Coding Bootcamps and Higher Ed (4 of 4)
PART 4: INDUSTRY OUTLOOK
So, what does this all mean for the coding bootcamp industry?
The two high profile closures probably have little to do with the health of the bootcamp industry, but more to do with the political climate in for-profit Higher Education. With no need to shore up 90-10 ratios, for-profits that had been shaking in their boots under Obama can breathe easier under Trump, and no longer need cash revenues from bootcamps. It’s believed that neither Iron Yard (15 cities, 9 states) nor Dev Bootcamp (6 cities, 5 states) were profitable. Was this because of the increased cost associated with multiple regulatory bodies? Maybe. Either way, it’s apparent that the cost of carrying break even or losing investments as a hedge no longer outweighed the benefits.
Industry speculation (and Edcelerant’s own modeling) says that most schools are running at around break even when they can graduate 120-150 students per year (or until they can complete multiple cohorts in a single city at the same time). For programs in large cities, real estate and regulatory oversight are the highest operating expenses, so having multiple smaller programs across many states may have hit Iron Yard’s bottom line pretty hard.
As to the future of the industry, I’m pretty optimistic that new models will shake out. That is, in fact, why Edcelerant was created. Demand for talent continues to grow much faster than supply, and the difficult immigration and visa climate will only make the talent gap grow wider. Right now, there are roughly 800,000 open positions in the United States that require coding skills. The Bureau of Labor and Statistics sees that number growing to 1 million jobs by 2020.
Coding bootcamps, especially the more intensive, in-person programs, are changing the lives of graduates by increasing their earning potential exponentially. With demand for talent so strong, even the mediocre students are quickly employed, averaging a 70-75% increase in salary within a year. Coding bootcamps have become the new white collar vocational school, producing well-paying jobs as coders, but not computer scientists. Carnegie Mellon and MIT have nothing to worry about.
Student demand is steadily growing, though financing options and limited credible industry data make the decision to enroll difficult for those not deeply knowledgeable of local tech employment opportunities. Employer demand here in the Philadelphia area is very strong. More than a few large employers have stated publicly that they are eager to hire bootcamp grads, as ten thousand positions currently sit vacant.
Employers benefit from bootcamps beyond just creating a larger talent pool from which to hire. When schools work directly with employers to help craft the curriculum, schools are ensuring that graduates enter the workforce with the proper skill set necessary to hit the ground running at a new job. Employers working directly with schools can significantly decrease the hiring and onboarding costs for junior development talent. That’s where Edcelerant comes in. We act as an intermediary between schools and employers, guiding curriculum and program design, and coordinating job opportunities.
We predict a few significant changes over the next couple of years. First, the programs that produce lousy coders will go away, as employers will stop hiring the below-average graduates. Developing and maintaining relevant, up-to-date curriculum is incredibly expensive, so bootcamps that do not scale quickly will find it difficult to maintain quality.
In order to compete with other bootcamps that place graduates at respectable jobs, schools will become more selective with admissions and programs will become more rigorous. Prices will also increase. Happy employers will fund scholarships, allowing cash-strapped students the ability to afford slightly longer programs and creating graduates that can be productive on Day 1 at a new job.
Schools who want credibility with both future students and corporate employers will begin to use third parties to verify employment data and graduates’ skill comprehension. 17 bootcamps recently joined together to form the Council on Integrity in Results Reporting, a non-profit designed to set standards and validate student outcomes.
From a political perspective, we foresee workforce development trumping oversight <pun fully intended>. Even the worst bootcamps lead to better jobs for students and ultimately more tax revenues, so jobs will win out over regulation in the current climate. At the very least, we will see a clear separation of the coding bootcamp programs from the rest of the for-profit certificate world as a way to isolate the programs that benefit the economy. Good programs will require less oversight, much like well-established nonprofit universities require less oversight than for-profits. Bootcamps are still in their infancy. Once outcomes are better documented, regulations will ease, driving investment and industry growth.
Most importantly, we predict an increase in longer, intensive bootcamp-style programs inside adult/continuing education departments at non-profit universities. State schools and community colleges have a mission to create a job-ready workforce. Adult education is a significant revenue driver for schools, and without Gainful Employment to worry about, it seems like a logical move. Trilogy Education Services, who offers white-label bootcamp programs to Adult Ed departments at Higher Ed, recently raised $80 Million, and has expanded to more than 30 schools, including a course at the University of Pennsylvania which started this spring. Given that nonprofit Higher Ed has mission alignment, industry credibility, less per-capita oversight costs and deeper pockets, the first and biggest moves should happen here.
Expect to see new programs launch tied to the Veteran’s Administration as well, most likely from the for-profit Higher Eds. As we noted earlier, GI Bill funding is counted as cash revenue at for-profits, not Federal Aid. This may or may not be important in the future regulatory climate. However, three additional factors make veteran-focused courses really interesting. First, many companies have money set aside to fund training for veterans, and many have programs to hire veterans in place that are under-utilized. Second, the VA will pay more than double the tuition cost that Title IV funding covers, enabling schools to charge more and extend the length of programs. Employers want to hire people with deeper knowledge; better skills require longer courses, and longer courses cost more money. Better yet, the VA pays a living stipend during training, making it much easier for veteran students to justify a longer period before employment. Last but not least, for-profit accreditors allow exceptions to schools around much of the regulatory reporting and program expansion difficulties if courses are offered at Department of Defense facilities, so expect programs to pop up at the local army base with little difficulty.
Finally, last October, Google announced an initiative to fund 50,000 scholarships on Udacity for aspiring developers, further demonstrating the value of non-traditional training to corporations. Amazon recently hired Candace Thille away from Stanford University, establishing her as the new Director of Learning Science and leading to speculation that Amazon will launch its own internal technical school, following the likes of many corporate giants. Microsoft recently released its own internal software development curriculum online and as open source. Google, Amazon and Microsoft- three of the biggest names in tech and cloud computing – have an obvious incentive to see more developers, and one can expect other industries with similar motivations to follow suit.
Adding more confusion to the mix, also this past October, Apple Co-founder Steve Wozniak announced a plan to roll out Woz U, based in Arizona, in partnership with Southern Careers Institute, a for-profit college based in Austin, TX. Woz U’s extensive announcement was light on details, but the offering was robust: a mobile app-driven technical aptitude test, a series of five tech education bootcamp programs (to be first delivered online and eventually in person across as many as thirty locations worldwide), a learning management platform, a K-12 teacher certification program, and a startup accelerator. Within weeks of the initial announcement, Arizona newspapers reported that Woz U had not filed paperwork with regulators, casting doubt on whether Wozniak’s plans for such an ambitious rollout took oversight into consideration and demonstrating the difficulty that startup bootcamps still face. With anyone else, such a plan might normally be written off, but given Wozniak’s resume, we’ll have to wait and see.