- The Washington Times - Monday, February 18, 2002

The U.S. Army's decision to spend $453 million on a new cyber-education program for soldiers indicates online learning is big business.
The fact that three local companies are among the firms sharing the contract shows electronic learning has become big business around Washington.
The contact to design and deliver eArmyU is the largest ever for an electronic-learning project.
The main contractor and two of the subcontractors awarded the contract are Washington-area companies. Long known as a hub for Internet companies, Washington has quietly become a center for cyber-education businesses.
An estimated 65 firms in the area are marketing the technology and content that schools, private-sector employers and the federal government need to put information online. Washington's tech firms are helping young students take courses at home, college students sign up for courses and corporate workers participate in training programs.
"I find electronic learning to be exceptionally compelling and I find it especially satisfying because this area is turning out to be a major electronic-learning cluster," says Christopher Gergen, the 31-year old co-founder of Smarthinking Inc., a privately held company in the District that tutors students online.
Mr. Gergen, whose company is one of the three local firms helping run eArmyU, is arguably the most ambitious and voluble booster promoting the region's nascent electronic-learning companies.
In a sparse conference room at the headquarters of his Pennsylvania Avenue company, Mr. Gergen explains that his goal is to draw attention to electronic-learning companies doing business here and attract others to the region. A bigger cluster of companies will help attract investment and attract workers, he says.

Taking root

The effort to boost the number of electronic-learning companies took root nearly two years ago.
Thomas G. Morr, managing partner at the Greater Washington Initiative, an economic-development group, remembers a conversation in June 2000 on a trip to Halifax, Nova Scotia, to recruit Canadian companies to the region. A local businessman who accompanied him said the number of Washington-area tech companies engaged in online education was rising and suggested the Greater Washington Initiative turn its economic development efforts toward the burgeoning industry.
By the fall of 2000, Mr. Morr and his colleagues gathered a group of electronic-learning chief executives to see just how many there were and whether they supported efforts to attract other companies.
They did.
As part of the endeavor, the Greater Washington Initiative published the first-ever list of area electronic-learning companies last October. It is working on a new report to quantify the industry's fiscal effect on the area: its combined work force, payroll and revenues.
Recruitment efforts are under way, but Mr. Morr can't yet point to a single electronic-learning company that the Greater Washington Initiative has convinced to move here since it began recruiting efforts.
But he is optimistic.
"We believe it will work," he says.
The cluster of companies can attract other firms in the same industry, he says.
To date the reason so many electronic-learning companies have set up shop here has more to do with the presence of the Department of Education, the teachers' union headquarters and the numerous nonprofit groups representing educators and administrators than it does with the economic development agency's efforts to attract them.
The landscape of electronic-learning companies doing business here now consists mainly of small firms, but analysts say they have room to grow because the public's appetite for electronic learning is big.
Electronic learning used to be synonymous with taking school courses online. In fact, it means using the Internet to deliver all educational and training material for either students or workers. And schools aren't even the most prolific electronic-learning customers. Corporations and nonprofit associations that want employees to take mandatory training programs or want members to have access to materials for continuing education are the electronic-learning industry's biggest clients.
"We believe demand will grow very fast," said Daniel Neal, chief executive of VCampus Corp., a publically traded Reston firm marketing the technology and services that corporations, associations and government agencies use to deliver training programs.

A growing industry
Electronic learning already is a $5 billion industry, says Jerry Herman, managing director of education research at Baltimore investment banker Legg Mason Wood Walker Inc. Corporate spending for online-training programs will reach $15 billion within two years, Mr. Herman predicts. Spending by colleges and universities lags behind corporate spending, but higher education still invests about $2 billion a year in electronic learning.
By 2007 electronic learning will grow to an estimated $40 billion industry, Mr. Herman says.
"Electronic learning is not a niche industry," says Matthew Pittinsky, chairman and co-founder of Blackboard Inc., a 4-year-old privately held District company. Blackboard's enormous growth has been fueled by demand for software that colleges and universities need to put course information, registration services and teaching and learning applications online.
The local landscape of electronic-learning companies is populated with small firms. But Blackboard has blossomed to become one of the anchors of the region's online-education cluster. Its 2000 revenue reached $32 million, and it hasn't disclosed 2001 earnings.
Mr. Pittinsky and Blackboard President and Chief Executive Michael Chasen, classmates at American University, were working together at KPMG Consulting's online-education practice in 1996 and 1997 when they decided to start their own electronic-learning firm. Online education was still an unfamiliar concept in 1997, and the college friends had difficulty attracting interest, let alone investors.
"I had a tough time believing this group of people could build a company," Roger Novak, co-founder of the Bethesda venture- capital firm Novak Biddle Venture Partners, said last month at the Third Annual Early Stage Venture Capital Forum in the District.
With Mr. Chasen sitting next to him, Mr. Novak explained that he turned down Blackboard's initial request for funding. But he reconsidered after hearing other investors and other entrepreneurs talk about moving education initiatives to the Web. When he saw Mr. Chasen some time later, he swallowed his pride and made an admission.
"I'm the guy who spiked [any plans to invest in Blackboard]. I'm stupid. Let's do a deal," he remembers telling Mr. Chasen. Novak Biddle led the first round of venture-capital investment in Blackboard in Oct. 1998. Blackboard, which is also involved in the eArmyU contract, has raised $103 million to date, has 420 employees and 2,200 customers. Analysts say it is positioning itself for an initial public offering, perhaps as early as this year.
Mr. Gergen considers Blackboard to be one of the standard bearers of the regional electronic-learning cluster because of what its co-founders have accomplished. But Blackboard isn't the only compelling company here.

Learning pioneers
Smarthinking, founded in July 1999, works with 260 universities to provide online tutoring to students. It also provides online support for textbook publisher Houghton-Mifflin Co. Students who purchase one of 10,000 Houghton-Mifflin textbooks get a Smarthinking account and can consult one of its tutors if they have questions about material in the text.
Last month the company, which employs just 17 persons at its headquarters and has 150 tutors worldwide, secured a contract with the state of Massachusetts to tutor 10th-graders in its public schools who have failed the state's proficiency test and must retake the mandatory exam.
K12 Inc., a 10-month-old company in McLean with 140 employees, targets younger students by marketing software to parents of home schoolers and to the ever-increasing number of virtual charter schools.
Under the virtual charter-school model, students learn at home, have access to course materials online and have little direct contact with teachers. Teachers monitor the progress of students over computers and are in contact with parents over telephones, while parents lead children through lessons that K12 has crafted in language arts, math, history, science, art and music.
The K12 curriculum was written under the guidance of former Education Secretary William J. Bennett.
"We tell parents what their children should know, and that's very valuable," K12 Chief Executive Ron Packard says.
About 4,000 students at virtual public schools in Pennsylvania, Alaska, California and Colorado use the curriculum developed by K12, but the home school and virtual-charter school markets that the company targets are significantly larger.
Parents were home schooling an estimated 850,000 children in 1999, according to a U.S. Department of Education report last year. And there are at least 30 virtual charter schools in 12 states, according to the Center for Education Reform, a District-based school choice advocacy group.
The Center for Education Reform says about 10,000 students attend those virtual charter schools, which are public schools.
K12's curriculum for students in kindergarten through second grade is online now. The curriculum for students in grades three through five is expected to be online by September, and course material for students in upper grades will be complete in subsequent years.
VCampus makes most of its money serving the corporate electronic-learning market, but it is also turning its attention to the public sector. The company began running the General Services Administration's online-ethics course last year. GSA employees take the mandatory, self-taught course once a year. That will generate up to $4 million in revenue over two years for the publicly traded firm.
Last week VCampus started a new online-training program for the Social Security Administration that will generate up to $440,000 in revenue for the company over two years.
Despite the increase in the number of electronic-learning companies and the eager reception of online education and cyber-training by Internet users, the proliferation of electronic- learning companies may not continue.
"It will face the same constraints that the dot-coms did. We will begin to see that some companies find their future is better if it's tied to a bigger company," says Jill Kidwell, a principal at PwC Consulting's electronic-learning group, the Arlington company that was named the prime contractor on the eArmyU contract.
Some consolidation has already started.
Blackboard bought electronic-learning company Prometheus, based in Washington. last month, though terms of the deal weren't disclosed. Prometheus was a direct competitor of Blackboard with just 65 customers and its software also helped colleges and unviersities put course material online.
"Consolidation is a very important theme. I would expect a ton of merger-and-acquisition activity," Mr. Herman says.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide