VIRGINIA M. ROMETTY, the chief executive of I.B.M., recently urged her employees to take 40 hours of continuing education this year. The company would not reimburse tuition, but would pay for expenses, like textbooks.
The offer inspired Todd Watson, an I.B.M. executive in Austin, Tex., to update his knowledge of corporate finance. But who needs tuition? Instead, he signed up for a free finance class created by the prestigious University of Michigan and offered by a start-up called Coursera. The company promotes massive online open courses — known as MOOCs.
“Voilà, problem solved,” wrote Mr. Watson on his blog. He could now rekindle his finance “love” and study “at no cost to myself or to I.B.M.”
Mr. Watson solved his problem, but he represents a larger one for many colleges and universities: MOOCs threaten to poach paying students. But at the same time, emerging competition in higher and continuing education will most likely lower costs for students.
Often likened to a tsunami or an avalanche, the free online learning juggernaut gained momentum in the past year. Coursera, which counts Columbia and Princeton among its elite affiliates, has two main competitors.
A nonprofit venture founded by Harvard and the Massachusetts Institute of Technology, edX features 26 classes, including “Quantum Mechanics and Quantum Computation.“
Another competitor, Udacity, backed by venture capitalists, was begun by Sebastian Thrun, an acclaimed computer science professor, after more than 160,000 students took his online artificial-intelligence course at Stanford University. He thinks Udacity will ultimately increase enrollment at brick-and-mortar institutions by preparing more underserved high school students for college.
“There’s a distinction that people often don’t make,” said Professor Thrun, “which is whether these classes reach existing students and take away business, or whether they reach new students and add to the business?”
While that question is being answered, MOOC-phobia continues to spread. Last year, the University Professional and Continuing Education Association entitled its annual conference “Resilience.” This year’s event is called “Disruption 2.0.”
“Everybody should be afraid of MOOCs,” said Gary W. Matkin, dean of continuing education, distance learning and summer session at the University of California, Irvine, “although there are some that should be more afraid than others.”
He scoffs at the notion that MOOCs threaten top-tier residential universities, like his own. In fact, he headed his university’s alliance with Coursera.
For the universities that create free online courses, mainly major colleges with A-plus brands, relationships with Coursera, Udacity and edX could pay dividends. Mega classes, which can draw hundreds of thousands of students, may aid faculty retention, providing a perk for star professors. And all MOOC marketers promise to share revenues with partner universities, although the path to profitability is murky.
Professor Thrun, Udacity’s chief executive, concedes this. “The truth is for all these massive online courses that are being offered for free, there’s clearly a question of what our business model is, and I don’t think there is a good answer quite yet,” he said.
Still, Mr. Matkin forecasts tough times ahead for what he calls the “mediocre middle” — institutions that have not been invited into what amounts to a higher-education V.I.P. room.
The future is brighter for students, whether in continuing education or not. Mr. Matkin says he believes that as colleges start to give credits to students who complete MOOCs, market forces will pressure many other institutions to liberalize their credit-transfer policies, bringing educational costs down.
Last month, the American Council on Education’s College Credit Recommendation Service, which many institutions rely on to assess whether workplace and military training courses merit credit, included free online courses for the first time. Five Coursera courses passed the test, and four Udacity classes have a received a “preliminary thumbs up,” said Professor Thrun.
“If people are coming at you and they’ve got learning that they can demonstrate from other institutions, are you going to turn them away?” asked Mr. Matkin. “Or are you going to make them take that class over again? I don’t think so.”
“Shifting Ground: Technology Begins to Alter Centuries-Old Business Model for Universities,” a 2012 report by Moody’s Investors Service, delivers more grim, or great, news depending on whether you are a dean or a student. The report warned, “Less selective, smaller colleges that are unable to join emerging networks or carve out an independent niche will likely experience credit stress driven by declining student demand.”
Online upstarts offering free classes could particularly hurt profit-making degree-granting schools, like the University of Phoenix, predicts Chris Peterson, a researcher for the MIT Center for Civic Media.
“For-profit colleges only enroll about 12 percent of the nation’s students, but these students are responsible for over 50 percent of the nation’s defaults in student loans,” Mr. Peterson said. People turn to profit-making education, he argues, “because they have no other option when they have a job, when they have a kid, when they have other things eating into their life.”
Mr. Peterson said he envisions free online courses evolving from a jumble of individual courses into free degree programs.
“Rather than paying large sums of money to a proprietary, for-profit university for a degree of contested value, you can instead get a free degree of contested value,” said Mr. Peterson, “where at least you know the content is good.”
Continuing education programs are also vulnerable and could lose 10 percent to 20 percent of their students to free online courses from esteemed universities, said Tony Bates, an online learning consultant and former director of distance education at the University of British Columbia.
“It’s not rocket science,” he said. “Why would I even go to U.B.C. to do a continuing studies course on artificial intelligence, when I can get one from the top professor at Stanford for free?”
What the free online courses take with one hand they may later give back with the other, said Cathy A. Sandeen, vice president for education attainment and innovation at the American Council on Education and former dean of U.C.L.A. Extension.
“Right now, MOOCs are not organized in any sort of a program — it’s course by course,” she said, “whereas continuing education is probably some form of a credentialed or certificate program, a series of courses.” For example, Ms. Sandeen can see students sampling Berklee College of Music’s Introduction to Music Production through Coursera, getting “turned on” and then paying tuition for a more comprehensive program.
There may be another way for both administrators and students to benefit from the MOOC revolution.
“A lot of the offerings could be complementary to what we do,” said David Grebel, president of the Association for Continuing Higher Education and director of extended education at Texas Christian University. “Let’s say I’m doing a class on the Civil War, and if there’s a James McPherson lecture out there in a MOOC,” he said, referring to the Pulitzer Prize-winning historian, “it’s a great resource.”