degree at an older age. They are frequently working adults and must often balance work and family needs with their educational goals. LIFE FULFILLMENT LEARNERS are interested in education for its own sake. They enjoy learning and the academic environment and view additional education as a source of personal development or as a hobby. “COLLEGE EXPERIENCE” LEARNERS are preparing for life. This segment includes many of the 18-24 year old residential college students for whom the “coming of age” process that occurs in college is often as important as specific academic learning. PRE-COLLEGE (K-12) LEARNERS are interested in taking baccalaureate-level work prior to completion of secondary school. This segment may be interested in getting a “jump start” on college. REMEDIATION AND TEST PREP LEARNERS are interested in learning as a prerequisite for an examination or enrollment in another program.

9. Section II: What is the demand for e-learning? What are the e-learning needs? • KEY FINDINGS • Of the seven core market segments, in the U.S., Corporate Learners, Professional Enhancement Learners, and Degree Completion Learners are the segments where technology-mediated learning has achieved the greatest penetration. • CORPORATE LEARNERS: • The corporate learning market has grown significantly over the past several years and growth is expected to continue. Many postsecondary institutions, especially community colleges across the country, are actively seeking to provide training to companies. Thus, the corporate training market presents an opportunity for institutions of higher education to expand their customer base and generate additional revenue from e-learning investments. • Corporate web-based training is expected to surge by more than 900 percent between 1999 and 2003. A key reason according to Business Week is that “online training is far cheaper than bringing in a live instructor.” • A survey conducted by the National Association of Manufacturers found that 37 percent of respondents were having difficulty introducing productivity improvements and 36 percent were having problems upgrading production technology due to employee skill shortages. This presents a tremendous corporate training opportunity. • PROFESSIONAL ENHANCEMENT LEARNERS: • Based on an environmental scan of e-learning programs, there are five major categories of Professional Enhancement Learners. Business Education, Teacher Education, Health-related Education, Information Technology Education, and Manufacturing Education. • E-learning opportunities in the business content area cover a wide range of courses and programs in the area of business skills and management education. Selected topics include general management, finance, customer service, and leadership. • Between 1984-85, and 1994-95, the number of MBA degrees conferred increased by 40%. • To meet this demand, numerous postsecondary institutions and corporate e-learning providers have launched online MBA general management certificate programs. • E-Learning opportunities K-12 professional development area has become an attractive market segment for companies, postsecondary institutions, and investors attempting to meet the needs of today’s current educators and the hundreds of thousands of new educators entering classrooms across the next decade. • Merrill Lynch estimates the market for teacher professional development is approximately $3 billion.

10. Section II: What is the demand for e-learning? What are the e-learning needs? • Our nation’s schools will need to hire about 2.2 million teachers by 2010 (Bureau of Labor Statistics). • Currently, 19.9% of all distance education courses, including 31% of all distance education courses at four-year institutions, are targeted at current or prospective teachers. • E-Learning opportunities in the health-care arena, particularly in nursing, cover several distinct program areas including bachelors and masters degrees, licensing and certification renewals and post-masters programs. Unlike many other occupations, nursing has well-defined educational requirements that must constantly be updated in order for nurses to retain their license. • Between 1996 and 2006, the number of nurses are expected to increase 21%, for a total increase of 411,000. • Between 1996 and 2006, the number of home health aids are expected to increase 76%, for a total increase of 378,000. • Currently, 10.2% of all distance education courses offered are targeted at nurses. • Web-based IT training represents the largest portion of training currently delivered online, covering topics in database and enterprise services, desktop applications, Internet, operating systems, and application development. Leading technology companies such as Microsoft, Cisco, Oracle and Novell have developed multi-course certification programs available online and delivered by dozens of partners through Web portals and/or proprietary Web-based libraries. • Approximately 50% of IT company executives cited the lack of skilled workers as the most significant barrier to growth in 1999-2000. • Skills of IT professionals become outdated in 3-5 years; and Sun Microsystem’s Chairman and CEO has commented that employees at technology companies face an annual 20-25% skills obsolescence. • Employees in the manufacturing sector monitor workplace conditions to ensure emplooyee health, comfort and workplace efficiency. Safety coordinators, directors and managers comprise the majority of occupations within the industrial safety group. The primary objective employers seek to attain is staff quality control. • Employment projections for manufacturing in 2008 indicate that the industry will be one of two that experience declines in employment. • Unlike the rest of the Nation, the manufacturing sector in Minnesota is projected to continue to expand. Manufacturers are expected to add 41,000 new jobs (MnSCU - Industry Image Research - Precision Manufacturing Partnership).

11. Section II: What is the demand for e-learning? What are the e-learning needs? • DEGREE COMPLETION LEARNERS: • The total market for degree completion students is 9.1 million. Part-time enrollments for undergraduates between 17-24 years of age is at 2.9 million; while the part-time enrollments for undergraduates above the age of 25 is at 5.3 million (NCES). • Students 25 years of age and older now represent 43% (6.1 million) of all post secondary enrollments, up from 28% in 1970. • More than 90% of MnSCU’s students are employed full-time or part-time. • According to a Noel-Levitz Market Research report, about half of lifelong learners surveyed are degree-seeking. 26.4% of the adults surveyed stated the primary objective is to complete a bachelor’s degree; 19.5% stated the primary objective is to earn a master’s degree. • CONCLUSIONS • The corporate market offers higher education the greatest opportunity to expand its customer base and generate additional revenue. • Business education, teacher education, health-related education, and information technology education are the largest market segments in distance education for professional enhancement learners nationwide. • The demand for manufacturing education appears to be a unique demand within Minnesota, as manufacturing remains the State’s second largest industry. • Adult degree completion learners are increasing in numbers. Since students over the age of 25 tend to work part-time or full-time, the need for more flexible learning environments has become more pressing. • IMPLICATIONS FOR MnSCU • Development of an e-learning strategy requires determining for each market segment whether there is alignment between the segment and the institution’s overall mission and goals. What is the degree of alignment of these market segments—corporate learners, professional enhancement learners, degree completion learners, life fulfillment learners, college experience learners, remediation and test preparation, and pre-college (K-12) learners—and MnSCU’s mission? • Identification of a particular market segment—rather than a particular program—is one approach to identifying a market niche from which an e-learning strategy can be developed. • Specific market segments have proven to be successful e-learning targets for several successful providers. • A number of questions surface around the notion of market penetration, such as: • Is the market segment significantly robust to support additional entry or is it an already crowded market? • What untapped markets are significantly large to warrant investment to establish its own niche e-learning offerings?

12. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • Due to changes in demand and improved technologies, e-learning is a “hot” market. Entering this market means competing against or collaborating with traditional providers, many of whom have incorporated innovative business models, as well as for-profit non-traditional providers who are aggressively launching well-funded e-learning initiatives. Section III of this report outlines e-learning trends and highlights the five major areas of activity within the broader e-learning market. Case studies of select vendors are included, providing MnSCU with a glimpse of the types of characteristics and capabilities needed to succeed in this market. • KEY FINDINGS • Over the past several years, there has been an influx of private investment into the education market, but the economic slowdown in recent months has curtailed this influx of funding. In 1999 and 2000, education ventures received $5.5 billion in equity investments. As a result, hundreds of companies were formed, may of them in the corporate e-learning space. However, more recently there has been a contraction in venture investing. Moreover, many companies receiving initial funding are finding access to additional capital extremely difficult. • In 1999 and 2000, a handful of strategic investors capitalized on the fertile investment climate. Companies such as Kaplan, Sylvan, Pearson, and Thomson, among others, announced sizeable investments and/or acquisitions in postsecondary and corporate e-learning businesses. These companies aim to develop comprehensive solutions for customers that integrate technology platforms, proprietary content resources and value-added services that meet customers’ complete needs. • The vast amount of private equity directed to single-solution corporate e-learning ventures has led to a wave of consolidation activity in the e-learning space. Leading companies are making targeted acquisitions to enhance their solution set. However, those companies and organizations lacking a differentiated e-learning offering will not likely attract partners and/or investors necessary to support ongoing operations in a consolidating market. • Availability of robust learner support services such as mentoring, 24x7 tutoring, FAQ’s, and live technical support have become important elements as vendors and organizations gain a better understanding of learner needs in an online environment. • The convenience and flexibility inspired by online delivery of content continues to blur the distinctions between the corporate and postsecondary markets, particularly within the context of targeting Corporate Learners, Professional Enhancement Learners, and Degree Completion Adult Learners. Many for-profit companies are targeting customers that would traditionally turn to postsecondary institutions.

13. Criteria for E-Learning Success Scorecard Strong Brand First Mover Advantage High Internal Capital Availability High Distribution Channel Control High Distance Learning Skills Availability Entrepreneurial Organizational Structure Centralized/ Coordinated Organization College-Level Academic Programs 4 4 4 4 4 4 4 4 Is the organization’s brand recognized? Has the organization moved swiftly into the e-learning space? Does the organization have a high capital availability to support costs? Does the organization offer various modes of distance learning? Are the appropriate and sufficient e-learning skills available? What type of leadership exists? Does the organization respond quickly to market demand? Does the organization work in a collaborative manner; avoiding duplication of effort? Does the organization offer college-level academic programs requested by students? Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • Within the postsecondary e-learning market, institutions have begun to look beyond the core student base in hopes of attracting a much wider audience for an institution’s offerings. During the past several years, both the number of web-based distance learning programs and the number of students enrolled in web-based distance learning courses have increased dramatically with a handful of prominent institutions launching highly visible ventures. • Within the corporate space, for-profit providers have eagerly invested in e-learning solutions to help their customers capture the “anytime, anywhere” benefits of education and training delivered online. • In reviewing the market, five major areas of activity within the broader e-learning market warrant more detailed analysis. These are: • Information Technology Education • Business and Management Education • Teacher (K-12) Education • Nursing Education • Workforce Training • A close look at the successful traditional and for-profit providers of content for these five areas demonstrates a similarity in certain core characteristics as defined in the Criteria for E-Learning Success Scorecard.

14. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • INFORMATION TECHNOLOGY EDUCATION • Information Technology Trends • IT training is a highly competitive e-learning market. Many for-profit entities have crowded this space. • IT is a commoditized content market. Those companies and institutions achieving the most success in the online IT space posses sufficient scale, experience, or innovative delivery modes to differentiate themselves. • The rapid rate of technological innovation has dramatically reduced the lifecycle for software and hardware products. Developing web-based IT Courseware that can successfully meet the requirements of learners under these market conditions requires not simply strong instructional design methodologies and content expertise, but also deep financial and human resources. • Although IT certification is valuable, building a broad set of IT skills is more valuable. Leading online IT training providers need to furnish customers with multi-platform, multi-vendor education environments that test professionals’ flexibility and problem-solving abilities. • Information Technology Competitive Landscape • By far, the most competitive of the e-learning markets, the online IT space includes -- or will soon include -- the largest companies in the training industry. • Several leading high tech vendors have launched substantial e-learning initiatives to supply both internal employees and external constituents with online courseware and resources. • Additionally, global instructor-led IT training companies also represent potential threats in the online IT space although there efforts to date have been limited. • Information Technology Providers • New Jersey Institute of Technology: NJIT has a strong regional brand built on decades of successful distance learning programs in IT. NJIT offers one of the broadest online undergraduate and graduate IT degree programs in the US. The school is ranked among the “most wired” universities by Yahoo! Internet Life. • University of Phoenix: UOP’s reliance on the synergy between its physical and online classrooms may give it the necessary edge to maintain its growth and stay ahead of its competitors. The institution stands out in the crowd for its strong brand, competitive academic programs and early entrance into Internet-based education. • SmartForce: has established a strong brand name in the two years since it embarked on an Internet-dominated business model strategy. As one of the only e-learning companies with revenues greater than $150 million, SmartForce is able to generate enough cash to keep shareholders happy and fund necessary research and development as well as acquisitions. • KnowledgeNet: The management team of KnowledgeNet was able to raise significant capital at a time when the venture market was drying up. Additionally, its recent launch of a learning management system bolsters its ability to offer total IT training solutions.

15. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • BUSINESS AND MANAGEMENT EDUCATION • Business and Management Education Trends • There is a mixed quality of current business and management offerings. One particular challenge for effective migration of business content online is the difficulty in translating certain management behaviors and concepts to a web-based environment. In addition, many institutions and vendors service the corporate market have employed a content library that places heavy emphasis on quantity, not necessarily the quality of the courses available in the library. • With the initial wave of online business skills content of mixed quality and interactivity, vendors are striving to develop courseware that actively engages learners and approximates realistic business environments. The first group of companies aiming to develop realistic business scenarios and role playing opportunities for learners garnered significant venture capital resources, secured high profile partnerships with leading business schools and extensive media coverage. • There are few postsecondary institutions tapping the corporate market. Despite a number of high profile partnerships between e-learning vendors and leading business schools during the last 18 months, few institutions are using the Internet to deliver business skills content and certificate and degree-granting programs to corporate customers. • Business and Management Competitive Landscape • IDC predicts that revenues of web-based soft-skills training, of which business skills and management education represent a significant portion, should exceed those of online IT training by 2003. • Currently, several of the more high-profile content companies in the management education space, including Unext, Quisic, and Ninth House Network, have struggled to gain market traction even after raising sizeable sums of private equity and developing high quality and encouraging learner centric online courseware. • Several leading online IT companies have entered the business skills and management education market, seeking to leverage their experience and installed base in new content verticals. • Among postsecondary institutions seeking online education opportunities, migrating executive education programs to the Web represents the most popular initial step in the business content arena. The challenge form these organizations is to differentiate their online business programs from those of other institutions. • Business and Management Providers • University of Maryland University College: UMUC benefits from a long history of providing degree-granting programs to U.S. military branches that should enhance UMUC Online’s efforts in this expanding market. Additionally, the organization achieved good visibility and brand establishment with its early entrance into the postsecondary e-learning market. • UNext: With strong financial and distribution support provided by Thomson Learning, a key strategic investor, UNext appears to have the operational resources necessary to capitalize on the business skills and management education online opportunity. • SkillSoft: SkillSoft’s library of content gives it a significant competitive advantage over other content competitors in the corporate e-learning arena. The content depth of its library makes it an attractive partner to other companies. • American Management Association: The AMA brand is internationally recognized and respected. Its efforts at keeping course offerings timely, cost-effective and valuable to member companies and their employees are a hallmark.

16. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • TEACHER (K-12) EDUCATION • Teacher (K-12) Education Trends • Traditionally, K-12 educators have completed professional development requirements through on-site presentations and workshops and by attending conferences and seminars. Currently, most online professional development vendors have found much slower teacher adoption rates of online courses and resources than they had anticipated. • The dearth of qualified K-12 educators has spurred many states to create accelerated, alternative certification programs for individuals considering education careers. The rise of alternative certification programs in states and major urban districts aim to help offset the poor retention for new teachers and schools’ difficulty in attracting qualified candidates for selected subjects. • Several of the leading online professional development companies would like to develop partnerships and/or working relationships with schools of education and professional development consortium. These partnerships would introduce vendors’ online products and services to large groups of future classroom educators and create new distribution channels in which the institutions could participate. • Teacher (K-12) Competitive Landscape • The dramatic demographic data concerning the demand for preparing new educators has made the K-12 professional development market particularly attractive to leading companies such as Sylvan Learning Systems, Kaplan, Pearson and McGraw-Hill. However, the professional development market – both online and offline – remains a tremendously fragmented market. • Online professional development companies delivering web-based resources and continuing education courses and programs are gaining customer acceptance remains a challenge. • Teacher (K-12) Providers • Walden University: The Walden University brand is well known in graduate distance education, and the Sylvan investment will help Walden launch the sizable marketing campaign required to break into the undergraduate space and gain serious traction. The synergies with other Sylvan companies also give Walden a strong competitive advantage. . • Lesley University: Lesley has a strong reputation in graduate programs in education and aims to capitalize on that national reputation as it migrates course content and degree offerings to the Internet. With an e-learning commitment directly from the President’s Office, Lesley is guaranteed the necessary financial investments to maintain its first-mover advantage in delivering online education degrees. • Riverdeep/TeacherUniverse: In addition to Teacher Universe, Riverdeep has made some key strategic acquisitions and partnerships that allow the company to penetrate the K-12 market in different ways. A traditional publisher of K-12 curricular CD-ROM products, Riverdeep enjoyed solid brand awareness as it migrated its content online and filed its 2000 initial public offering. . • TeachStream: The company’s 10 years of experience selling professional development resources into districts, and its high-quality content drawn from more than 200 annual classroom visits, position TeachStream as a leading provider of professional development online. Securing contracts in several major U.S. school districts also bodes well for TeachStream as superintendents, principals and teachers look to solutions that can be used district-wide.

17. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • NURSING EDUCATION • Nursing Education Trends • The American Nurses Credentialing Center reports a continued decline in employer support of nurses’ continuing education. This trend places increasing pressure on nurses to identify cost-effective solutions to meet continuing education requirements as they become responsible for the costs associated with license renewal. • Constant advances in medical fields require that nurses possess a command of new developments and research findings. As online learning becomes more prevalent in institutions, it will be imperative that providers keep courseware up-to-date with the latest findings and innovative technologies to deliver those offerings. • Nursing Competitive Landscape • Even in its infancy, the nursing content market is crowded with many small players. For-profit and not-for-profit postsecondary institutions recognize they must offer online degree courseware or risk losing existing enrollments as well as any hopes of expansion. • Not-for-profit players benefit from a legacy of accreditation and an understanding of nursing regulations in their state. The discerning student migrates to these institutions because they have the best guarantee that the credit hours and degrees offered will be accepted by their employer. • For-profit institutions and companies, benefiting from better access to cash either through private investment or solid margins, have an opportunity to capitalize on opportunities deliver online degrees and certification programs at competitive pricing. • Nursing Providers • University of Central Florida: As an early player in this market, UCF is in a solid position to carve out a healthy piece of the online nursing content market. UCF’s commitment to online learning spreads across a number of subjects, indicating its Virtual Campus will receive appropriate funding in order to keep its online programs relevant and competitive. • Duquesne University: Duquesne has consistently been rated as one of the top 10 Catholic colleges in the United States, and the school’s commitment to online education comes straight from the University’s President and Provost. This high-level support should help Duquesne’s School of Nursing attract sufficient resources to establish itself in a fast-growing online nursing marketplace. • Kaplan College: KaplanCollege.com is building on the brand and reputation that Kaplan has built over six decades. KaplanCollege.com is a leading distance education provider in the U.S., delivering web-based courses to more than 8,000 students in 1999. • ANA: The ANA and various state nursing associations have decades of experience supporting and advocating for nurses in the United States. As such, these associations have the trust and respect of their constituency. Continuing education has been a longstanding membership benefit of ANA and state associations and online learning only enhances their overall service offerings.

18. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • WORKFORCE TRAINING • Workforce training is increasingly becoming a necessity among corporations that strive to succeed in an information economy. • Training in the areas of information technology, manager and supervisory skills, technical processes, and occupational safety are among the most common types of training. • More and more companies are incorporating technology-based training into their overall training strategy. • Large companies offer their employees comprehensive e-learning solutions with customized content and learning management support. • Small- to mid-sized companies, that do not have sufficient resources, rely more on training vendors, many of which offer customized training solutions at reasonable prices. • The customized training market is over-saturated with training vendors that provide training in information technology, finance and insurance, and retail. • A fewer selection of training vendors offer a selection of courses in manufacturing and health-related fields. • MnSCU has already established close partnerships with the many of the state’s major employers. • Opportunities exist for further collaboration and customized training in selected areas. Specifically, MnSCU should consider customized training for employers within the manufacturing and health-care industries.

19. Section III: What are others doing in the e-learning arena? Against whom will MnSCU compete? • CONCLUSIONS: • High distance learning skills availability is integral to the success of an e-learning program. Whether or not an organization has the right mix of skills (e.g., IT support, course developers, designers, marketing, finance, student services, etc.) is a key component of a successful e-learning program. • A strong brand and an entrepreneurial organizational structure that supports innovation through flexibility and agility are also critical success factors for an e-learning initiative. • Other criteria for success are important facets and should be considered by an organization planning to enter the e-learning market. • MnSCU has already established close partnerships with many of the state’s major employers. This is a key strength and MnSCU should leverage its existing relationships. • IMPLICATIONS FOR MnSCU: • A “criteria for success” scorecard can be used as a tool to identify those programs and/or MnSCU institutions that demonstrate strengths in various capabilities. • Using the scorecard requires determining which capability and capacity criteria will be used to identify strengths and weaknesses. • The chosen criteria provide a mechanism for identifying which e-learning programs are “ready” to be marketed to a broader e-learning environment. • The same scorecard criteria can serve as an internal tool for evaluating proposals supported by FIPSE funding. • Opportunities exist for further collaboration and customized training in selected areas, specifically, customized training for employers within the manufacturing and health-care industries.

20. Section IV: What else should MnSCU consider prior to developing an e-learning plan? • In conducting our research we started by focusing on direct market activities from a supply and demand perspective. Thus, the primary emphasis of this report is the presentation of a picture of the direct e-learning marketing segments and providers in postsecondary education. However, in addition to understanding the market and the competition, an institution or system considering whether and how to implement a successful e-learning initiative must also assess several additional facets of its organization and capabilities. Section IV of this report provides an overview of these additional marketing considerations including strategic partnerships, governance models for e-learning, funding factors, branding, and Internet adoption trends. • KEY FINDINGS • Strategic Partnerships • As competition in the e-learning market intensifies, both educational delivery and service providers are assessing innovative ways of partnering with others to strengthen their portfolio of service and product offerings. • Leading e-learning institutions and companies have developed partnerships principles to serve as criteria for selecting e-learning partners. Some of these include the opportunity to venture into new markets, the opportunity to mutually gain something out of the relationship, the opportunity to enhance the brand, and the level of commitment to the e-learning initiative. • Although much of the e-learning activity has occurred within the past ten years, several niche organizations are emerging. Determining which vendors are strong prospective partnerships for MnSCU depends on MnSCU’s vision for e-learning and other factors that are critical for successful partnerships. • A partnership is an agreement between two or more parties to work together to achieve common aims. Surveys of partnerships and workshops of practitioners have produced a set of factors that describe successful partnerships. These include respect and trust between different interests, commitment of key interests developed through a clear and open process, and collaborative decision-making. • Governance Models • Several universities and higher education systems have created distinct distance education or e-learning delivery structures to capture and leverage their collective assets as well as to emulate those characteristics critical for success in the distance end e-learning competitive environment.

21. Technical Service Model E-Learning Delivery Model Comprehensive Service Center Delivery Model Section IV: What else should MnSCU consider prior to developing an e-learning plan? • Seven building blocks provide the foundation on which to formulate an e-learning governance structure. These building blocks include technical infrastructure, distance learning delivery modes, leadership, support services, policy, program planning, and funding issues. Addressing these various components is critical to the success of a strategic e-learning program. • A number of objectives have been identified as drivers of e-learning organizational strategies and structures. Not all objectives are equally critical or applicable to every situation. As MnSCU considers development of an organizational structure for delivering e-learning, the drivers of e-learning need to be clearly established and prioritized. • There are numerous ways in which to organize an e-learning governance model. Three approaches outlined in the report include 1) a technical service model whereby institutional autonomy is maintained for all e-learning functions, while technical resources are leveraged across the system; 2) an e-learning delivery model whereby the development and delivery of courses and programs is across all institutions, leveraging the breadth and size of the system; and finally 3) a comprehensive service center delivery model provides a seamless interface of e-learning support services for students and faculty.

22. A look at some leading e-learning and distance education providers reveal that institutions have adopted governance structures with a range of solutions for centralizing and decentralizing a variety of e-learning functions. • Funding Factors • Strategies for funding the development, support, and delivery of e-learning programs must consider both the resources expended and the revenue source available. • Leaders of higher education institutions consistently report information technology funding and staffing and distance learning among the top four strategic issues facing them. • Although more institutions report the need for a closer link between technology planning and financial planning, the predominant practice continues to be an ad hoc approach to funding including year-end savings, temporary allocations, and one-time state appropriations. Section IV: What else should MnSCU consider prior to developing an e-learning plan?

23. Section IV: What else should MnSCU consider prior to developing an e-learning plan? • Branding • A brand is the distinctive characteristic that makes an organization or a product stand out and establishes its emotional appeal. Brand gives the consumer a reason to buy and to keep buying. MnSCU has a strong local brand; however, brand recognition within the national and international education arena is not as well established. • There are various ways in which MnSCU can address the issue of branding including the three approaches listed. • Internet Adoption Rates • Internet adoption rates are important factors to consider when developing an e-learning business plan. Adoption rates can help determine which geographical regions and learner segments to target. • In Africa, South America, Eastern Europe, and Asia (except Hong Kong, Japan, Taiwan, Korea, and China), Internet connectivity is low. This will serve as a major obstacle to expanding technology-mediated education. • The top fifteen countries with the highest percentage of Internet penetration (e.g., percent of total population connected and online) include European, North American, and Asian Pacific countries. Of these countries, three site English as the primary language -- Australia, U.S., and Canada. These fifteen countries also boast high literacy rates ranging from 94% in Taiwan to 100% in Iceland, Finland, and Australia.

24. Section IV: What else should MnSCU consider prior to developing an e-learning plan? • CONCLUSIONS • Strategic Partnerships: E-learning requires organizations to develop comprehensive product and service offerings to meet the needs of target market segments. Being able to provide e-learning to existing or new markets may require strategic partnerships with those companies and/or institutions that are deemed an asset to the organization. • Governance Models: A governance model for e-learning provides the foundation by which e-learning processes and functions occur; thus, it is a natural step to develop an e-learning governance model that makes sense in the context of the institution. • Funding: Because of the extensive role of technology in both the delivery and support of e-learning, financial planning for e-learning is integrally linked to funding of the technology infrastructure. Effective IT funding strategies require aligning revenue solutions with strategic initiatives. • Branding: A major characteristic of the for-profit e-learning providers is the fact that they seem to have clear specializations -- a clearly defined and differentiated brand. This is important when rolling out an e-learning initiative, as the brand provides the learner with a reason to enroll in a course and/or program. • Internet Adoption: Analysis of Internet adoption rates reveal that Europe, North America, and Asia Pacific are the key regions where Internet penetration is high. • IMPLICATIONS FOR MnSCU • Additional strategic considerations include the appropriate governance model for organizing and delivering e-learning, development of innovative partnerships and strategic alliances, development of alternative funding strategies, adoption of a MnSCU brand, and consideration of Internet adoption rates to better focus on target markets and regions. • Through a broad range of external consultancies and internal analyses, MnSCU has plowed a massive field as it explores its future in the e-learning environment. Determining how to use this information is one of several critical next steps in the overall development of an e-learning strategy.

25. Review prior MnSCU e-learning reports and synthesize key points Identify key market segments Identify e-learning programmatic areas Consider funding issues including revenues and costs Select branding approach Develop e-learning governance model Develop partnership principles and pursue strategic partnerships if necessary Elevate MnSCU to the next level of e-learning planning What are some next steps for MnSCU? • WHAT ARE THE HIGH-LEVEL NEXT STEPS FOR MnSCU? • Synthesize the key points gathered from each report, looking for major points of intersection and disjunction. • Use analysis of current programs, institutional goals, market segmentation, and Internet adoption rates to identify prospective targeted market segments. • Based on the key market segment, identify programmatic areas of focus, tied to MnSCU’s capabilities and mission goals. • Identify a MnSCU e-learning brand and design an e-learning governance structure to promote and deliver the brand. • Integrate branding, program development, and marketing with funding strategy. • Use current strengths and weaknesses to identify and explore prospective partnerships that share mutual visions and complement one another’s needs.