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Finances of e-school are not making the grade

Four UK institutions receive tiny return on millions invested in U21Global. Melanie Newman writes

It was an ambitious project from the outset: an online graduate school backed by an international consortium of universities that promised to tap into the hugely lucrative global higher education market.

But eight years on, after millions of pounds in investment by British universities, U21Global is under growing scrutiny, with the University and College Union and a book by a New Zealand law professor raising questions about its financing and academic credibility.

The universities of Birmingham, Edinburgh, Glasgow and Nottingham have invested more than £5.5 million in the project, but have recouped only £40,000 - a return of just 0.7 per cent.

And while the British participants remain supportive, four overseas universities have walked away from the project.

U21Global was established in 2001 as a joint venture between Thomson Learning (now known as Cengage Learning), the education and training arm of Canadian conglomerate Thomson Corporation, and 16 members of Universitas 21, an international consortium of higher education institutions incorporated in Guernsey. Five other universities then joined the venture.

Nottingham has to date invested £2.3 million - all from externally generated funds - and has earned royalties of about £11,000. Birmingham has received the same sum on an investment of £1.3 million.

Glasgow made a single contribution of £1.3 million in 2001 and declined requests for further investment, having received royalties of just £7,800.

Edinburgh invested $1 million (£610,000) in 2001, with subsequent investments in 2006 and 2007. It has received royalties of £7,690.

The long view

The universities insisted that short-term financial gain was not their prime motivation for involvement, and that e-learning expertise and partnerships in teaching and research had been more significant returns.

However, the U21Global business plan, drawn up in 2000, forecast 2011 revenues of $820 million and an operating profit of $325 million - an operating margin of 39 per cent. Plans to move into undergraduate provision have not come to fruition.

Thomson Learning withdrew from U21Global in 2007 and was replaced by Mauritius-based Manipal Universal Learning International. In 2008, four institutions - the universities of Auckland and New South Wales, McGill University in Montreal and the University of British Columbia - also pulled out.

Christopher Tremewan, pro vice-chancellor (international) at the University of Auckland, said the institution had not wanted to invest more money in the venture, and had "learnt all we could from it about online education".

In June, UCU representatives at each of U21Global's four UK members wrote to their vice-chancellors with questions about the venture.

"We are aware that university partners in the Universitas 21 consortium were each asked to contribute towards the initial investment of £50 million in the joint venture," they wrote.

"We are also aware that in July 2008, following the news that student recruitment was about half what was necessary for the joint venture to break even, the universities were asked to invest further in the company."

The UCU representatives asked whether the vice-chancellors remained committed to the project. All four confirmed that they were.

Jane Kelsey, professor of law at the University of Auckland, has been highly critical of the venture.

In her book Serving Whose Interests? The Political Economy of Trade in Services Agreements, published last year, she writes: "The original U21Global business plan said the shareholding universities would recoup the total initial investment of $50 million in six to nine years.

"However, the projected 5,000 students by 2004 did not materialise. As of mid-2005, some 600 students from India, Singapore and the Middle East were enrolled; each paid fees of up to $12,000 ... U21 shareholders were asked for a further multimillion-dollar injection, knowing that if they refused, a high-profile venture that bears their brand names might fail.

"By 2007, the U21Global website still claimed only 3,000 students in 60 countries, well short of the 10,000 it reportedly needed to break even."

Money's not the only object

Nick Hutton, chief executive of U21Global, said it was "unfortunate that Professor Kelsey should concentrate on financial gain alone".

"The real value of U21Global is in the quality of the e-learning that takes place, and the gains that have been made in the development of a highly interactive, professor-facilitated learning environment," he said.

Currently, U21Global has enrolled just under 7,000 students, he added.

He declined to comment on the UCU's claim that universities had been asked for further investment in 2008 because recruitment targets had been missed.

Asked whether the venture was still on track to make a profit of $325 million by 2011, Mr Hutton said it had "revised its business expectations in the light of changing circumstances".

In a speech to a UCU conference in May, Professor Kelsey also criticised U21Global's quality-assurance processes, and said that the venture had "all the classic features of risky privatisations". Students who buy its products have no guarantee that their qualifications will be recognised internationally, she claimed.

However, U21Global said that all its courses were approved by "U21 Quality Assurance" as being of an academic standard equivalent to that maintained by its member universities.

melanie.newman@tsleducation.com.

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