1 The Costs of e-Learning Presentation and Workshop Professor Paul Bacsich Dipoli, 23 March 2004, Finland

2 Problems of different cost perceptions  There is slowly increasing agreement on the methodologies of costing e-learning  So why is there a dilemma where Education see “No Significant Difference” whereas Training sees “Return on Investment”?  The challenge is to find a uniform evaluation/planning methodology, including costs, which copes with a “world without borders”  Borders are not only geographic

3 Hidden Costs – the bane of financial planning  Increased telephone call and printing bills for students due to Internet usage  Entertainment expenses “necessarily” incurred by staff at conferences but not reimbursed  Administrator time answering student queries  Support costs of a new Learning Environment  Costs of content - “created in one’s spare time”  Costs of institutional collaboration  Costs of conformance to standards

4 Contents  Activity-Based Costing (CNL2)  Hidden Costs and Stakeholders (CNL1)  Planning (after HEFCE)  Actual costs  Workshop

5 Activity-based Costing: CNL2

6 CNL2 = ABC  Done at Sheffield Hallam University (UK)  Funded by JISC  JISC recommendation that Activity-Based Costing be trialled in a university

7 Activity-based costing (ABC) ABC was developed as an alternative costing methodology by Robin Cooper and Robert Kaplan of the Harvard Business School (1988) in their research into product costing in the manufacturing industry.

8 Cooper and Kaplan (1988)  They argued that traditional costing distorted product costs (“peanut butter spread approach”)  There is a cost to all activities carried out within an organisation  Activity costs should be distributed to products in relation to their use

9 Activity Drivers Hold Tutorials No. Students Business Intelligence Resources Cost for each Customer/product/channel group method Activities Staff time Cost driver I.T. & Management FT DL

10 Advantages of ABC  Gives more than just financial information  Fairer system of overhead allocation  Accountability of central services  Highlights cross-subsidisation  Recognises the changing cost behaviour of different activities as they grow and mature  Can provide data for other initiatives, e.g. Balanced Scorecard, EFQM

11 Disadvantages of ABC  Data collection can be costly and time consuming  Initially it can be difficult to collect the data you want  Determining appropriate and acceptable cost drivers  More complex system and relies on impeccable accounting system

12 Implementing ABC takes time “Its important in a service organisation to get started with ABM and not worry about total accuracy from the start. Accuracy will improve with time” Antos (1992)

13 How a university differs from manufacturing Manufacturing In manufacturing industry the central finance department require and analyse the costs of production and the make- up of the the organisations’ product portfolio. Its pricing policy is directly influenced by this information. University Very rare to find a finance director examining costs on a course-by-course basis. Product information is held in the School and product decisions are not based primarily on cost.

14 CNL2 Project Outcomes  External:  Report and Handbook available on Web at  Internal:  SHU amended their cost codes and adopted a minimal form of ABM  Central Finance Department “very keen” to adopt ABC across the University

15 Hidden costs and stakeholders: CNL1

16 Introduction to CNL1  Done at Sheffield Hallam University  Funded by JISC  Aim - to produce a planning document and financial schema that together accurately record the Hidden Costs of Networked Learning

17 Examples of Hidden Costs  Increased telephone call bills for students due to Internet usage to access lecture notes, course conferencing and assignments  Entertainment expenses incurred by academic staff at conferences but not reimbursed by the Institution  The usage of research funding to bolster teaching resources - or visa versa

18 Study Methodology detailed literature review of over 100 sources sectoral survey of UK HEIs seven case studies based on interviews with key staff survey of students at Sheffield Hallam University consultation with other projects and experts world-wide

19 Barriers to costing  Reluctance to consider timesheets  Reluctance to acknowledge overtime  Inconsistency and non-granularity of internal accounting  Worries about any move to ABC  Inhibition of innovation once the costs are known  “Cost of Costing”  “Cost of having done the Costing”

20 Lifecycle model  Cost items recorded from literature  Current distance education costing models analysed  Bates (UBC, Canada)  Rumble (UKOU)  Moonen (Twente)  Also looked at US (Flashlight, TCM) and training sector  Consultation with academic staff  Conclusion: Traditional financial accounting inappropriate for exposing hidden costs

21 Course Lifecycle Model Planning and Development Production and Delivery Maintenance and Evaluation Three-phase model of course development

22 Details in three- phase model

23 Financial Schema

24 HEFCE’s planning model

25 Conclusions from CNL1 In order to accurately record the Costs of Networked Learning you must have a universally accepted method of what costs to record, and how, in place from the start; which takes into account all stakeholders

26 But what are the real costs?

27 Focus on study hours (not teaching hours)  UK: 10 hours = 1 CATS point  180 CATS = 1 MSc  120 taught, 60 dissertation  360 CATS = 1 degree  Bologna  Badly flawed concept but best we have

28 What does e-learning content cost?  Commercial figures: average $12000 per study hour, but very large standard deviation  10% of this for simple material  could one aim for < $1000 per study hour?  This is still around $8000 per CATS point.

29 Actual figures!!! (US)  “Course conversion costs are about $25000 and up for a two-hour [per week] course, depending on the kind of interaction needed.” Schooley (2001)  “...we can say with some level of certainty that it can take on average about 18 hours - of faculty time [$1200 at $70/hour] - to create an hour of instruction that is on the web”. Boettcher,1999

30 Media Hours of academic effort per teaching hour (taken from Boettcher, 1999)  Lecturing  Small group teaching 1-10  Videotaped lectures 3-10  Web development  Teaching Text (book) *  Broadcast television 100*  Computer-aided Learning 200*  Interactive video 300* * require support staff as well

31 Learning hours: Rule of thirds 1: Study of “engaging” multimedia: expensive 2: Study of existing or slightly modified (learning) resources: mid-price 3: Working on activities and assignments (maybe in collaboration): cheap

32 How to reduce the price  Forget research  Go for templates  Economies of scale: long runs of similar material  Professionalism  Outsource to specialists (outside HE/FE)  UK view: Outsource development - and support - to cheaper countries close to UK culture (provincial Canada, Australia, New Zealand)

33 Details about the CNL projects can still be found at Thank you for listening; now it is your turn Paul Bacsich