Distance-learning ventures propel top universities into for-profit sector: Harvard, Cornell, and Stanford among those lured by $10 billion potential - B2C

Matrix: The Magazine for Leaders in Education, Nov-Dec, 2000 by Karen Singer

Myers said a plan to transform UMUC's rapidly expanding online education program into a for-profit company began "just through serendipity" about two years ago, during his lunch with a senior executive from a large provider of Internet service.

"The mind set and predisposition probably started earlier than that, with the economic recession in the late 1980s and early '90s when all of education generally had to start looking for additional revenue. Budgets were being cut ... and a lot of traditional sources of revenue were drying up.

"In looking at non-traditional sources, a bit of evolution coincided with a revolution in the electronic world, the building of the Internet, and the really aggressive look that business was taking in using the Internet in ways that could not be imagined 10 years ago.

"About five years ago we started aggressively providing degree programs outside the traditional environment. We had enormous success, and were wondering how long we could sustain it without substantial capital investment."

A possible solution emerged during the business lunch, when, after Myers described the school's dilemma, the executive recommended starting a for-profit business.

"I was a little taken aback, then said, `Yes, you're right, but we're a public university,'" Myers recalled. "After that conversations over the next couple of months led to assembling a core management team in two to three months, which in university time is light speed."

The school committed $1 million in seed money, to establish the management team and work out a model and business plan.

"We are now in the process of going to around 30 venture capitalists to get the second round of funding," Myers said. "Eventually we want to be a public company."

Using methods developed for Internet learning, UMUC OnLine.com offers 26 full degree programs, 14 undergraduate, including accounting, communications, English, and business management, and 12 graduate programs, which are more focused on management. There also are 40 certificate programs. Students from 29 countries are enrolled in courses.

"We're also working with a major worldwide entertainment company, a major worldwide systems integration company and the military, which is one of our oldest partners," Myers said. "We have been providing education for the Army, Navy, and Marine Corps in Europe and Asia face-to-face for more than 50 years, and are now working on ways to deliver it online to service members and their families anywhere, anytime."

Cornell University is another recent entry into the spin-off business. In September, the Executive Committee of the school's Board of Trustees approved the creation of eCornell, a university-owned and financed, for-profit corporation, to produce, market, and deliver non-degree educational programs developed with the university's schools and colleges.

The school's initial capital funding will be $12 million.

"No for-profit university spin-off is for the faint of heart," warned NYU Online's Eisenstein. "Not only do you have to overcome whatever legal or regulatory frameworks might be prohibitive, you must also overcome a quite natural resistance of institutions to change. And e-learning is requiring tremendous change."