This document provides an overview of the online education market and the evolution of online learning. It discusses the large size of the US education market and growth of online learning. It also summarizes perspectives on misconceptions about the US education system and reviews commercial online learning platforms, open source alternatives, and new developments like learning object repositories. The document then summarizes factors like private funding, the economic stimulus package, and how universities may benefit from increased education and training, infrastructure, energy and healthcare funding.

1. Company Overview Online LearningEducational Market Review Stephen Gilfus, General Partner, Gilfus Education Group Llc.

2. Agenda Background and Overview Market Overview Mis-Perceptions Online Learning The Evolution Growth of Online Learning Providers and Advancements (Commercial and Open Source) Learning Object Repositories Content as A Platform Why a Learning Object Repository Educational Funding Private Funding The Stimulus Package How Education will Benefit

3. Market Overview According to the U.S. Department of Education (“DOE”), there are 9,258 colleges and universities in the U.S. Of this total, 4,197 are degree granting, meaning that they are authorized to grant associate’s level degrees or higher The remaining 5,059 institutions are typically small, single-site and, in aggregate enroll less than 3% of all students. Serves a student population of approximately 17 million students in college and 54 million in K-12. Over a trillion dollar industry, second only to healthcare in the U.S.

4. Our Mis-Perceptions Can online learning help? The U.S. has the best system in the world. We are loosing traction and competitiveness Serves all sectors of the population. The rising cost of Higher Education, not equal to all Has been a growth engine of our economy. Is this proven – Can we be sure? Our institutions are innovators and creative. In research maybe, but not in the education business Our system is a role model for the rest of the world. Yes – But how is the world improving upon it

6. Commercial enterprise course management system

7. Online courses, organizations, and institutional services integrated with back-office systems

8. A full online campus with learning communities and shared digital content resources

9. When any student or teacher can view instructional content, collaborate with educators, evaluate academic performance, and access learning resources at any time to achieve their educational objectives. Phase 5 Phase 2 Phase 3 Phase 4 Phase I TIME Evolution of Learning technologies Source: The Educational Technology Framework “The Gilfus Model” © Gilfus Education Group 2004

10. 6 MISSION CRITICAL EXPLORATORY SUPPORTED STRATEGIC TRANSFORMATIVE Planning Budgeting Technology Support Training Phase 5 Phase 2 Phase 3 Phase 4 Phase I TIME Adoption Implications (Organic vs. Planned) Source: The Educational Technology Framework “The Gilfus Model” © Gilfus Education Group 2004

11. Growth of Online Learning Online learning applied appropriately can create a strategic advantage Not just growing acceptance but part of the fabric Over 3.5 million or about 20% of all college students have taken an online class. In the K-12 market it is estimated that over one million students gave taken an online course (primarily in high school) It was born out of a classroom model but has grown into something else. From augmentation to full online learning It can personalize learning and better engage students. It provides capabilities to the non-traditional learner It can increase efficiency and accountability.

12. 8 Increased Value over each Phase Source: The Educational Technology Framework “The Gilfus Model” © Gilfus Education Group 2004

13. 9 MISSION CRITICAL FOUNDATIONAL SUPPORTED TRANSFORMATIVE MISSION CRITICAL EXPLORATORY SUPPORTED STRATEGIC TRANSFORMATIVE Transition 4 Transition 3 Transition 2 Transition 3 Transition 2 Transition 1 Transition 1 Phase I Phase 2 Phase 3 Phase 4 Phase I Phase 2 Phase 3 Phase 4 Phase 5 Organic vs. Planned Adoption Planned Adoption Planned/Foundational Adoption Initially driven by Executive Sponsor Accelerated growth Strategic planning upfront Organic Adoption Organic / Exploratory Adoption Initially driven by End Users End User Plateau Strategic Phase Necessary for continued growth Transition Management is the key to successful adoption regardless of approach. Source: The Educational Technology Framework “The Gilfus Model” © Gilfus Education Group 2004

14. Comercial Platforms

15. Commercial Capabilities “a Suite of Applications” What does it mean to be an “Education Company”? Improve Assessment Administrative Tools Instructor Tools Student Tools Outcomes Management Communication & Collaboration Learning Content Management Technology Systems Integration Accessibility Standards

16. Commercial Advantages Focused on meeting customer needs will creating business sustainability Strong Support Models One company does it all Company Stability Sustainable model for growth Dedicated R and D Budgeted R and D dollars towards enhancing the platform Customer Sensitive Revenue generation based on meeting customer needs and desires Open “Platform” Building Blocks, Agents, Plug-Ins, allow for extensibility

17. Open Source Alternatives Permission to use, copy, modify, merge, publish, distribute, andsublicense this Original Work and its documentation, with or withoutmodification, for any purpose, and without fee or royalty to thecopyright holder(s) is hereby granted, provided that you include thefollowing on ALL copies of the Original Work or portions thereof,including modifications or derivatives, that you make: http://www.opensource.org/licenses/ecl1.php Sakai and Moodle are freely available via a GNU Educational License.

18. Our Mis-Perceptions Complexity and Flexibility versus Stability and Support Open Source is Free. The software is free but the underlying costs are not Open Source is cheaper. The cost of the software does not include hosting, hardware, support Open Source is more flexible. With flexibility comes complexity, you can get whatever you need but how does this strategy complicate support? Open Source is more innovative Although a mass of individuals can work on an open source project are they truly developing components that meet the need? Open Source can be modified any way I want. Yes – But what is the cost to make the modification and then support the modification

19. Mixed mode Alternatives rSmart and Moodle Rooms provide critical capabilities for the support and management of open source alternatives

21. Risk vs. Reward. Perception of cutting edge

22. Resources and capabilities to manage complexity internally

23. Primarily support themselves

24. The 10%+ - Growing number of institutions

25. Fighting open source perceptions (Cheaper)

26. Mixed approach looks to Mitigate complexity

28. New Players - Learning Object Repositories Definition: Content as a Platform (con-tent as a plat-form) create a centrally managed “engine” to share, create and manage content across an institution. Then enable various consumers on and off campus to access that content in a secure and contextual manner. Content can be stored locally (documents, presentations, spreadsheets, audio/video), on web solutions (streaming audio, video, podcasts), in subscriptions to journals and articles (library content) and make it seamlessly available to the various consumers both on and off campus. Source: The Learning Edge North America This includes course managements systems, other digital repositories, authoring tools, ePortfolios and others.

29. Items Metadata Attachments = Content Collections The Content Advantage – Publisher Positioning Content Sharing Open textbooks Open Content Open Market ECollege is now a Pearson Company Source: The Learning Edge North America Publisher strategy is to bundle tools for learning, others is to “Free” Content to make it accessible to all.

30. Why a Learning Object Repository Significant cost efficiencies through reuse. Creating/Finding quality content is expensive & time consuming Once you have it – share across multiple collections/systems/state All while enforcing DRM and full copyright compliance Ease in transition from one CMS to another Serve content to multiple CMS at the same time Integration of library content Management of ballooning content storage and content versions Compliant with any/all metadata schema – crosswalk Supports Federating and harvesting (OAI) Incorporate state standards for accreditation, common course numbering Incorporate Publisher Content – tied to standards as well

31. Higher Education Funding Private funding for higher education in the United States is substantially higher than it is anywhere else in the world, with many American universities having established considerable endowment funds over the last twenty years. Harvard University, for example, has developed an endowment fund that was valued at $25.9 billion in 2005. Yale University, its closest competitor, has an endowment fund that was valued at $15.2 billion whilst Stanford, Texas and Princeton Universities each have endowment funds that were valued at more than $10 billion in 2005. The USA does not have a centralized, Federal-Government-run higher education endowment fund. However twenty-four US states have created government matching fund programs. Although there is a great deal of variability in American matching fund programs, due to their being designed, implemented and overseen at a state level, these programs’ purpose is typically to leverage private funds, enhance the quality of teaching and learning and increase access to higher education.

32. Recovery and Reinvestment Budget Allocations Category $ in Billions Tax Relief $288 State and Local Government Fiscal Supplement $144 Infrastructure and Science $111 -- $126 Vulnerable Individuals and Populations $ 81 -- $142 Healthcare $ 59 Education and Training $ 53 -- $78 Energy $ 43 -- $65 Other $ 8

33. Economic Stimulus package Impact on University and College Green Initiatives The economic stimulus package is expected to protect and accelerate campus green initiatives: The cyber-infrastructure of computer and networks is the largest producer of CO2 (carbon dioxide) emissions at most universities and colleges. Many schools have already started initiatives to reduce CO2 emissions. Schools are expected to be early-adopters of LEED (Leadership in Energy and Environmental Design) standards for new construction projects. Green initiatives are also attractive because they reduce school energy consumption operating costs.

34. Use by Universities and Colleges Analysts believe that many universities and colleges will benefit directly from four categories: Education and Training With growing unemployment schools, applications for full-time and part-time programs has already increased at most schools. Infrastructure and Science It is expected that funding for basic and applied research in science, technology and engineering will increase. Energy It is expected that funding for basic and applied research in energy exploration and energy efficiency will increase. Schools are expected to be early-adopters of LEED standards for new construction projects. Healthcare University hospitals and medical schools are expected to be early adopters of electronic medical records.

35. The Future of Higher Educaition The economic stimulus package will require efficiencies in operations and technology Academic institutions will continue to look towards outsourcing to mitigate risks, refine operations and reduce costs Online Learning will continue to grow to provide greater capabilities to academic instituions without having to build more brick and mortar Privately held academic instituions will be challenged by decreases in endowment value Content sharing as a reduction in cost is a viable space for collaboration The system will continue to evolve creating more sustainable for-profit instititutional opportunities.

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