Developing Telematic Based Learning Services

Costing Issues

by Peter J. Bates,
pjb Associates, UK

Whenever a trainer or an educator starts talks about introducing a new technology to use as part of the learning process, a common response from managers is - What does it cost? This question is proving to be very difficult to answer. A response back to managers who ask that question would be - "What does it cost to provide a specific learning experience through existing methods?" There may be some blank faces at this stage particularly from those offering a learning service within the public sector. Those from the private sector may be better equipped to provide a global budget figure – only because it has to be presented to their Board – and most human resource managers will probably say that they did not have enough funds.

However, the increasing use of multimedia and telematic-based learning is perceived by an increasing number of people to be the way forward to assist in the upskilling of large numbers of people and also the reduction of costs. The TeleLearn Project, which is partially funded by the European Commission, is aiming to help trainers and educators gain a better understanding of the complexities of costing issues through the establishment of an observatory to collate information on these issues.

Initial research findings have found that there has been very little work done in the area of vocational training and adult education, so early research has called upon work which has focused on open learning and higher education. As is often the case in the academic world there have been more studies and papers written on these than in the training world.

Categories of budgeting

One such study for the UK Employment Department Group in 1991 focussed on open learning courses in higher education institutions in the UK but did not cover the use of technology. However, it does attempt to identify the main types of costs and make some analysis of : -

"Comparisons with the Open University difficult to assess"

It concluded that the number of students required to break even was in general, higher for the open learning (OL) courses than for face to face courses, full-time or part-time. Once that was reached the potential financial contribution of OL courses was greater than that of conventionally taught courses. The cost of developing an OL course was less for a mixed-mode institution than for a wholly distance teaching institution, as converting an existing course is cheaper than developing a totally new OL course. It also made the interesting point that the scale of operation of the Open University in the UK as compared to other institutions involved in distance teaching is so great as to make any comparison difficult to assess.

According to Betty Collis budgeting for tele-learning (2) may be approached from the perspective of:

Programme - line item expenditures and revenues for a self-supporting activity, typically under one manager and for a specific time period

Supported service - line-item expenditures that are dependent on the allocation of limited resources during a budget period

Subsidy - allocations from a reserve or development fund for a specific purpose

Capital equipment - the generation and expenditure of funds for capital items that could return value to the system.

She considers of particular importance to the planning and management of tele-learning is the distinction between: a self-supported programme and a supported service, re-occurring budget components and one-time subsidy allocation and the interpretation of "bring value to the system" that can motivate capital-equipment expenditures.

ACTIONS - developing a decision model

According to Tony Bates, Director of Distance Education and Technology, Continuing Studies, University of British Columbia, design decisions concerning the use of multimedia in a course tend to start with the idea of using a particular technology or even a particular piece of software or equipment. However, this is generally not the best place to start. He has devised a set of questions, which need to be answered before choosing the technology. The questions make use of the acronym ACTIONS. (3)

Access - How will students access the teaching? - through campus labs, home-based computers, community skills centres? Will the students be in the region, across the whole of the country or across the continent? Will there be different versions of the materials for different target groups? Will students learn in groups or individually, anytime or anywhere?

Costs - How much money is available and how much is needed? What will be the cost of development and of delivery, and what parts of this will the student pay for? What will be the cost per full-time equivalent student over the life of the course, for the various possible technologies for this project? Are there secondary markets that will increase revenue?

Teaching - What are the teaching requirements of this course?

Interaction and user friendliness - What kinds of learning does the subject matter require? How well does a particular technology facilitate this kind of activity? How easy is the technology to use, for both teachers and learners?

Organisational infrastructure - Is the necessary technology and human support infrastructure in place?

Novelty - How new is this technology? Is it well enough developed to be reliable? Is it innovative enough to attract funding?

Speed - How quickly and easily can courses be developed, and changes made, using this technology?

"to reduce costs in the long run, some costs must be shifted to the student"

Moonen (4) points out that so many variables affect cost calculation that only generalities emerge after any careful attempt at analysis. His major conclusion - to reduce costs in the long run, some costs must be shifted to the student. Students must take more responsibility for learning themselves, and expect less personal contact from instructors.

In one way, tele-learning resources such as interactive learning materials made available via WWW sites, can help this to occur. On the other hand, the desire for communication that tele-learning resources stimulate - through email and different forms of conferencing - can increase the amount of time that students expect to have from their instructors.

Not surprisingly, a study (5) in 1994, also found that there were significant savings when learners undertake all or part of their studies in their own time (i.e. training time is unpaid) or in relatively quiet periods (i.e. where the employee is paid, but training time makes little or no impact on their work output). The study considered that sometimes learners’ time is viewed as a cost in terms of lost output, although the reality is that few instances can be linked directly to a loss of sales due to the existence and possibility of stocking up.

This is however more applicable to service industries where stock cannot be kept. The report produced for the Learning Methods Branch of the UK government Employment Department in 1994 mainly covered traditional open and flexible learning in large companies, using paper-based materials with sometimes audio and video cassettes. There was one example of "newer" but now outdated technology the "video disk".

However, the study found that absolute reductions in costs of trainee time using open and distance learning (ODL) were found to range from 46% to 90% of those of conventional training. But it is noted that not all companies formally recognise savings resulting from the use of "quiet time" for training.

The report also cited key factors that can influence the decision to use OFL: geographical spread of learners (particularly if international), consistency and quality of message, need for flexibility of learning, appropriateness of delivery mechanism and availability of conventional courses.

In examining the relative cost effectiveness of ODL verses conventional training, the report stated that it must be appreciated that there are difficulties due to the close relationships between cost effectiveness, cost efficiency and training effectiveness. An ODL programme could be cheaper to run than a comparable conventional training programme, but if the resultant learning were ineffective, then it would not be deemed as cost effective. Therefore:

cost effectiveness of training = f (cost efficiency of training, training effectiveness)

The study primarily focused on the cost benefits associated with ODL, i.e. cost efficiency. The case studies do provide a convincing argument with cost advantages of open and flexible learning over conventional training of between 12% and 90% in a range of circumstances. With these savings a company could raise the profile of training by providing more training within their budget and/or create additional training opportunities which were too expensive or regarded as impractical before.

From the companies interviewed for the study, cost justification is greatest where OFL:

Can technology substantially reduce costs?

For those that think that technology will substantially reduce costs a warning comes from Tony Bates (6). He believes that technology cannot substantially reduce the costs of education without a parallel loss in quality. The interaction between learner and a real teacher can be substituted only to a certain extent by learning materials. Learners are always capable of generating questions and ideas that cannot be adequately anticipated by machine-based learning. If the learning system cannot handle this diversity, then the quality of learning will drop.

Ruth Sharratt (7) also believes that there needs to be some careful costings done on the "Virtual University" concept. There is an assumption that it is cheaper than a physical university, but this does need to be checked. The sorts of costs that need to be included: infrastructure costs - capital/current, course development & maintenance costs, delivery costs - software / hardware, tutor / support costs, administrative costs, Management costs and royalties. Some of these costs may be hidden, in that they are met by the participating institutions, and all that is needed are marginal costs. However, scale is a factor, and organisations may incur extra costs in order to meet the increased scale of demand.

She considers that at the moment much that is on the Internet & WWW is free to the user. This situation may well change as mechanisms for charging come into place. To compare with a conventional university, there needs to be some method to desegregate course costs from the other activities of a university.

She also calls for quality of outcomes needs to be assessed. Learning is not information transfer - it is a process, which involves discourse, assimilation, and application. The effectiveness and value of the virtual university needs to be measured in some way. She considers that we do not know what is the effect, if any, of on-line systems of delivery on learning outcomes. There has been some research and much is ongoing, but the picture is certainly complex. We also do not know the cost of on-line delivery. Partly because equipment/physical infrastructure costs are changing all the time. Partly because the process of delivering courses is also likely to change as we become more familiar with the technology. Until we know those costs and the outcomes the investment produces, we are not in a position to say that it is more cost effective than, say, other DL modes of delivery or face-to-face. It should be, but it does need to be checked.


1. "Report of the Investigation into the Cost-Effectiveness of Open Learning for Producers" by Contact produced for the UK Employment Department Group, 1991

2. "Tele-learning in a Digital World" Betty Collis 1996 pp. 373-4

3. Based on the article "Multimedia Projects - Design issues for instructional multimedia" in The newsletter of Computing and Communications, University of British Columbia, Canada October 1995. Tony Bates can be contacted via Email:

4. Moonen, J. (1994) How to do more with less? In K. Beattie, C. McNaught, & S. Wills (Eds), Interactive multimedia in university education: Designing for change in teaching and learning (pp. 155-164) Amsterdam: Elsevier

5. "Cost Effectiveness of Open and Flexible Learning" edited by Brian Tucker of The Forum for Technology in Training for Learning Methods Branch, Employment Department, UK in 1994.

6. Taken from keynote presentation at the Queensland Open Learning Network Conference "Open Learning: Your Future Depends on It" 4 - 6 December, 1996 Brisbane, Queensland, Australia. The title was "The Impact of Technological Change on Open and Distance Learning" by Dr. A. W. Bates, Director, Distance Education and Technology, Continuing Studies, The University of British Columbia, Canada. The full paper can be found at: brisbane.html

7. Original item appeared in DEOS L on Wed, 23 Oct 1996 Ruth Sharratt is Acting Director Distance Learning Unit, University of Sheffield, UK


About the author

Peter Bates is the senior partner of the educational consultancy - pjb Associates. Under a contract with LearnTel, pjb Associates is providing project management and research for the TeleLearn Project. He can be contacted via Email:

Issue 14&15 "Learning in a Global Information Society" 31 January 1998