A Degree of Respect for Online MBAs
Web-based programs lack Ivy prestige, but they can boost aspiring executives' fortunes.
By Krysten Crawford

(Business 2.0) – Last year Samantha Kitover reached a critical point in her career. A 25-year-old Chicagoan who works as a sales trainer for Canon USA, Kitover figured she'd boost her salary and increase her options if she got an MBA. But she didn't want to quit her job, and frequent business trips ruled out a part-time program at a local college. "I couldn't guarantee I would be in town for a Saturday class," she says.

Her solution? The online MBA program at University of Phoenix, a for-profit educator that has become the largest institution of higher learning in the United States. Now Kitover's classroom is her laptop. Hotel rooms double as late-night study lairs. Just a few months in, she's happy with her decision, even though it means her only chance of meeting her classmates will be graduation day--in 2007. "I'm an informed consumer," she says. "And this is the way things are going."

Kitover isn't the only one who thinks so. Enrollments at online MBA programs are soaring--to about 125,000 students from virtually zero 10 years ago--even as applications to traditional business schools have dropped. And while online programs might not grant access to powerful alumni networks or the most prestigious consultancies and investment banks, respect for the degrees has increased to the point where, for some, getting one makes good career sense. "Our perception is that an online education from a reputable college or university is as valuable as the degree offered on-ground," says Alan Fisher, manager of corporate extended education at Intel, which pays for employees to earn MBAs through various Web-based programs. "We don't differentiate between the two."

More than 150 accredited business schools now offer online versions of their curricula, according to GetEducated.com, which tracks online education. Some of the biggest players in Internet-based MBAs, however, are companies like University of Phoenix (a subsidiary of publicly traded Apollo Group), which boasts an enrollment of 18,800 online MBA students, and Capella, which plans to go public and has about 1,000 MBA students. The nation's top 20 business schools (as ranked by U.S. News & World Report) have yet to offer online programs, but prominent midtier schools like Indiana University and Arizona State University have jumped into the market.

Fueling the boom in Internet-based management education are corporations hungry for better-trained executives. General Motors pays for its employees to earn an MBA through an Internet-based school launched two years ago by the New York Institute of Technology and Cardean University. Ingersoll-Rand has a deal with Indiana to customize an online MBA program for its employees. Capella offers tuition discounts to Fortune 500 companies like Boeing, Johnson & Johnson, and Wells Fargo for putting the school on "preferred provider" lists. Online MBAs serve "a real market need," says Trace Urdan, an analyst with Robert W. Baird's equity research unit. "It's a win-win for companies and employees."

Many online MBA students might otherwise have chosen traditional part-time degrees. Karen Breinlinger, for instance, was working in the human resources department at Corning, in western New York, when she enrolled in Syracuse University's Internet-based iMBA. That meant she didn't have to give up her job and could do coursework at night after her kids had gone to bed. She graduated in May and is now working a higher-paying management-level job in the company's product development division. "The heavy business training balanced out the lack of technical training" required for her new job, she says.

Daniel Forester, a 26-year-old industrial engineer at Bridgestone Americas in Nashville, Tenn., also wanted a management degree without leaving his company. Currently working toward an online MBA from Arizona State, Forester estimates he spends 20 hours a week on average "at school." In the evenings and during lunch breaks, he accesses course readings, video clips, and class discussion boards through a secure website. He takes one course every six weeks and is graded partly on his participation with classmates and professors in online discussions about assignments. There are some hard deadlines too: He has 48 hours to complete a final exam once he downloads it.

Detractors say the Internet can't deliver the valuable career contacts that traditional business schools offer. "There's definitely a case to be made for talking to classmates face-to-face every day," Forester admits. But he's been surprised by how easily and quickly he's made friends. He e-mails jokes to an economics professor he's never met, and the Web serves as a virtual student lounge where Forester and his classmates can hang out the way their on-campus counterparts might. It helps that Arizona State requires all incoming students to spend a week on campus and divides classes into small groups of six. Most online MBA programs, in fact, follow this hybrid model, offering a mix of Internet and live instruction. Some, like University of Phoenix and the University of Michigan at Dearborn, however, don't require their online students to set foot on campus.

Of course, if you think an online MBA is a way to get a degree on the cheap, do some homework. Many schools charge as much for online degrees as for offline ones--or more. At Arizona State, for example, a two-year online MBA costs $38,000; a full-time campus MBA runs $30,000 for state residents and $50,000 for out-of-state students. University of Phoenix students pay up to $33,140 to get an MBA over the Internet--about $12,800 more than the average cost of a similar program offered in the school's physical classrooms. Syracuse charges the same, about $50,000, whether an MBA is earned online or off.

Also, the broader online education industry has come under increased scrutiny. University of Phoenix last year paid $9.8 million to settle U.S. Department of Education allegations that it improperly tied employee pay to enrollment numbers. Regulators are also investigating whether Career Education, which runs two online MBA programs, misrepresented the financial-aid eligibility of its students and job placement rates of graduates. Amid the controversy are signs that the meteoric growth of for-profit educators may be slowing: Shares of Apollo Group, Career Education, and Corinthian Colleges are trading far below their spring 2004 peaks.

But that hasn't stopped even the more prestigious schools--long fearful that Internet distribution might tarnish their brands--from making their way online. The curriculum of Duke University's $115,000 executive MBA is largely Internet-based, and in June the University of Virginia plans to launch a $90,000 MBA program for senior managers that will make extensive use of the Web. Even at Harvard University, incoming MBAs now take prep classes online before arriving on campus, and this fall a B-school class on leadership was taught entirely through the Internet. It may be just a matter of time, then, until all MBAs are available online. "I work with people all the time whom I rarely meet face-to-face," says Intel's Fisher. "That is the real world of business today, and anybody who says online MBAs don't work is just fooling themselves."