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Document Outline

Acknowledgements
Table of Contents
Table of Figures
Abstract
Background of Online Courses
- - Definition of an Online Course
  - Why this Type of Education Is Important
Costs Involved in Developing and Teaching Online Courses
Revenue for Online Courses
- - Sources of Revenue
  - Why an Institution Would or Would Not Want to Do This
What is important for this type of education to be successful
Interactive Web Site for Determining Costs
Online Development/Teaching Surveys
Online Student Survey
- - Aggregate results
  - Table 9: Summary of Results from the Flashlight Current Student Inventory
Summary
References
Appendix ADeveloping Online Courses Survey
Appendix BTeaching Online Courses Survey
Appendix CComments Received from Developing Online Courses Survey (names withheld)
Appendix DComments Received from Teaching Online Courses Survey (names withheld)
Appendix EFaculty Gap Analysis Survey
Appendix FFlashlight Student Current Inventory Survey

Pages 1--125 from Since there is not a huge plethora of literature or information regarding costs of online courses, or a concrete answer to the

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WEB PORTAL DESIGN CORP. ONLINE TECHNOLOGY COURSES
Is Distance Learning Worth It? Helping to Determine
the Costs of Online Courses
Brian M. Morgan
Marshall University 1
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Determining the Costs of Online Courses 2
Acknowledgements
This project has been incredibly intense but has provide an opportunity to get to know many
people while doing research. Therefore, I would like to thank those people for their assistance with this
project.
I would first like to thank Dr. Bernard Gillespie of Marshall University for assisting me in getting
started with my vision and encouraging me to trek forward and work on the project. His leadership,
insight, and dedication to the students of the Technology Management program have made this possible.
I would also like to thank Drs. Donna Spindel and Rudy Pauley of Marshall University for their
assistance with the editing of the faculty surveys distributed across the world. Taking the advice of other
faculty members who have taught through this medium for a number of years was very beneficial.
A special thanks is also due to Ms. Jan Fox and Marshall University's School for Extended
Education for their assistance in gathering research data for this project.
Even though I have only met him one time for a total of five minutes, I must thank Dr. Tony
Bates of the University of British Columbia. It was because of his books, his dreams about what distance
education can do for a University, and his backing of Murray Goldberg in the development of WebCT
that I truly became interested in the topic.
Most importantly, I would like to thank my wife Melissa and son Michael for their sincere
patience and understanding during the time that I have worked on the project. I have spent many
weekends and evenings away from them during the past nine months and I appreciate their support of my
venture. I believe they sincerely know how much this means to me. 2
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Determining the Costs of Online Courses 7
Abstract
Before an institution of higher education ventures into online education, a complete
understanding of costs to be encountered is essential. Although dozens of methods for delivering courses
through distance education have been utilized for years, the offering of online courses through the World
Wide Web has existed for less than a decade. Many institutions at this time may not understand the full
impact of the costs of online education. This paper will assist institutions in realizing these costs, whether
they are tangible or perceived. The paper and accompanying web site
(http:// webpages. marshall. edu/~ morgan16/ onlinecosts/) will discuss what areas must be considered, what
effects online courses may have on an institution, what costs are involved in the establishment of this type
of venture, and also examine costs and possible problems that may be encountered with ongoing course
offerings.
The need for this research became evident to as early as 1998 when trying to research what online
courses were costing our University. Marshall University's School for Extended Education provided a
simple spreadsheet showing how much the University had paid for the development and teaching of
online courses, and stated that these were the costs of Marshall University's online course endeavors. The
first thing that entered my mind was the question "what about my time and effort spent? Who accounts
for that?" This sparked interest to look back at what the University had done and thought about the
finances involved. It was decided that it would be beneficial to see if the investment has been rewarded.
In short, was it all worth it?
Nine months ago, there was extreme excitement about the possible outcomes of this project.
Nine months later, there is even greater excitement about the results, and a hope that the information
provided herein will be beneficial to those considering implementing online courses. Since there have not
been many books published on the costs of online education, research focus was through a literature
search of magazine articles, an analysis of gathered surveys, and personal experience. Although this
paper represents the findings of said research, a continued search for answers in this area with the use of
the accompanying web site (http:// webpages. marshall. edu/~ morgan16/ onlinecosts/) is necessary. 7
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Determining the Costs of Online Courses 8
Since this is such a gray area in higher education, there are hopes that this information will
provide other institutions as to what they need to be aware of before deciding to initiate these types of
offerings. After compiling research and survey results, it was evident there were many things found that
had not been considered beforehand. It was fascinating to find a high percentage of faculty who were
interested in teaching online, but only if administration were to make changes in such a manner they
would be recognized for their efforts. Students at our Marshall University have been very pleased with
their experiences in online courses to date, something we had no evidence to support until this point.
Some of the greatest concerns in the area of online courses have been retention and equality of
content being offered. It was gratifying to find that retention rates in online courses at many institutions,
including Marshall University, are in the 70% range and accrediting agencies are accepting online courses
as an acceptable form of delivery. Another positive experience that resulted from this project was the
accompanying web site (http:// webpages. marshall. edu/~ morgan16/ onlinecosts/) that allows individuals to
enter data specific to their institution in order to estimate costs associated with a venture into online
courses. This site was developed from research data gathered over the past nine months. By attempting
to account for all costs involved, the site should provide an institution with a true overview of the costs in
introducing and maintaining online courses.
Online education has rapidly developed into such a hot topic that it has become the center of
conversation at many higher education institutions. An institution either has plunged into it headfirst, or
is seriously pursuing interest. What more often than not happens is that higher education institutions
begin offering online courses without realizing what they will cost 1) to get started and 2) in the long run.
Carlson (1999) insists that to be successful, institutions must properly plan, convert material, and evaluate
their distance education offerings. Nonetheless, some institutions will never possess the resources to be
able to conduct this endeavor themselves without possibly a partnership. Online education may not even
be the approach that some wish to take.
Because there has not been much information available regarding how an institution should get
started and what the cost might be, this project is a great opportunity for additional research and 8
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Determining the Costs of Online Courses 9
development of a web site where an individual could answer questions regarding their institution to
determine if online courses will be beneficial or too costly for investment. Some institutions forced into
online education have closed shop, usually because they were without a well-thought out financial plan.
Still others have prospered.
This paper will provide insight as to what one should be aware of before venturing into the realm
of online education. The research results should also provide a means to see if the financial investment of
online education will be beneficial. It is easy to say that no two institutions are the same and, because of
this, the web site at http:// webpages. marshall. edu/~ morgan16/ onlinecosts/ allows the changing of
variables that reflect the affects on the outcomes of the costs. Once users of the site have made their own
entries and comparisons, updates will be made to reflect changes suggested by those users.
The web site was tested with findings from Marshall University's cost analysis regarding online
courses and found to be very accurate. The numbers were not identical, but the ratio of the institution's
cost to revenue between the site and the paper were within five percent. Additional comparisons at other
institutions will greatly solidify the site as an invaluable tool. Continued updates and maintenance of this
site will be a personal goal.
The Institute of Higher Education released a report on March 21, 2000 (Quality on the Line)
regarding guidelines for online courses. Throughout this paper, at some point 23 of the 24 principles that
Fleischauer (2000) named as critical elements to have in place before venturing online were mentioned.
The only one missed was that adequate library resources needed to be supplied to online students. 9
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Determining the Costs of Online Courses 10
Is Distance Learning Worth It? Helping to Determine the Costs of Online Courses
Background of Online Courses
Definition of an Online Course
Webopedia defines distance learning as "a type of education where students work on their own at
home or at the office and communicate with faculty and other students via electronic mail, the World
Wide Web, electronic forums, videoconferencing and other forms of computer-based communication"
(Webopedia, 2000). The concentration of this paper is on just one of dozens of types of distance
education. For this reason it is very important to define clearly what type of distance education this paper
covers. These courses require no physical attendance on a college campus or affiliated center to receive
parts of course materials. The requirements are not so restrictive to imply that a course would not be
considered an online course if it contains traditional students. Many online courses contain full-time
students that are unable to take the class during a scheduled, traditional offering, but found the online
version to their liking. The requirement for being an online course holds true as long as there is no
attendance requirement for lecture, lab, or any other course function that others at a distance would not
have the opportunity to attend.

Why this Type of Education Is Important
The popularity of online courses has blossomed over the past three to four years. Many believe
these courses are beneficial offerings for colleges and universities. According to a 1999 study by the
National Center for Education Statistics (NCES), nearly 1/ 3 of all 2-year and 4-year postsecondary
institutions offered some form of distance education in 1997-98, and an additional twenty percent, plan to
offer distance education within three years. It is amusing to see that 78 percent of 4-year and 62 percent
of 2-year public institutions offered distance education, compared to 19 percent of 4-year and 5 percent of
2-year private institutions (Boettcher, 2000). One possible reason for this is the sheer cost of such an
endeavor and the limited resources of private institutions. Everyone in higher education knows that
funding is becoming restrictive. This, coupled with many colleges and universities seeing shrinking 10
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Determining the Costs of Online Courses 11
enrollment, has spurred the search for alternative ways to reduce teaching costs or draw students. Inglis
(1999) believes one way to do this is to offer online courses to reach the largest possible market.
Although this represents valid reasons why an institution of higher education would want to offer online
courses, others may find that there are other compelling reasons for doing so.
By offering material online, faculty can hope to extend participation to those who would not
otherwise participate due to large class sizes or a student's shyness. Often times, in a large lecture or
course offered via other distance education methods, students are scared or discouraged from participating
because of the course's style. Online courses give each student an equal opportunity to participate.
Reports claim that students feel more comfortable asking questions in non face-to-face situations with an
instructor or peers. Because of the open environment on the Internet, this may lead to a better
understanding of material.
Faculty hope that online courses will assist them by helping to increase the quality of their course.
Online courses can help provide alternative methods to how material is presented in a traditional setting
by taking advantage of multimedia and breakthrough Internet technologies. Inglis (1999) believes that
because online courses can use such technologies more effectively than other forms of distance education,
they meet the needs of a wider variety of subjects and students. This depends on the ability of the faculty
member to match technologies to the learning styles of students.
With the opportunities of online courses, an institution can hope to open new markets and/ or
partnerships, and quite possibly, decrease overall costs of teaching. Many of the costs of investment to
participate in this type of education may not be beneficial to all institutions. The accompanying web site
will allow a person to explore these costs and experiment with numbers governing potential offerings and
students to see if this type of venture is worthwhile. Inglis (1999) notes that by increasing student intake,
one could achieve a greater economy of scale and reduce the overall costs per student. Zanville (1996)
found that replicating courses over multiple campuses or using the same modules over multiple courses
can help increase those economies of scale, allowing an institution's investment in faculty time to be 11
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Determining the Costs of Online Courses 12
multiplied because of flexibility. Zanville also believes that online courses help to enable instructors to
reallocate time to deal with students on an individual basis and at convenient times (Zanville, 1996).
Another benefit of online course is in the area of instructional throughput. When effectively
deployed, online courses help to reduce the time and volume of instructional activity necessary for
students to complete a course. Everyone has met students who can effectively show mastery of the
content of a course at its outset, but are forced to progress with others because the course is required.
Online courses can help students test out of content already mastered, complete coursework sooner than
they would with traditional courses, or help to circumvent course availability problems (Zanville, 1996).
Students of higher education will be the largest benefactors of online courses. Students will often
be able to save money on travel and lodging while obtaining a degree. Most importantly, students will
not have to give up their earnings potential. Downes (1998) states that students will be able to continue
working while learning, allowing them to continue their careers while obtaining college credit. 12
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Determining the Costs of Online Courses 13
Costs Involved in Developing and Teaching Online Courses
There are some real difficulties in attempting to determine the costs of an uncertain endeavor.
Bates attempts to answer the administrative question "why can't we just compare the costs for online
education to the traditional courses offered at our University?" (Bates, 2000). If it were only that easy. It
would have made this writing much easier. Bates (2000) shows that there are incredible differences
between costs for traditional courses as opposed to technology-based teaching. Everyone has seen that
the investment in technology is very necessary, but also very expensive. Often, the true cost of traditional
education is hidden because the costs of developing courses is not tracked or budgeted. Instructors are
expected to prepare their material. The main difference lies in the fact that educational technology
equipment and support costs are often under budgeted because their importance is not understood or
because such costs conflict with other priorities. To truly get an idea of what it will cost an institution, a
comparison of the costs of different modes of delivery into a quantifiable number is necessary. Inglis
(1999) shows that the easiest way to do this is to determine the average cost per student. Use the
accompanying site (http:// webpages. marshall. edu/~ morgan16/ onlinecosts/) to estimate the cost for online
courses and then compare the results to traditional courses, or other forms of distance education at an
institution.

Determining Categories for Costs
Bates states that to find the underlying cause of costs, they must first be broken into distinctive
categories. Cost factors that are being investigated include: capital and recurrent costs, production and
delivery costs, and fixed and variable costs. Capital costs are costs for infrastructure, equipment and
materials necessary for the offering of courses. Recurrent costs are costs that occur on an ongoing basis,
such as information technology support. Production costs are costs incurred during the development of
the courses while delivery costs are costs associated with teaching a course. Fixed costs are costs that do
not change as the number of students change while variable costs change with the number of students 13
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Determining the Costs of Online Courses 14
enrolled (Bartolic-Zlomislic & Bates, 1999). For technology-based education, one can see that fixed
costs are high, but variable costs are low in comparison to traditional courses.
After breaking down the categories, the task was to assign specific areas to categories. The areas
that are of utmost importance are technology specific costs, support personnel costs, faculty development
costs, administrative costs, hidden costs, costs of developing courses, and costs for teaching courses. An
explanation of each of these areas follows. The web site located at
http:// webpages. marshall. edu/~ morgan16/ onlinecosts/ shows a break down for the estimated costs for an
institution.

Technology Specific Costs
One of the largest cost hurdles in deciding to offer online courses is technology infrastructure.
An institution must commit to building a proper information technology infrastructure to support online
courses before offering the first course. What often happens is that costs are shifted when looking to
invest in online courses either through other uses or through neglect. The most often ignored cost is
bandwidth charges. Inglis (1999) shows that if an institution tries to require students to bear
communication and computing costs as a way of reducing costs, this only shifts costs and does not reflect
a savings. To find the underlying cause of what online courses will cost, all costs must be analyzed
completely.
One of the worst things an institution can do is invest in technology thinking that it will
immediately reduce other teaching costs. Technology usually adds to an institution's costs because of the
support and time required to implement. Upon the realization of the expense and willingness to invest,
one can hope to improve the quality of learning by making use of the interactive capabilities of newer
web technologies. Cost implications come into play when looking at the time involved with
accomplishing this goal. Inglis (1999) points out that it may take up to 100 hours of development time to
create one hour of student material. The delivery of audio and video requires more bandwidth than
simple text or most graphics, which relates to higher costs. 14
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Determining the Costs of Online Courses 15
In terms of technology needs, an institution must explore the acquisition of a powerful server to
house their online courses. Often, an institution will purchase packaged software to serve online courses.
When purchasing a server, it should be configured so that it is compatible with this online course delivery
software and provide room for future growth. For costing purposes, you should amortize the cost of a
server over a three-year period (lifespan of many computer systems) and assume that an investment of
10% of the cost of the machine each year for new equipment will be necessary.
If growth is planned, it is highly recommended that an institution invest in an online course
delivery tool. Most software packages offer pre-built tools so faculty do not have to perform in-depth
programming to offer conferencing tools, online tests, secured environments, etc. It is very important that
the cost of this software be included in estimations. Traditional courses may use this type of software as
well for enhanced offerings to their courses. Remembering that costs should be accounted for
completely, the cost of software should be split to reflect costs for online courses and traditional courses.

Support Personnel Costs
Because of the uniqueness of this type of education, institutions will likely benefit from the hiring
or assignment of an individual whose function is to manage online courses. This person could be seen as
a business manager, one who would be in charge of the administrative side of the operation, but not have
academic administration of the courses. Turoff (1997) suggests that all academic decisions be made on
the same basis as they are for traditional courses. Typical duties of the business manager would be to
assist students and faculty in getting started with online courses; if compensation is rewarded, completing
paperwork necessary for compensation of faculty for development or teaching; conduct evaluations about
the technology being used for online courses to assure that students and faculty understand what is taking
place; generate administrative reports regarding registrations, retention, satisfaction, etc.; distribute any
necessary student materials; and coordinate between faculty working with online courses and support
personnel on what problems are present. 15
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In addition to the business manager, technology support individuals are key for the success of
online courses. Faculty need to be provided with instructional technology and design support while
developing their courses, as well as key technical support while the courses are being taught.
Furthermore, students will undoubtedly make technical support calls due to a lack of understanding of the
technology or the course material. Whatever they may call about, Turoff (1997) states that proper support
should be provided to them to ensure they receive proper answers. Even though many of these positions
may already exist at an institution, the costs for the portion of their time spent with online courses needs
to be accounted for to properly cost out the endeavor.

Faculty Development Costs
Without the provision for faculty development with distance learning, the venture will
undoubtedly fail. Faculty development needs not only to revolve around how to use the technology tools
themselves, but also provide an understanding regarding how to teach using technology. This type of
education often takes a total retooling of faculty to teach online. Turoff (1997) believes that it is often
wise to select faculty who are thought to be able to adapt to the use of the underlying technology and to
the facilitation, guidance, and leadership of online courses. When a course fails, it is often because either
an instructor was forced into teaching the course and was not able to adapt to the role, or that proper
development was not provided. One intriguing question that many ask is how does one attract faculty to
the developmental sessions? Alternatively, how does an instructor become trained to teach in this
environment? One school in Southern Nevada took the approach of paying faculty at a rate of $20 per
hour for attending training during the summer when they have no contractual obligation. Analysis of
results received from the faculty development survey, show that it is because of such incentives that they
are able to attend development sessions and offer well-thought out and well-prepared courses.

Hidden Costs
What many schools neglect to consider when performing cost estimates are those costs that are
deemed hidden costs. How does one value office space in trying to determine the cost of online courses? 16
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Many overlook this area because instructors would have an office space regardless of the type of course
they are teaching. This is an important factor in considering costs. One must be aware that not all hidden
costs will actually be tangible costs. As John Morrison noted (personal communication, December 5,
1998), one of the costs that can fit into this area would be the increase in network traffic because of online
course material.
One of the most difficult tasks in trying to establish costs for distance learning is the
determination of how to assign different costs. When trying to determine categories, many costs are
forgotten. For example, we mentioned office space above, but Bates points out that there should be a
provision for a computer system for the faculty member developing and teaching the courses, telephone
services, heating and lighting, central finance office, president's office, and a host of other services,
including registration, human resources, and so on. He recommends that there are three ways to account
for such costs, often deemed as overheads (Bates, 2000):
not to charge users
to average overhead costs out over each operational functions using the service
spread the costs over all operational units whether they use the service or not
How you decide to account for the costs are up to you but if you truly want to know the true cost of
investing in technology, all costs need to be accounted for (Bates, 2000). Other overhead considerations
include website construction and maintenance costs. The extent of these expenditures is sometimes
hidden by policy or internal departmental costs and is often believed to be negligible.
Many areas must be considered when costing online courses. Institutions may be easily deterred
from even considering the endeavor because of the investment. Turoff (1997) shows that costing efforts
are used, but can be startling if an effort is as much as 20% in the wrong direction. What is important to
take into consideration is that even though the costs seem to be lofty in the beginning, Inglis (1999)
argues that long-term costs are likely to be lower than other types of distance education.
Another hidden cost that must be considered is evaluation. Even though evaluation may be the
responsibility of the business manager, there is much more to evaluation than determining the cost for the 17
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Determining the Costs of Online Courses 18
person administering the evaluation. After administering, evaluations must be tabulated and evaluated if
they are to have meaning for future course offerings. In traditional courses, instructors can gain valuable
feedback from students just by watching how they react in class. In the online environment, often the
only method of feedback is through an evaluation process. Kibby (1999) shows that this can be
accomplished through constant feedback with e-mail, web forms, or a course evaluation at the end of the
course.

Costs of Developing Online Courses
This section will assist in viewing costs directly related to the development of online courses. By
now, one understands that a large investment in technology and its associated training is essential for
online courses to succeed. After investment and training, it is time to develop the courses. Development
of courses cannot happen overnight. Additionally, there is not a set formula for how long it takes to
develop an online course.
Several factors make it difficult to place a simple formula on determining the amount of time
necessary to develop online courses. Patti Shank (personal communication, January 13, 2000) and
Maggie McVay (personal communication, December 8, 1999) noted that some of the most influential
factors in causing for varying development times include: resources available to the developer, technical
abilities, pedagogical knowledge, availability of content, form of content (electronic or not), availability
of developers and faculty, complexity of course, objectives and desired outcomes of course, type of
instructional strategies necessary, and programming needed. Instructional designers should be assigned to
a developer. McVay pointed out that at one location, 120 hours are budgeted for the faculty developer,
120 hours for the instructional designer, and 40-60 hours for the web coding, totaling nearly 300 hours.
What happens when this course makes use of complex multimedia material? What happens to the amount
of time necessary to build the course? It most likely will increase dramatically. Who is to say that all
courses will take 300 hours to develop? 18
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Determining the Costs of Online Courses 19
For these reasons, the pricing of course development based on the number of hours to develop a
course should not be considered. There are just too many unknown variables. Since the development of
online courses is such a complex activity, some type of compensation structure should be in place for
those who wish to develop. Methods for compensation include a flat stipend for development, release
time for the developer, or contractual development. Still, many institutions are having faculty develop a
course as part of their regular pay. All one has to do is review the results received from the
developmental survey to see what developers have to say about this type of compensation method.
Without a proper reward structure, faculty cannot see continuing to develop courses because of the
complexity and time required.
Individuals are often worried about what it is going to cost to invest in the development of online
courses. You must take into consideration that some, notably the capital equipment costs and the
development costs of the course materials, are part of an investment that will be used over the life of a
course. Other costs are expenses that will be incurred only once. Still others, and an incredibly smaller
amount, are those that will occur yearly (Rumble, 1989). The accompanying web site helps to break
down these figures and types of costs.

Costs of Teaching Online Courses
Many instructors fear that once an online course is developed, because of the investment in
technology, they will not need to be kept around to teach the course. This is one reason instructors do not
wish to participate in the development of distance learning courses. Administrators need to stress that
since computers are not smart enough to anticipate all questions, misunderstandings, and more
importantly, original and creative outputs of students, faculty are needed to teach online courses.
As there is a need to study the costs of developing online courses, we must consider how
instructors will be compensated for teaching as well. Downes (1998) argues that empirical data exists
showing that online courses are more labor intensive than traditional classroom courses because of the use
of technology. Online students interact to a greater degree than students in traditional courses. If an 19
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Determining the Costs of Online Courses 20
online course has not been developed properly, each student will expect more detailed and individualized
comments causing instructors to spend larger amounts of time per student (Downes, 1998). Bates (2000)
points out that courses need to be developed so that instructors can spend less time per student moderating
discussion forums compared with the total time spent in classroom teaching.
Since many online courses require additional time of the instructor, one of the biggest questions
on everyone's lips is "what is the number of students at which technology-based teaching becomes more
cost-effective than face-to-face teaching?" Unfortunately, as Bates (2000) and others have noted, the
answer is no one knows. Just as the case for the time it takes to develop a course, there is not a formula
for determining the maximum number of students an online instructor can effectively manage.
Bates (2000) does note that proper student-teacher ratio is as much determined by educational
philosophy, course design, and student numbers as by technology. For example, a course which offers
didactic information will have little need for teacher-student interaction. This type of course is one that
may have high development or fixed costs and low variable costs. Didactic courses could enroll a higher
number of students. Other courses may have a high student-student and student-teacher interaction rate
because of the way the course's content is delivered (Bates, 2000). This type of course could have lower
development or fixed costs and high variable costs with fewer students enrolled.
There are several methods by which faculty can be compensated for teaching online courses.
Methods include a flat stipend per course, stipend per student enrolled, or simply as part of the faculty's
regular pay. At Marshall University, nearly all instructors of online courses are paid a stipend per student
enrolled, but these courses are taught as overloads. Administrators need to be aware of how instructors
will be compensated and how many students each course will enroll, particularly because instructors often
have to spend more time with an online course than the same course in a traditional setting.

Sample of Marshall University's Costs
There are two reasons that a study of what it has cost Marshall University to offer online courses
over the past two and a half years was done. One was to provide readers with a real life example of what 20
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Determining the Costs of Online Courses 21
an institution has invested in its technology to take part in such an endeavor. The other was, when
combined with the data received from the surveys, to aid in the development of the accompanying web
site. Marshall University is an institution of nearly 16,000 students (12,000 undergraduate and 4,000
graduate) in West Virginia. Because of the rural environment and the decline in the number of students
attending college in the state, offering online courses to boost enrollment seemed ideal. Former Marshall
University President Dr. J. Wade Gilley made a commitment in 1996 to this effort, providing money for
support and for compensation of faculty for developing and teaching these courses. Tables 1 through 5
and Figure 1 represents Marshall University's investment in online courses from 1997-1999.

Table 1: Costs of Developing Online Courses
Stipends for Development 60 courses at $1000 per credit hour $148,500.00 Hidden Costs
Supplies Consumed $150/ course developed (estimate) $9000.00 Administrative Approval Time 1 $14,400.00
Faculty Development Training 2 10 hours IT Training per course $13,320.00
Software/ Hardware Costs Faculty Development Labs $33,600.00 Support Personnel in Lab $19,110.00
Instructional Technology Support 2 42 hours per course developed $55,944.00 Library/ Electronic Reserves Support 3 13 hours per course developed $7456.80
TOTAL COSTS FOR DEVELOPMENT $301,330.80

Table 2: Costs of Teaching Online Courses
Stipends Paid for Teaching -Marshall pays a stipend per student enrolled in a course Fall 1997 76 enrollments $4977.40
Spring 1998 204 enrollments $14,689.40 Summer 1998 (4 sessions) 206 enrollments $14,507.30
Fall 1998 390 enrollments $31,139.10 Spring 1999 345 enrollments $29,985.80
Summer 1999 (4 sessions) 174 enrollments $11,836.50 Fall 1999 333 enrollments $35,023.90
Hidden Costs Office Space 4 $24,153.60
University Administration 5 1652 enrollments $31,784.48 Help Desk Support 6 189 Offerings $27,471.15
TOTAL COSTS FOR TEACHING $225,568.63 21
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Determining the Costs of Online Courses 22
Table 3: Technology and Infrastructure Costs
Course Server Purchased in 1999 $11,600 Backup Materials and Costs $1500.00
Server Maintenance and Support 7 $15,575.00 Communication Charges 8
Fall 1997 $44.80 Spring 1998 $161.28
Summer 1998 (4 sessions) $176.38 Fall 1998 $277.76
Spring 1999 $250.88 Summer 1999 (4 sessions) $76.80
Fall 1999 $259.84 Software Costs $3000/ year – 1997-1999 $9000.00
Evaluation Software Costs $1250.00 Electronic Course Administrator Salary 9 2 years on staff $59,160.00
TOTAL TECHNOLOGY AND INFRASTRUCTURE COSTS $99,332.74

Table 4: Revenue from Online Courses (Tuition)
Fall 1997 $93 per credit hour – 228 credits $21,204.00 Spring 1998 $93 per credit hour – 569 credits $52,917.00
Summer 1998 (4 sessions) $93 per credit hour – 524 credits $48,732.00 Fall 1998 $98 per credit hour – 1056 credits $103,488.00
Spring 1999 $98 per credit hour – 936 credits $91,728.00 Summer 1999 (4 sessions) $98 per credit hour – 420 credits $41,160.00
Fall 1999 $102 per credit hour – 956 credits $97,512.00 TOTAL REVENUES $456,741.00

Table 5: Summary of Costs and Revenues
Total Costs for Developing 60 online courses $301,330.80 Total Costs for 189 online course offerings $225,568.63
Total Technology and Infrastructure Costs $99,332.74 Total Costs $626,232.17
Average costs per student enrolled $379.08 Total Revenues $456,741.00
Average revenue per student enrolled $275.81 Total Cost to the University to Date ($ 169,491.17) 22
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Determining the Costs of Online Courses 23
Distribution of Costs for Online Courses at Marshall University
48%
36%

16%
Developing Costs

Teaching Costs
Technology & Infrastructure Costs

Figure 1: Distribution of Costs for Online Courses at Marshall University
Explanation of Costs
Without an explanation of the costs aforementioned, one could easily be misled. The information
here explains the cost categories in tables 1 through 5 that have accompanying superscript numerals.
1 – Marshall University has a committee comprised of faculty from each college that must

approve an online course before it is offered. This committee's time and departmental chair's
time in approving the course, as well as time for paperwork, is assumed at eight hours per course
at a rate of $30 per hour.
2 – Rates for instructional technology support are based on an average instructional technology

salary of $33,000 plus benefits, $1000 for supplies, with an average of 1950 normalized hours per
year. This equates to a rate of $22.20 per hour. Based on results from an internal survey of
instructional technology support individuals, it was concluded that on average, 42 hours are spent
supporting each online course developed.
3 -Rates for library/ electronic reserve support are based on an average salary of $15,000 plus

benefits, $225 for supplies, with an average of 1950 normalized hours per year. This equates to a
rate of $9.56 per hour. Based on results from an internal survey of instructional technology
support individuals, it was concluded that on average, 13 hours are spent supporting each online
course developed. 23
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Determining the Costs of Online Courses 24
4 – To calculate office space costs, a $17 per square foot rate per year and 64 square feet per
office was assumed for all faculty offices. To calculate the cost of office space for online
courses, this figure was taken at 1/ 5 of its rate because we assume that 80% of the time, office
space is used for traditional courses. The figure in Table 3 is calculated based on 111 course
offerings over the spring and fall semesters of 1998 and 1999.
5 -Administrative costs are calculated at a rate of $19.24 per student enrolled. These costs

include those incurred from the offices of the registrar, bursar, financial aid, admissions, and
other administrative areas. This figure is based on the rate established at the University of British
Columbia.
6 – Rates for help desk support are based on an average salary of $16,398 plus benefits, $195 for

supplies, with an average of 1950 normalized hours per year. This equates to a rate of $9.69 per
hour. Based on results from an internal survey of instructional technology support individuals, it
was concluded that on average, 15 hours are spent supporting each online course taught.
7 – Marshall University has taken advantage of using one of its existing staff members to take

care of its online course server for the past two years. This person estimates that this task has
consumed 12.5% of his time during this period.
8 – Data communication charges are one of the hardest charges to calculate. For Marshall's

courses, costs are figured using two T-1 lines for data transmission at $800 per month. It is
assumed that each online course occupies .16% of the University's network data traffic per
month.
9 – The Online Course Administrator's line is calculated based on a $22,000 salary plus benefits

and $1640 in supplies per year. This position has been in place since 1998.
Inglis (1999) analyzes one study that suggests a minimum 3000 enrollments per year are required
to repay the investment on infrastructure. Why such a high number? It is because as the number of
enrollments increase, the rate at which the cost per student drops significantly decreases. In Marshall
University's case, averaging 826 students per year (2345 credit hours) over the past two years has nearly 24
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Determining the Costs of Online Courses 25
paid for Marshall's investment in online courses. The reason Tables 2-6 show such a large deficit is
because an additional 18 courses that have not been offered have been funded for development but are
included in the costs. Taking away the mere development costs of these 18 courses results in a decrease
of $84,043.26. This shows an $84,800 loss in investment over 2.5 years. An average of 968 enrollments
per year would have been an acceptable number to repay the investment at Marshall University (see
Figure 2). From 2000 forward, Marshall would need to average 968 enrollments (or 2904 credit hours)
per year, assuming a new server is purchased every three years, courses continue to be developed or
modified every three years, and tuition continues to be raised approximately $5 per credit hour over the
three-year period. At the same time, compensation rates could increase by the same percentage. To make
up the current loss in investment, an enrollment in 627 additional credit hours would be necessary. These
numbers do not take into account the number of traditional enrollments that Marshall may have lost due
to the availability of these courses. With these tables, the University can now look at the areas where they
could make substitutions to see what number of enrollments would be needed for online courses to be
cost effective.

Costs and Revenue Streams

$626,232.17
$456,741.00

$751,478.60
$920,969.77

$0.00
$100,000.00
$200,000.00
$300,000.00
$400,000.00
$500,000.00
$600,000.00
$700,000.00
$800,000.00
$900,000.00
$1,000,000.00

Years 1, 2, & 3 Costs Years 1, 2, & 3 Revenue Years 4, 5, & 6 estimated Costs Years 4, 5, & 6 necessary Revenue
Figure 2: Costs and Revenue Streams for Online Courses at Marshall University 25
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Determining the Costs of Online Courses 26
Revenue for Online Courses
Sources of Revenue
Determining revenue for online courses is actually the easiest part of the entire process. Revenue
is generated from student tuition for online courses. One other source of revenue is from a technology
fee, which some institutions apply to online courses. When determining what it will cost for an endeavor
into online courses, you must consider this when performing costing. Will you report the revenue to your
general teaching funds? Will you create separate funds? It is difficult when faculty are not compensated
for this type of teaching, but becomes easy when you are paying them stipends to teach. You can
compare the amount paid for teaching to the amount received from tuition and technology fees.
A prevalent area of debate for revenue is the determination of what to charge for tuition in online
courses. If too much is assessed for tuition or fees, students will not enroll in these courses because of
competition from other sources of education. Since the courses are online, your competition is no longer
the institution 20 miles away, but the world. Nonetheless, charging too little for tuition will result in a
loss of a tremendous amount of money. The approach that many institutions are taking, including 43
graduate schools surveyed by Stevens' WebZine, is to charge the same for online courses that they do for
traditional courses (Stevens Institute of Technology, 1999). Of the 43 schools, all but 8 programs charge
the same amount. In those eight programs, schools charged more for their online courses than their
traditional tuition rates. The NCES study (1999) showed that nearly 77% of schools surveyed charged the
same rates for distance education as they did for traditional courses. Marshall University adopted a policy
that it would charge in-state tuition rates for online courses. Students are able to take courses for the
cheapest rates, without the institution having to lower prices below normal tuition costs.

Why an Institution Would or Would Not Want to Do This
Many argue that some type of online presence will be mandatory for institutions in the near future
to stay in the market. Even though institutions may not save money by offering these courses, because of
direct competition and possible decline in student enrollment, they will need to. Downes (1998) agrees 26
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Determining the Costs of Online Courses 27
that it may cost more in the end if they choose not to offer the courses. Students are going to begin to
look for courses they may take while at home, managing a family or job, and at their own pace. With
additional courses placed online at equal or less cost than traditional courses, students will not always
look at the benefits of attending a college campus. They will take classes most beneficial and convenient
for them. Results of the Economics of Online Learning survey done at the University of Alberta
(Downes, 1998) indicate that there will be a significant drift in attendance from classroom based course
offerings to online courses within the next 10 years. This means institutions that do not offer online
learning risk losing students.
Individuals in higher education continue to argue that traditional teaching methods are the best
form of learning. There are surveys that continue to reinforce this concept. One report however, known
as "No Significant Difference," argues that there is no difference in what is learned in the different
mediums (Russell, 1999). You can visit http:// cuda. teleeducation. nb. ca/ significantdifference/ to learn
more about the No Significant Difference studies. As online courses improve, it will become hard to
argue that traditional courses may be the best method for learning. As Downes (1998) indicates, we will
continue to see savings for students improve, making traditional courses appear less appealing.
Because of studies such as "No Significant Difference," institutional competition, and the
availability of online courses, Mottl (2000) projects classroom use for course delivery to drop
dramatically from 77% to 51% by 2003. Mottl also projects the growth of technology delivered courses
to increase from 17% in 1997 to 46% by 2003. Will higher education courses follow suit? All one has to
do is look to the state system of Georgia with its 50,000 student seats in WebCT to think seriously about
this.
Students in higher education could be the most beneficial participants of online courses. More
often than not, students will take less time to complete an online course than to cover the same material in
a traditional class. This is because a student can move quickly through work they have mastered online
whereas, in a traditional course, must proceed at the pace of the instructor. Morrison (personal
communication, December 5, 1998) points out that only a few accreditation bodies are concerned with 27
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Determining the Costs of Online Courses 28
how a course is delivered, rather than with the content of a course. Marshall University's policy on this is
that an online course's content must match the content offered in the traditional setting. Turoff (1997)
believes that online courses will begin to draw those individuals who are over committed to attend
traditional courses.
Even though much of the information has been positive, research has helped to identify reasons
that an institution would not want to delve into such an endeavor. Some administrators, faculty, and
students see online courses as an inferior type of education. This is why interested institutions should
survey the parties involved before deciding on whether or not to offer online courses. Make sure that the
constituents are ready for the new paradigm. Some students will pay higher amounts of money to
physically attend more prestigious traditional-based institutions. If a school makes an investment in
technology and the courses do not succeed, this could seriously deplete a school's finances. Some also
argue that this large investment is worth it so that access to an institution is increased. As Inglis (1999)
points out, what often happens is access is only granted to those who can afford technology but denied to
those less fortunate, showing that a true digital divide exists. 28
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Determining the Costs of Online Courses 29
What is important for this type of education to be successful
Unfortunately, online courses do not just occur. A well thought out plan must be in place before
venturing into this realm. Some of the areas in which institutions must look include how they plan to use
technology, centralization of their information technology support, instructional technology support for
faculty and students, and buy-in from faculty, administrators, and potential students.

Using Technology as a Strategic Asset
One of the worst things an institution can do is hurry the purchase of technology to possess the
latest and greatest tools. Graves (1999) concludes that the purchase and investment in technology should
be approached in a way that technology becomes a strategic asset to an institution, instead of something
forced on faculty and students. Often the integration of technology will not meet its concept. An
institution should rely on research and evaluation to see if it is worth the technological investment for
online courses (Graves, 1999).
In deciding how to use technology to its fullest benefit, investigation of the methodology
instructors plan to use to deliver course materials is necessary. Turoff (1997) shows that without research
regarding how individuals will use technology and training, the direct relationship between instructor and
students, instead of improving through technology, may decline. This will more thoroughly isolate the
content experts from the learners. Faculty peer groups and instructional technology teams should be
established to review existing courses, survey faculty's information technology needs, and interview
students to see if the investment in technology is worthwhile. Albeit most institutions may have already
invested heavily, some will find that they have flooded faculty and students with too much at a given
instance. They should have moved more slowly to integrate technology into academia.
Turoff (1997) believes institutions must realize the need to incorporate changes in the learning
approach. One way to take advantage of technology is to have students help develop learning
communities. Online students miss the interaction with other students. Instructors will create a course
based on how they have been teaching it in a traditional classroom mode and perform a straight 29
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Determining the Costs of Online Courses 30
translation with technology. Turoff's study (1997) found that some instructors will treat the course as a
question-answer dialogue or a problem discussion section led by a teaching assistant and throw out the
interaction. These courses often lead to poor reviews by students. This is a key reason that the
investment in the technology necessary for courses must be accompanied by proper education of the
individuals that will be designing and teaching courses.
Also important is the opinion of students who will be taking the courses. Bates (1997) points out
that the success of online courses will be determined by the willingness and readiness of the students to
tackle this type of course and delivery. Not only must a new way of thinking be developed by
administrators and instructors, but also by students. Students must have the necessary technology
available and skills to take advantage of the technology (Bates, 1997). Institutions must invest in
technology training programs or courses for students. Providing necessary skills and resources is the only
way an institution can successfully prepare students for this type of education. Some problems may arise
from the technology itself. Zanville (1996) says that often institutions make an unwise investment in
particular hardware or software technology which is difficult to master and requires sustained effort to use
effectively.
A chapter in a book by Graves (1999) was particularly useful in determining areas of focus for
integrating technology in higher education. Graves gave six points, termed his, Principles for Optimizing
Investments in IT, that anyone investing in technology should consider. The six points are included here.

1. An institution's total IT investment should serve institutional strategic interests while being
administered with enough flexibility to encourage and support innovation and entrepreneurship in
the departments.

2. Formal institutional processes are required for selecting, developing or customizing, and
installing any mission-critical application and should include input from both the central IT
organization and a representative group of stakeholders, with a senior information technology
officer holding veto power in the final selection decision. 30
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Determining the Costs of Online Courses 31
3. An institution's senior information technology officer should be involved in any institution-wide
strategic planning and budgeting processes. In turn, the central IT organization should assume
responsibility for communicating about, and reporting progress toward, the institution's strategic
vision for the deployment and use of IT.
4. Funding for an institution's central IT support organization should be placed on a recurring life-cycle
basis to the extent possible, and should not overly rely on one-time sources or depreciation
schedules not attuned to the rapid pace of technological change.
5. All of an institution's students and employees should have convenient and affordable access to a
personal computer, with a basic collection of productivity software, that can be connected to the
institution's network at any time and from almost any place they are working – the office, a
library, a home or residence hall, a field location, or another remote location.
6. An institution should contain overall IT support costs by centrally supporting only a few specific
configurations of personal computer hardware and productivity software to be replaced/ updated
on a technological life-cycle basis. Indeed, the central IT support organization should assume
responsibility for the institution's IT architecture (standards) and organize departmental technical
leadership to assist in the development of that architecture.

Turoff's paper (1997)-first written 18 years ago, and revised in 1997-on what is financially
necessary to start the virtual university is very enlightening. Many of Turoff's points still hold true for an
institution wishing to venture into online courses today. Turoff concentrated on informing administrators
and faculty of the questions they should be answering before deciding to make their investment. He was
concerned with how an institution insures quality and how it is to be measured; how student input will be
used effectively to evaluate courses, faculty, and programs; what methods will be used to insure faculty
will be effective at teaching with the technologies; the need to insure that there are appropriate social and
emotional benefits to the institution; and the need to insure that students understand what they are getting 31
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Determining the Costs of Online Courses 32
(Turoff, 1997). These questions should be a basis of surveys that are shared with faculty, IT staffs, and
administrators before deciding to offer the first online course.

Centralization of IT Support
The centralization of IT support is one of the most hotly debated topics in higher education for
the past few years. Does an institution centralize their information technology support or do they
decentralize and allow each college/ department/ division support their own technology ventures? Because
of personal experience at Marshall University, it is believed that centralized IT support seems to best
benefit institutions in their effort to offer and support online courses.
Such a statement may offend many, and some are probably asking how this conclusion was
drawn. Frankly, it is simple. Centralized support helps create a single system for offering online courses.
How does this help? A single system helps students and faculty work with multiple courses without
learning multiple systems. This makes sense when looking at savings for training time and costs in
teaching support teams, faculty, and students multiple delivery systems.
Having centralized support and systems helps bring everyone on to the same track for planning
and implementation. This opens the door for course designers to have a large number of resources to call
upon, whether it is IT support, other faculty doing innovative things with the system, or a worldwide user
community. Graves (1999) says, "broadly available core services give the greatest bang for the buck..."
The centralized IT organization can help manage and better control these types of services as they become
mature offerings for the institution.

Instructional Technology Support
After witnessing a venture start from the ground up, it is believed that instructional technology
support is the key to success for online courses. Without timely and effective instructional technology
support, online courses cannot and will not happen. Often a simple interaction with an instructional
technology support individual helps an instructor start thinking in the right direction. This can help an 32
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Determining the Costs of Online Courses 33
instructor toward designing their course material or assisting in getting over a barrier that is hindering
progress.
One may ask, what makes instructional technology support different from other areas of
technology support? Instructional technology presents special challenges that standardized help desk
support usually cannot offer when it relates to online courses. It is an instructional technologist's duty to
assist faculty in determining which opportunities exist in finding and implementing technology to fit
course content. Many think it is the opposite--that the instructional technologist must fit an instructor's
content to the technology. This limits the content and methods by which an instructor may offer their
intellectual property. Faculty quickly determine that the incorporation of technology into an existing
course cannot be done overnight or be seen as a simple addition to a course. Zanville (1996) wrote that
with instructional technology assistance, faculty see it often requires a rethinking of objectives and
instructional strategies, including discussions in pedagogy and curriculum design.
Even the most technologically sophisticated instructors often need help in choosing the
technologies best suited for their content based on affordability, scalability, availability, and
supportability. At Georgian College in Barrie, Ontario Canada, faculty are given eight hours per week for
sixteen weeks to develop an online course. During this time, they are given the assistance of an
instructional designer who puts in an equal amount of time. Instructional technologists must be involved
in the technology selection, course development, and course offering processes through evaluation,
training, and support. Institutions often undertake instructional technology initiatives, such as faculty
grants, without accounting for the recurring life-cycle resource implications of the success of initiatives
(Zanville, 1996).
To gauge how faculty perceived their own use of technology at Marshall University, a short
survey was distributed to those teaching online. The survey asked faculty to analyze themselves on a
scale of 1 (no knowledge) to 5 (expert user) in the areas of sending/ receiving e-mail, searching the
Internet, creating a web page, and the use of WebCT. A copy of this survey is contained in Appendix E.
Table 6 contains the average responses of the 32 respondents. 33
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Determining the Costs of Online Courses 34
Table 6: Analysis of results from faculty teaching online courses at Marshall University
Send or receive E-mail 4.56 Search for information on the Internet/ World Wide Web 4.38
Create or edit a World Wide Web site 3.03 Use the product WebCT 3.47

This study is very important for Marshall University because it gives their Center for Instructional
Technology an idea not only of how faculty perceive themselves, but also how well instructional
technology training is perceived. Marshall University will continue to offer faculty development courses
for those areas with a score of less than 4.5.

Faculty and Online Courses
One of the most important parties involved in the decision to offer online courses is faculty. If
faculty are not provided with the proper training, tools, or have interest in this type of education, then
online courses are not going to be successful. Faculty are often against online courses if planning is
negated upfront. One of the first reactions from faculty who do not have the proper knowledge of online
courses is that they are going to be replaced because of technology. Some faculty fear administration
believes that the courses can be handled by adjuncts or that the distance learning courses will always be
inferior to traditional courses. Turoff (1997) states that the quality of the program can be determined by
the quality of the instructors and the culture of the institution, and that this can influence teaching
methods. It is key to involve faculty in planning and provide them with as much detail on administrative
plans for offering online courses.
It was useful to gather comments from several individuals who have taught online courses. These
individuals were very positive about this type of education after teaching their first course online.
Nonetheless, many have concerns that administrators should be aware of when planning for online
courses. In addition to the issues previously mentioned, faculty stated concerns about such issues as
student dishonesty, proper recognition for this type of work in the tenure process, proper pay, and he
belief that the administration is forcing this type of education on institutions who are not even ready to 34
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Determining the Costs of Online Courses 35
keep up with those who are already doing it. Improper ventures into online courses have resulted in some
faculty members spending 200 to 300% more time preparing for and teaching online courses than
traditional courses. Why is this? Such drastic changes in course offerings means there needs to be shifts
in teaching behavior. Zanville (1996) points out that instructors often have problems adapting to teaching
online and those who are forced into this role are uncomfortable from the outset. On the revenue side,
administrators make the mistake of promoting that additional students means more money for the
institution. John Morrison (personal communication, December 5, 1998) stated that this is an area where
faculty are concerned about the possibility of having huge classes taught by one instructor. For more in-depth
comments from faculty, please refer to the Selected Comments from the Developing Survey and
Selected Comments from the Teaching Survey portions of this document, as well as Appendixes C and D.
There is one area that nearly all faculty note as being of utmost importance. If investments in
faculty development were made, those who were not teaching online would consider it. Zanville (1996)
points out that many institutions see online courses as "marginal", meaning instructors' reward structures
and relative investment in critical faculty development or technical support resources are not provided
(Zanville, 1996). This perception is what turns many faculty away.

Administration and Online Courses
Two principal mistakes administration can make is to introduce online courses to their faculty as
a way to simply gain additional students or think technology will create cheaper courses. Cheaper costs
may arise in courses that have material learned by drill and practice, but Turoff (1997) shows that it will
not happen for courses that rely heavily on problem solving and critical thinking. Administration should
look at technology as a way to improve the cost-effectiveness of education. This is not the same as
reducing costs. Bates (1997) argues that for the same dollar expenditure learning effectiveness can be
increased. If additional students can be taught to the same standard for the same level of investment, it is
a wise investment in technology. There has to be insight and good reasoning behind such a venture and
these reasons need to be discussed with faculty and students before a final decision is made. 35
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Determining the Costs of Online Courses 36
Many administrators have stayed away from online courses because they fear the huge
investment that is necessary to get online. This is a real concern. Do not think that by offering online
courses that costs of teaching will drastically decrease immediately. Costs may decrease at some point in
the future, but never at the outset. One of the biggest hurdles is attempting to determine how much
money is needed during initial setup. Research shows that there are several ways to estimate costs, but
who is right? Bates (2000) shows that administrators can attempt estimates with wild guesses, marginal
costs (extra costs needed to put a course online), careful estimates (purpose of the paper and web site),
and actual costs – measure each penny spent and recovered. A major problem in budgeting by using
actual costs is that if you are measuring this way, resources have already been committed in some way.
The accompanying web site helps to clarify some strong estimates for administrators in the area of costs.
How one ultimately costs technology depends on the type of decisions to be made and by whom. Bates
argues that what is of utmost importance is that all costs be identified, that the assumptions underlying
costs be understood, and that reasons for including or excluding the various costs be valid (Bates, 2000).
In performing costing exercises, some shy away and say that traditional teaching is much cheaper. If they
have never attempted it, how do they know? Bates agrees that it is very difficult to find the costs of using
technology in traditional courses because it is integrated into regular costs of teaching, usually buried in
faculty salaries and support personnel (Bates, 2000).
Administrators are also concerned about such areas as accreditation of online courses, improving
learning experiences, time and effort required by faculty, and retention rates. Accreditation has been a
key discussion area for the past several years, but is beginning to take a back seat when Jones
International University, a totally online degree granting institution, was fully accredited. As for
improving learning experiences, Inglis (1999) points out that when done correctly, online courses do offer
the possibility of improving the quality of students' learning experiences and increasing access to an
institution. When it comes to time and effort, this is one of the nearly unavoidable areas encountered with
the offering of online courses. Even though development time for courses is usually increased because of
new ways of thinking, administrators should think of development time in reference to completing goals, 36
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Determining the Costs of Online Courses 37
objectives, and/ or competencies. As Phil Rasmussen (personal communication, December 8, 1999)
stated, "seat time should be out the window as it doesn't measure anything educationally but only
provides a convenient way for bean counters and administrators to measure faculty involvement."
Retention rates for distance education have been a concern since the 1920s (Russell, 1999).
Depending on the view, one could argue that the theory of no significant difference between delivery
methods is true. Some of the findings for retention rates relates to the opinions that students have about
the quality of the courses. During the first few offerings, while the institution is getting used to online
courses, retention rates may seem low. Often times, instructors are still getting used to these courses,
while at the same time students are taking their first plunge into distance learning. Data from UCLA
shows that during the first few quarters of online course offerings, retention rates were at 50-60 percent.
Carr (1999) shows that over the past eight semesters, UCLA is seeing retention rates of 87 percent in their
online courses, with nearly 1300 students taking online courses each semester. Findings through an
online course taught by the author attest to these figures. Over the course's first five offerings,
completion rates were at 71%. Over the next seven offerings, currently completion is only at 60%, but all
seven are still running. This figure actually reflects that 60% have finished before the term is over. Over
the past two years, Marshall University has seen a retention rate of nearly 78% in its online offerings.
Instructors are helping these retention figures by using feedback from students and turning it into
constructive criticism to improve their course. Carr (1999) reported that Emilio Ramos, dean of academic
and administrative technology at the LeCroy center, believed that switching to an interactive system with
chats and electronic mail helped to increase retention rates from 62 to 90 percent. "The key to having low
attrition and successful completion in the online medium is the ability of instructors to keep the students
engaged, and that requires quite a bit of effort from the instructor's point of view," Ramos said.
Administrators believe they can assist with cutting costs by placing adjuncts as instructors for
online courses. People also argue that those who are retired will work for considerably less. Adjuncts are
often paid at one-fifth the rate of faculty teaching the exact same course, often using the regular faculty's
material. Administration believes this is a way to reduce costs, often offending faculty and students who 37
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Determining the Costs of Online Courses 38
do not see adjuncts as providing the same quality instruction. Turoff (1997) points out that this is one
reason that accrediting agencies are concerned with the number of adjuncts teaching in any accredited
program. If an institution wishes to deploy the best courses, they must realize that they will pay for the
quality they deliver (Turoff, 1997).

Students and Online Courses
Similar to faculty and administrators, student opinions of online courses are mixed. Those whose
first experiences seem to be positive are those taking additional courses. Those who take an online course
that was either of poor quality or one in which they did not understand the technology are those providing
poor evaluations. Carr (1999) provided a report revolving around a student who had completed two
courses successfully before dropping out of a third. The course that was dropped was because of the
nature of the course. The student reflected that it was the instructor's first online offering and the material
had been set up in a difficult to follow manner (Carr, 1999). This just strengthens what was mentioned
before-an institution must provide for faculty development and training, including developing an overall
plan for what they wish to accomplish before opening online courses to students.
One area that an institution should consider when creating the plan is the offering of online
degrees. Why offer online courses if students do not have something that they can work toward?
Students should have a goal to obtain. Offering courses over a wide variety of topics is not the way to go.
Students who take online courses are usually those who do not have the time to attend traditional courses,
professional students working to further their education while maintaining a career. To be successful, the
infrastructure must be in place to make it as easy as possible for students to continue their education.
Carr (1999) and Young (2000) share some of the data that has been gathered from students who
have taken online courses. In the article by Carr, the same student who had taken two courses and
dropped a third has also seen successful instructors lose large numbers of students, often beyond the
instructor's control (Carr, 1999). Students take an online course thinking the course will be easier than a
traditional course. Because of their lack of discipline needed for this type of education, they quickly get 38
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Determining the Costs of Online Courses 39
over their head. "You don't realize how much is involved until you get into it," says Chuck Kurfman, a
33-year-old student at the University of Illinois at Springfield. "With this kind of class, there are things
you could do every day. It's almost worse than going to class every week" (Young, 2000).
Students are often misled with expectations of online courses. One of the largest complaints
students have is that they do not receive instant feedback from their instructor. Many believe that just
because the course is taking advantage of advances in technology, the instructor will provide instant
feedback. The problem crops up when students need to ask a question about something they do not
understand. Young (2000) points out that whereas in the classroom, students can raise their hand and get
an answer, they often have to wait a day or more for an electronic answer. By the time they receive their
answer, many have forgotten why they were asking the question in the first place. It is essential for
instructors to consider these problems. The best method may be to use these questions and feedback
received from students to either change the way material is presented or build intelligent answer systems.
Gale (2000) suggests that to get a true feel for how students perceive a course, try taking one yourself.
This could help faculty who are considering teaching online.
Another challenging area for students is examinations. Many point out that instructors worry
students are cheating or having others take the tests. This is causing instructors to require students to take
exams at central locations, which defeats the purpose of online courses. Students who take the course for
convenience are being inconvenienced because of travel. If students are mature enough to take an online
course, one can only hope that they are mature enough to be honest. 39
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Determining the Costs of Online Courses 40
Interactive Web Site for Determining Costs
The original goal of this study was to produce results that would not only help Marshall
University in future planning endeavors, but also other higher education institutions considering online
courses. This led to the creation of a web site where individuals could answer questions about their
institution and their plans for online course offerings. This is to help determine if this type of endeavor is
feasible for their institution. This web site can be found at
http:// webpages. marshall. edu/~ morgan16/ onlinecosts/. Instructions on how to use the site are contained
at the location. Information regarding how the site works and why it was developed is contained herein.

Disclaimer
The content of the accompanying web site is intended to be used only as a guide. If you rely on
the information on this site, you are responsible for ensuring by independent verification its accuracy or
completeness. A great deal of research was completed to develop the site and the information that it
represents. The user assumes all risk by using the information and data related to this website.

How the Site Works
The accompanying web site will guide a user through the process of answering questions about
their institution and then walk them through establishing the costs associated with the offering of online
courses. The site is built upon Microsoft's Active Server Pages (ASP) scripting language to store a user's
answers, perform calculations, and format the results returned to a user's web browser. The site was
written entirely by the author of this paper, and a flow of how a user navigates the site is shown in Figure
3. 40
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Determining the Costs of Online Courses 41
Figure 3: Data Flow for Determining Costs Web Site
When a user visits http:// webpages. marshall. edu/~ morgan16/ onlinecosts/, they must first agree to
the site disclaimer. Once they agree to the disclaimer, they will transfer to a page where they begin
entering data as it is presented to them in the form of a single question per screen. Users will be able to
take their time and concentrate on an individual question without the page being cluttered with data or
questions. Under each question will be an area explaining what type of data should be entered for the
question and an example relating to Marshall University.
The first question is the determination of the size of the user's institution. This is the most
important part of the entire process, but probably does not appear significant to the user. In developing 41
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Determining the Costs of Online Courses 42
the site it was determined that the best way to calculate shared and support costs is based on the size of
the user's institution compared to Marshall University and its 16,000 students. This is done because it is
seen as the easiest constant to compare between any two institutions.
The next question sets the stage for the beginning of the calculations for the continued growth of
online courses at the institution. The question allows the user to set the initial number of online courses
that will be offered. Later, the user will determine by what percentage the institution wishes their online
presence to grow, helping to determine additional costs and revenue streams. Next, the user is able to
enter the average number of students that are expected per course. Everyone knows that each course will
be different in its enrollment figures, but providing an average is a good way to proceed with estimated
calculations.
The next area deals with how an institution will pay faculty to develop online courses. The first
question will determine the method of payment, whether as a stipend for developing a course in the form
of monetary reward or release time, or if the courses will be developed as part of the developer's regular
pay. If the user selects stipend, the site will then ask the user to enter the amount of the stipend per course
for developers. If the user selects as part of the regular pay, the site will proceed to the compensation for
teaching section.
The compensation for the teaching of online courses segment is similar to the development
section in that it starts with a question regarding how one will be compensated. This question provides
the user with three options: paid as part of their regular pay, a flat rate stipend per course, or a stipend per
student enrolled in the course. Depending on the user's answer, the site asks the user for the proper
amount of compensation.
After determining compensation, the site will ask questions on support issues for online courses.
The first is a yes or no question asking if instructional technology support will be provided to developers
and instructors. The other is whether the institution already has a server in place or not to house courses.
No matter the answer, a new server will be calculated into the costs every three years, and the cost of this
server will be spread out over a three-year period. 42
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Determining the Costs of Online Courses 43
The next section determines the institution's revenue stream. The questions regarding tuition and
technology fees are presented to the user. The first question asks for the tuition rate per credit hour. The
second question asks if a technology fee for online courses will be charged. If the answer is yes, the site
will ask for the rate per credit hour for this technology fee. If the answer is no, the site continues to its
last question. For calculations, each course will be assumed a three credit hour course.
The final question determines the projected growth of online courses. The answer to this question
will be used to draw from the costs and revenues generated in the first year to build years two through
seven. Once this value is entered, the site will calculate and return several tables containing the results of
the input. After a user reviews the data, they will be able to click on a given variable in the list and
change their input to see what effect that would have on their results.

How Costs and Revenues are Calculated
The reason that participation in the two surveys developed was requested was to assist in building
and testing the web site. Based on the answers from the surveys and the results from costs found at
Marshall University, it is believed that this site provides a fair estimate of the costs an institution would
encounter in deciding to offer online courses. Even though there will never be a set formula for
determining costs for online courses, the method developed is extremely efficient.
What the site does is build upon the user's entries to calculate the costs that an institution will
most likely incur. Even though the user does not enter information for help desk support, library support,
hidden costs, online course administration, and other costs that were contained in the Marshall University
cost section, these costs are included. They are calculated based on the enrollment at the institution as
compared to Marshall. Other costs are determined by information entered for the method of
compensation and the number of courses. These numbers are straight calculations to determine the costs
of development and teaching compensation. With the number of courses, average students, and growth
rate, calculations to determine costs over seven years are included in the results. 43
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Determining the Costs of Online Courses 44
Costs involving human services, such as help desk support, library support, instructional
technology support, business manager, and a server administrator are calculated based on enrollment, but
the rate never drops below 80% of the rate of Marshall University. The reason that these calculations are
based on enrollments at an institution is that if an institution shows that they are going to offer one online
course in its first year and also provide instructional technology support, it would not be fair to calculate
rates for IT support for a single course as compared to a part-time position. In addition, the rate of 80%
was chosen because when you look at smaller institutions, for example, one with 3000 students, rates
would be calculated at only 18.8% of what Marshall compensates. For help desk support, this would be
$1.80 per hour. This was deemed a necessity because such rates are unfeasible and would not be
meaningful if calculated in a true linear fashion compared to Marshall. The reason Marshall University's
pay rates were chosen to be the standard is because of the school's SREB classification. Marshall is
considered to be in the 90 th percentile in rates of pay compared to peer SREB schools. 44
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Determining the Costs of Online Courses 45
Online Development/ Teaching Surveys
Since there is not a plethora of literature regarding costs of online courses or a concrete answer to
the question at hand, it was necessary to survey a wide variety of individuals who have developed or
taught such courses. By gaining insight regarding how much effort is required of others and how they are
compensated, a better understanding of how to develop the interactive web site was achieved. To
accomplish this, two separate surveys were developed: one to obtain information regarding costs and
efforts to develop online courses and one to determine the costs and efforts to teach online courses.

Developing Online Courses Survey
The purpose of the first survey developed was to help determine how institutions currently
offering online courses are funding development. This survey asked a variety of questions including the
method of compensation for development and the time spent in development activities. Information
regarding 118 online courses was received from institutions around the world. A copy of the survey
instrument can be found in Appendix A. A compilation of results and comments received (minus names)
are contained in Appendix C.
One of the most interesting results found from the survey was a high percentage of courses
developed as part of the individual's regular pay (38/ 118). Research has shown that either paying
individuals stipends or providing release time for online courses has produced better results. Some form
of compensation to developers has gotten individuals interested who otherwise would not have been.
Many of those surveyed stated that stipends, release time, or recognition for the development of such
courses would aid in convincing others of trying their hand at this type of development.
A summary of the results obtained from the developing online course survey is contained in
Table 7 and Figures 4 and 5.

Table 7: Summary of Results from Developing Online Courses Survey
Total Number of Courses/ Credit Hours 118/ 350 Number of Courses/ Credit Hours developed as part of Regular Pay 38/ 110 45
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Determining the Costs of Online Courses 46
Number of Courses/ Credit Hours developed given release time 9/ 30 Number of Courses/ Credit Hours developed with Stipend Payment 71/ 210
Average stipend per credit hour paid to those developing with stipend pay $1260.00
Highest stipend paid per credit hour $21,125.00 Lowest stipend paid per credit hour $191.67
Breakdown of Respondents (number of courses from each) 4 Year Institutions – Total 69
Full-Time Faculty Members 40 Part-Time Faculty Members 6
Information Technology Specialists 22 Consultants 1
Community College 29 Full-Time Faculty Members 25
Part-Time Faculty Members 3 Information Technology Specialists 0
Consultants 1 Graduate College 16
Full-Time Faculty Members 14 Part-Time Faculty Members 1
Information Technology Specialists 0 Consultants 1
Technical School 3 Full-Time Faculty Members 3
Part-Time Faculty Members 0 Information Technology Specialists 0
Consultants 0 2 Year Institutions 1
Full-Time Faculty Members 0 Part-Time Faculty Members 0
Information Technology Specialists 1 Consultants 0
Technology tools used to develop courses WebCT 70
Plain HTML (using tools such as FrontPage or Dreamweaver) 37 CyberClass 6
Other 5 Average answers to questions regarding % of time spent developing
(answers are per course) Percentage of total work hours per week spent developing an online
course 25.95% Average weeks spent developing an online course 17.01 weeks
Learning how to use the specific software and/ or hardware technologies in order to develop your course 12.82%
Online course syllabus development 6.52% Course interaction development (E-mail, bulletin boards, etc.) 6.73%
Course learning activities development (quizzes, exams, self tests, assignments) 15.80%
Course content development (includes gathering instructional material, 30.43% 46
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Determining the Costs of Online Courses 47
conversion, etc.) Development of multimedia content (video, audio, animations) 4.75%
Determining best pedagogical approaches for online course 6.07% Designing layout of course 8.96%
Testing of course's technical components 5.96% Copyright Clearance 1.81%

Breakdown of Compensation Types for Development of Online Courses
31%

9%
60%

Regular Pay
Release Time
Stipend Payment

Figure 4: Breakdown of Compensation Types for Development of Online Courses
Participation Percentages for Developing Online Courses
13%
7%
7%

16%
29%

5%
6%

9%
6% 2% Learning Technology
Syllabus
Interactions
Learning Activities
Content
Multimedia
Pedagogy
Layout
Testing
Copyright

Figure 5: Participation Percentages for Developing Online Courses
Selected Comments from Developing Survey
Each of the surveys contained areas where individuals could express what they considered
barriers for either developing or teaching online courses. Even though these areas could not easily be
statistically measured, the content of many was interesting. For purposes of confidentiality, permission
was asked of each comment contained here. 47
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Determining the Costs of Online Courses 48
In analyzing information from the developing courses survey, the greatest barriers for developing
courses were stated to be the time involved, lack of monetary or other reward systems especially in the
lines of promotion and tenure, and any other form of motivation provided to developers. Other less
significant barriers mentioned by several individuals included a lack of understanding of how to teach in
the online environment and lack of administrator's understanding of online education. One developer
alluded to this when he said "too many times, professors use on-line courses like traditional courses,
which simply dispense information (lecture notes, assignments) rather than as a collaborative and
generative learning tool." Online courses cannot take on this form if they are to be successful.
When a developer begins the development phase, they often struggle with the translation of
course material to the online environment. An instructor from a Canadian university summed it up by
saying it was a "lack of understanding on how to increase student interactivity. The course must be more
that an electronic photocopy machine or an electronic correspondence course. How the teacher combines
different learning/ teaching styles into a cohesive whole is difficult." It is often very difficult to have
someone who has been teaching in a given mode for a number of years to easily change their thinking.
This is why development or teaching of online courses is not for every instructor. A course developer
from a university in Minnesota had more to say about the creation of courses and the support process.
This person wrote that there is a lack of understanding about the "need for paid professional support staff
in the department as a way to assist faculty to teach this way and maintain a reasonable schedule.
TAs/ RAs who are students themselves CAN NOT be the support!" An instructor from another Canadian
University agreed when she stated a major barrier was "hiring dependable subject matter experts who
have sufficient release time to write modules for on line presentation." She added that at their institution,
"to save money, grad[ uate] students are often hired at greatly reduced costs compared to hiring
professional staff. However this leads to problems of insufficient time on task. Students have other
priorities and getting a course on line according to timelines isn't one of them. While they work cheap,
they also work slow." 48
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Determining the Costs of Online Courses 49
There were several strong comments regarding the time it takes to develop online courses. One
instructor stated the greatest barriers to online course development were time constraints, load of other
duties, and the fact there is no reward system in place for develop ing the online courses towards tenure-track
consideration. "Considering the amount of time that I have spent developing the online course, I
have not received documentation that I will obtain significant consideration for this course development
in my tenure-track review." Another developer from the United States had more to say about the time it
takes to develop an online course. This developer/ instructor even had what he deemed as a "GREAT
support staff" but claimed that it took a minimum of 500 hours per credit hour to develop an existing
course, and estimated that it would take double that time to create a new course, and an average of .5
hours/ week/ student teaching the course. There are no courses at Marshall University that have taken this
long, but it is possible given elaborate technologies and pedagogical design.
Another developer from Canada was a bit more expressive. He stated that the greatest barrier
was a lack of technical help. At this university, interested faculty design their own course based on
interest. "There is little face to face help in course design. This results in far too much time spent on
technicalities that could be spent on pedagogy." This person said the support at their college is very
weak, resulting in there not being enough of a demand for these courses. This developer also alluded to
the costs involved in developing such a course, such as training, ISP access, etc., and felt that they would
never recoup a portion of their out-of-pocket expenses.

Teaching Online Courses Survey
After gathering information regarding the development of online courses, a survey on the
teaching of such courses was sent to the same lists where the development survey was sent. This survey
was prepared in hopes of finding how individuals were compensated for teaching online courses and to
find how much time was spent teaching online courses compared to the teaching of traditional courses.
Information from 110 online courses was received. A copy of the survey instrument can be found in
Appendix B. A copy of the results and comments received (minus names) are contained in Appendix D. 49
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Determining the Costs of Online Courses 50
A summary of the results obtained from the teaching online courses survey is contained in Table
8 and Figures 6 and 7.

Table 8: Summary of Results from Teaching Online Courses Survey
Total Number of Courses/ Credit Hours 110/ 341 Number of Courses/ Credit Hours taught as part of Regular Pay 59/ 184
Number of Courses/ Credit Hours taught paid a flat stipend per course 29/ 91 Number of Courses/ Credit Hours taught paid a stipend per student
enrolled 22/ 66 Average stipend per credit hour paid to those teaching with flat rate
stipend pay $661.76 Highest stipend paid per credit hour $1666.67
Lowest stipend paid per credit hour $333.33 Average stipend per student paid to those teaching with per student
stipend pay $160.00 Highest stipend paid per student $250.00
Lowest stipend paid per student $40.00 Breakdown of Respondents (number of courses from each)
4 Year Institutions 18 Community College 31
Graduate College 49 Technical School 8
2 Year Institutions 4 Average answers to questions regarding % of time spent teaching (answers
are per course) Percent of work time spent teaching an online course 32.11%
Number of courses who reported time comparisons teaching online courses to traditional courses.
Number who reported spending more time teaching online courses 83 Number who reported spending less time teaching online courses 14
Number who reported spending about the same time teaching online courses 13
Teaching the students how to access the course materials and progress through the course 7.80%
Reading and responding to course related e-mail 32.94% Online course office hours 6.18%
Grading of assignments and/ or exams 23.61% Course Maintenance 14.73%
Participating in class interactions (chat, bulletin board, whiteboard, or any other type of synchronous communication) 11.40%
Other 3.66% 50
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Determining the Costs of Online Courses 51
Breakdown of Compensation Types for Teaching Online Courses

54%
27%

19% Regular Pay
Flat Stipend per Course
Stipend per Student

Figure 6: Breakdown of Compensation Types for Teaching Online Courses
Participation Percentages for Teaching Online Courses
8%

32%

6% 24%

15%
4% 11%
Teaching Technology
E-mail
Office Hours
Grading
Course Maintenance
Class Interactions
Other

Figure 7: Participation Percentages for Teaching Online Courses
Selected Comments from Teaching Survey
Survey respondents identified the time it takes to teach a course, lack of rewards in the form of
compensation or tenure and promotion processes, lack of preparedness on the part of the student, and the
lack of interaction with students as the greatest barriers to online instruction. One instructor claimed to be
spending "about 200 to 300% more time preparing to and teaching online than I did when I taught in the
traditional classroom." He was very positive, though, in the sense that he added that even though "the
time investment is enormous" he still "love[ s] the work." 51
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Determining the Costs of Online Courses 52
It is interesting that the largest barrier found from both the developing and teaching survey was
that this type of education consumes a tremendous amount of time. Rockwell (1999) confirmed this in a
survey she did. Sixty-nine percent of the respondents to Rockwell's survey reported that the largest
obstacle to online courses was the time requirement. One faculty member from a university in South
Carolina summed it up best by saying "I need to sleep and eat." This individual has developed 10 online
courses and teaches about 100 students online in four or more courses each semester. He said that the
lack of time to do anything else is the greatest barrier because it is "very labor intensive."
In relation to the lack of interaction with students, one instructor claimed "it is remarkably easy to
start and maintain a miscommunication with only the written word for communication. When one can
speak in front of a traditional class, he or she can SEE if someone has 'lost it', and back up to try again.
With no real contact, a student can go an entire semester with incorrect ideas of what is expected of him."
Another instructor alluded to a barrier as not being able to see student's reactions. "Reading is still not
the same as seeing visual aids an instructor utilizes. The explanations and interaction are not as prevalent
with online coursework. Many want the credits without the usual course intercommunication." Another
instructor stated that they "don't think this kind of course can, or should, replace more traditional classes.
The instructor-student interaction is an important element of the instructional process, for both parties."
At the same time, one instructor claims that this is "the wave of the future," and still another who had
taught four classes said "I see NO barriers, yet some revision comes forth as student feedback is
implemented. But I don't see this as a barrier." Many have taken a dual stand in this regard. It goes back
to how well instructors are informed about how to teach in this environment as to whether or not this is
seen as a barrier. Rockwell found that 83% of those surveyed found that providing innovative instruction
was the largest incentive to teach online (Rockwell, 1999).
Several individuals who both developed and taught online courses stated their concern that
administration does not recognize their additional accomplishments when it comes to rewards, promotion,
or tenure. Olcott (1999) says that it is important to consider the current rewards and incentive systems so
that distance teaching receives equitable applicability towards promotion and tenure. One instructor 52
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Determining the Costs of Online Courses 53
stated that "there should be some consistency among universities (in adequecy of pay) if distance
education is going to be quality education. In addition there needs to be some recognition built into
faculty evaluation for teaching a distance learning course and for technological inovation. If institutions
are interested in quality they should recognize and reward it." Another blames the administration at their
University for the problem. "It is a tremendous outlay of time to design a quality course, teach it well,
and maintain it, but there is very little recognition on the part of administration that it differs at all from
the traditional classroom. Online teaching is dramatically different and the load issues and other faculty
related concern need to be redesigned to better fit this method of instruction." One instructor from
Australia looked at this a bit differently in saying "I don't think univ[ ersity] administrators appreciate the
effort involved in creating and maintains WWW courses --but they certainly are happy to take the
'profits'..."
In preparing this information, there was an advantage to having developed and taught an online
course. Because of teaching in the traditional classroom and background in the use of technology, there
does not seem to be any barriers to developing a course. The greatest barrier perceived is in the area of
instruction. As others agree, the barrier is the lack of preparedness on the part of the student. This is also
a major concern of another faculty member at Marshall University who believes that students "have the
wrong attitude--that this is supposed to be a short-cut through a course. Students who want to navigate
the course in the manner they choose rather than follow the syllabus are problems." Others agree. An
instructor from a community college in the US claims to spend more time "teaching technology and less
of it teaching my subject matter" because of a lack of technological preparedness. Many simply "are not
trained (or otherwise prepared) to take an online