Online MBAs Heading to the Ivory Tower

John Byrne Fortune January 27, 2011

While online MBA programs are nothing new, elite business schools are starting to offer the option to students, with UNC's Kenan-Flagler school the latest to join the party.

By John A. Byrne, contributor

(poetsandquants.com) -- When the dean of the University of North Carolina's Kenan-Flagler Business School first broached the idea of launching an online MBA program, his faculty and students were highly skeptical.

"Many of our full-time MBA students are not convinced this is a good idea," says Dean James Dean. "They underestimate the challenge of what it is for people to remain in their jobs and work and study for the degree."

UNC's Kenan-Flagler Business School plans to launch MBA@UNC in July.

Even Dean concedes that he had doubts. "To be honest, I was initially skeptical," Dean says. "I wondered: Can you really do an MBA online that you could be proud of? I came around to the idea that this was a great opportunity for us and could change the nature of business education at the top schools."

The upshot: This July, Kenan-Flagler will be the highest ranked business school in the U.S. to offer an online MBA program. The school expects to enroll 50 students in its initial class at a cost of $89,000 each, a price tag that includes up to four weekend residencies at different locations around the world. UNC is partnering with 2tor Inc., a company that provides the technology platform and instructional design to deliver courses online.

The two-year program, dubbed MBA@UNC, will feature pre-arranged sessions that use live streaming video as well as archived lectures and interactive simulations that can be accessed 24/7. Case study and lecture discussions also will be in both real time and via forum boards.

"The level of intimacy will be at least as high or higher than in the classroom because there are fewer people involved," says Dean. "You can hide in the back row in a classroom, but if you are one of 10 on a computer screen, you can't."

"Ten or 12 years ago, online dating seemed to have some scary edge to it," says Ian Van Tuyl, who as vice president of production at 2tor is working with UNC faculty to build the curriculum. "Today even your grandmother is urging you to go online and find someone. My sense is that online degrees will become as accepted as online dating is today."

Online MBA degrees, of course, are nothing new. About 11,000 business school students are currently studying for online MBAs at some 90 schools accredited by the Association to Advance Collegiate Schools at institutions like the University of Florida, Arizona State, and Penn State. The largest for-profit player, the University of Phoenix, has been offering an online MBA since 1989. More than half of its 66,000 graduate students are enrolled as MBA candidates.

But very few online players boast the prestige of the Kenan-Flagler Business School, which typically ranks among the top 20 U.S. MBA programs.

"It started out that the only providers were low quality and low reputation," Dean says. "Over the last few years, there's been a gradual migration toward the top so you see lots of reputable schools offering these programs. It follows the pattern of disruptive innovation, which starts from the outside and then makes its way inside."

IE Business School in Spain offers a global MBA online program with the highest status available today. The 15-month program has four 32-student cohorts a year, three in English and one in Spanish. With the exception of two one-week residencies at its main campus in Madrid, the entire program is online. The cost: about $50,000.

In the U.S., the pioneering top-rated institution so far has been Indiana University's Kelley School of Business. Now 10 years old, Kelley Direct boasts 1,500 current students on five continents, with roughly 40% of them enrolled in partnership programs with firms like John Deere, United Technologies, and Cummins. Like IE Business School, Indiana requires that students attend two one-week residencies at its main campus in Bloomington. The total cost: $57,000. Most students complete their degree in 27 months, though the coursework can be spread out over five years.

Duke University's Fuqua School of Business offers a pricey $146,600 hybrid MBA program, with five short, in-person sessions at its campus in Durham, N.C. as well as London, St. Petersburg, Dubai, New Delhi, Shanghai and Singapore. In between each residency, students engage in two months of learning from home via online classroom sessions, team projects and exams. Some 116 students from 105 countries are enrolled in the 15-month global executive MBA program.

Not everyone is convinced that online instruction is a quality substitute for an MBA program that brings together faculty and students on a campus for two years. Dave Wilson, CEO of the Graduate Management Admission Council, which administers the GMAT exam, says he believes online education is best suited for "rudimentary" courses in basic accounting or finance. "I'm not convinced you can use technology for deeper Socratic inquiries between a professor and the students," says Wilson.

For those who want an MBA and don't want to leave their jobs or incur a huge pile of debt, an online program can be a good option. That's why Tony Hodson, a consultant with Accenture in Washington, D.C., chose the IE Business School program. "The job I have is too good to give up," says Hodson, who graduated last month.

He says the experience exceeded his expectations, but it was hardly a walk in the park. "In the last 18 months," Hodson says, "I haven't shopped for groceries, cleaned the house or done the laundry. My wife has done all that. It's a huge commitment."

Instead of raising a hand during a 90-minute class, students post comments on online forums over the course of several days.

"The depth and quality of the posts is surprisingly good, better than in regular classes, because students have more time to think about what they want to say," explains Terrill Cosgray, executive director of Kelley Direct.

Cosgray also counters criticism that online students sacrifice important opportunities to cultivate friendships with classmates that can help them throughout their careers.

"That's a common myth," Cosgray says. "In fact, you can network with people across the country and across the globe. You may be on a team with someone in China, California and New York."

UNC Kenan-Flagler's James Dean believes that we will see an explosion in the amount of online MBA programs at elite business schools. As soon as word got out about UNC's launch, he says, four other top 25 U.S. schools contacted 2tor Inc., the school's partner, to explore similar programs.

Online MBAs Heading to the Ivory Tower

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