Next to all those sexy, unpredictable Internet applications, online learning seems pretty humdrum, but definitely has its feet on the ground, and is very popular with the old maid aunts. Distance learning (e-learning) has reached the world market, and means to stay there.
There are world famous names that want to take part in the buzz – Intel, for example, which recently made a strategic investment in the Israeli company Tegrity, is developing e-learning systems. Why Intel? E-learning combines two matters highly significant for the giant chip manufacturer: the educational market and the personal computer. Integrating the PC’s into every learning framework is Intel’s wet dream.
According to the IDC research firm, the organizational training market is expected to grow at a 40%-per-year pace. In 1999, $3.3 billion was already poured into start-ups in the field. Research by Piper Jaffray forecasts a $50 billion market in Internet-based learning by 2005. This rapid growth is explained above all by the expansion of Internet access: by 2003, 350 million Internet surfers are predicted.
At this point, it is worthwhile distinguishing between two different markets: academic and corporate. The first attracts with a recognized degree, the second with a professional training diploma and work advancement. The first belongs to respectable educational institutions hoping to get additional income. In Israel, the Open University is joining the club with an Ofek system.
Tel Aviv and Bar Ilan Universities already operate online study centers. Two million online students are expected by 2002, 1.75 million in the US alone, and in 2003 the global market will pass the $6 billion barrier.
To the second market belong companies wanting to train their employees and needing infrastructure and content. Acquiring education has become something that the average employee must continually strive for, and employers are usually happy to supply it, in exchange for a commitment to remain on the job. E-learning is simply an convenient way of doing it.
E-learning is convenient, but not necessarily cheap. Tegrity’s “Educart” system costs $12,000, not including users fees dependant on the number of users.
WBTIC, the information center for web-based learning, predicts, “an explosion of professional training”, following two trends: programmers expanding technical possibilities and providers of training realizing the potential. Companies focusing on e-learning only have only one goal: to teach, regardless of what they teach and to whom. Their aspirations to expand differ, but more on this later.
EnterWise Israel general manager Doron Dafna defines his company as “an Internet software company”. The “Millenium” system transfers the lesson from one central point over an intra-organizational network through normal dialing. Internet tricks, such as ICQ, Web Safari (the lecturer surfs together with his students), and Notes have also been included.
”Globes”: What about broadband?
Doron Dafna: ”If you’re talking about recorded audio broadcasts, we are already pushing them in advance to end users and thereby avoiding the problem. In addition, our system also includes asynchronous learning, which takes place in the student’s free time, rather than in real time, giving the system its market advantage.
Dafna says that 30 customers already exist, including Applied Materials, the US Department of Justice, Prudential, People Soft, the ClubKasparov Internet chess site, Comverse, Pele-Phone, and Bank Leumi. There is also strategic cooperation with SAP International (ERP) for training in use of its organizational system.
EnterWise itself, in which the chief investor is Benny Steinmetz, is currently in the final stage of a private placement at a company value of $80 million, including “negotiations for the entrance of an international company as a strategic investor”, the identity of which Dafna refuses to speak. The company also aspires to reach Wall Street this year and issue there at a value of $600-$800 million. They’re “going global”, to use Dafna’s words: “We are in Israel, the US, and Europe. We have a distributor in South Africa and activity in Japan”.
A hot field.
”Yes, the world is going to e-business, and that means every business management system: not just buying and selling, but also learning. There’s no e-business without e-learning”.
Where do you go from here?
”We want to be an Israeli corporation, like Check Point. We don’t want to be swallowed up. We’ll become a big player in the field in the next three-four years. People will take us very seriously”.
One company that has “gone global” only recently is the Sela Group, which has set up a subsidiary called youniversity.com with a $2 million investment. The subsidiary operates a site responsible for hardware and software courses. The content is taken straight from Sela’s traditional activity, from the activity of the computer and high tech faculty. Deputy general manager for marketing Alice Salpeter predicts 70,000 online students in Israel by 2002. The company is not solely relying on this, however.
”Globes”: Do you have overseas ambitions?
Salpeter: ”Youniversity is registered and operates as a US company. We want to penetrate the US training market, which stands at $40 billion and is expected to double itself over the next four years. The US currently has a shortage of a million programmers, and SELA intends to export know-how there”.
Yahud-based Tegrity is focusing on broadcasting lessons over the web, without stunts and fireworks. General manager Isaac Segal defines the activity of the company, which was founded in 1995, as “Internet learning and content solutions”.
Segal: “Anyone who hasn’t looked at education until now is beginning to do so, and several analysts are covering the field. The situation in the field can be compared to the medical market of 20 years ago, which was then very institutionalized, and is now large and private. The web is part of the reason
”We are working backwards. We aren’t going to change the teacher. Our job is to bring him the technique. All the teacher needs is to buy the product – a cart with a computer, a projector, and cameras. The lecturers have the intellectual capital, and we put it on the net”.
The Los Angeles municipality has already purchased 25 carts from Tegrity as a kind of pre-pilot. In the pilot stage, the municipality will buy 700 carts, and if it succeeds, they will buy “many thousands”. Segal claims that Tegrity’s sales have doubled in each of the last three years. What is the sales value? “Millions of dollars”.
Who else is on the list of customers?
”We are working closely with Microsoft International on many levels: outsourcing, co-development, co-marketing. We have an OEM agreement with Acer.
”In addition, we are now working with one of the three largest companies in the field of copyright training. An 800-man company is about to replace all its systems”.
B2B is also in the company sights.
So you, too, are in this market.
”B2B simply moves much faster. It’s trendy – it will balance out in a few months. For example, everyone’s thinking now ‘I must transfer my class to the web’”.
What are Tegrity’s aims?
”To make money”.
Will you issue soon?
”I don’t know. The vision is more important to us than the technique”.
Business logic is also guiding other companies, like Gilat Communications, which sells satellite services, but is making noises in the direction of e-learning. As part of a company shopping trip among online learning companies, Gilat has acquired 51% of John Bryce Training, which will insert content into its transmission systems. They have already announced the setting up of a dedicated portal in the field.
The involvement of Gilat in e-learning doesn’t stop here. The company added US company Allen Communications, which develops tools for constructing computerized courses, to its shopping basket for $23 million. Another Israeli company starring in the field is Arel Net, a subsidiary of Arel Communications, which has been doing well on the NASDAQ exchange since global beer manufacturer Anheuser-Busch has chosen the subsidiary’s system.
The buzz, it seems, is only beginning, and the end is not yet in sight. Today’s homework includes going over the successful business model: a product useful to humanity, a system with multiple uses, flexible prices, and work in English. Oh, yes, and don’t forget, B2B also.
Published by Israel's Business Arena on February 3, 2000