As more and more universities are opening up to the idea of online proposition, it becomes important to raise the question: “Can online-education be a profitable and sustainable business?” To answer this question, let us explore the various important facets of this model which would decide the feasibility and financial sustenance of the e-idea. Some key parameters to be considered are the demand, ability to supply, technology and delivery process.

The demand for the service is abundant as previously discussed and so is the availability of market players who could cater to this growing demand. Hence, the viability of the proposition rests solely on the issues of effectively delivering the services and choosing or rather designing an appropriate business model. It is critical to analyze the following factors to assess the economics of the idea:

-Virtual university vs. traditional university (in transformation)
-Selling commodity vs. selling experience
-Technology: availability and costs
-Process of delivering quality and differentiation
-Cost analysis: Initial vs. marginal

Virtual University vs. Traditional University
There could be two different versions of an online education: a virtual online model and an existing university expanding its traditional model to accommodate the online proposition. Both models have different economics. A virtual model starts from scratch and has no prior experience with a traditional education model; it prepares curricula either by itself or in conjunction with an existing educational institution; it also has low infrastructure expenses but simultaneously no branding support.

It is relatively easy to start this business, but what matters are the quality of content and the process of delivery. For standard modules or programs, this seems to be a good venture as the content would not be difficult or expensive to produce or distribute. However, care needs to be taken to ensure the target segment for the program is carefully identified, as this model is not only competing with traditional models but also with online propositions of existing reputed educational institutions.

On the other side are the existing schools that would be extending their services to e-learning. These do face a challenge of adopting a business model which may not be compatible with their existing proposition. There is a risk of cannibalizing their existing successful business model. Both models, if to be continued simultaneously, need to be targeting reasonably different markets.

This model has an edge over a new virtual setup in terms of already available content and existing and successful brand; thus the institution could charge a premium. The model does not require huge costs as the content is available, and only needs to be digitized; it is also relatively easier to generate demand for the proposition, riding on the back of the existing traditional model. However, the institution still needs to work towards differentiating the model, not by the content but by the process of delivery. » Read more: The Economics of Online Education