I’ve always liked the saying “May you live in interesting times.” It seems to embrace the excitement of change -- exploring the unknown, solving life’s puzzles, stepping up to challenges. I recently learned that this saying might come from an ancient Chinese curse.  Perhaps this explains the fear and gloom that hang over the world today.

At the recent EDUCAUSE conference, no conversation was complete without talk about the state of the global economy. University staffers chatted about probable cuts and purchasing freezes. Employees from software vendors speculated about market consolidation. Companies across the exhibit hall were visibly tightening their belts -- slashing the number of staff who attended the conference and eliminating after-hours receptions that only last year were in great abundance.

Hardware companies have been feeling the pinch for many months. Reports of large discounts abound. The consensus is that CIOs first look to trim their hardware budgets before eyeing cuts elsewhere. “That phone switch can last another year.” “Those servers will hold out another 6 months.”  “Let’s put off refreshing the computers in that lab for another year.” 

Software licenses are harder to trim because they are “seen” by faculty and students. If you’re trying to make cuts to a technology budget, you can get there much faster by delaying hardware purchases than by cutting “customer-facing” software. 

I’ve been asked by customers how I think the economy will affect higher education and K-12. The first thing I point out is that it’s extremely rare for a university or school to fail. Compared to the corporate sector where nearly 80% of businesses fail within their first five years, education is downright boring in this regard. Even the worst performing institutions don’t go under.

In the United States, there’s no doubt that institutions highly reliant on state or federal funding will see budget freezes or cuts in the months ahead, if they aren’t already. It will be painful and frustrating, but not fatal.

Among e-Learning vendors, there will certainly be fatalities. Companies that need capital in the next few months will be in trouble, leading to market consolidation or failures. Companies that sell products in the “nice to have, but not critical” category will also feel pain. The hardware companies are likely to post some awful numbers in the coming months, but will survive. Software companies that have perpetual licensing models instead of subscription licensing models (or SaaS) will feel like they’ve hit a wall.

I’m confident Respondus will emerge from this economic downturn in good shape, possibly stronger than before. We’ve always been lean and we have been profitable since 2001. While other companies have emphasized ”growth at any cost,” we’ve focused on increasing our customer base and delivering products that 1) increase faculty and student use of course management systems, and 2) reduce support costs for faculty who are using online assessments.

Our Respondus 3.5 software is a good example of this. Over 1,000 institutions have a campus-wide license because it increases faculty use of online testing within course management systems. If an instructor has test questions in another format, such as MS Word, they can spend hours copying-and-pasting questions into their CMS, or 5 minutes with Respondus 3.5 to achieve the same results.

Respondus LockDown Browser is our fastest growing product because it helps solve a highly visible problem -- students cheating during online assessments. Our solution is easy for institutions to implement, yet the price is downright cheap. Where else can an institution purchase a software license for under $5,000 that allows 35,000 students to install or use it? 

Over the last two months, nearly 60 institutions have begun piloting our new StudyMate Class Server product. At first glance, this product seems to be in the “nice to have, but not critical” category. But students and faculty have rapidly become huge fans of “the ultimate study group” concept. Instructors rave about how it is “revolutionizing” their courses. That makes me smile -- after all, revolution is the pinnacle of change.

I believe that the current economic climate will result in many positive outcomes for the e-Learning industry. It will force educational institutions to trim fat, think creatively, and be selective in their purchases. Likewise, it will force e-Learning vendors to develop products that solve real problems and are priced competitively. We shouldn’t forget that the e-Learning industry itself is the result of radical changes that occurred in education over the last 10 years.

Embrace change. Change is good. May we live in interesting times, even when budgets are tight.

David Smetters
CEO, Respondus Inc.

Source: Respondus, Inc. (www.respondus.com)
Originally Published: November 19, 2008

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