K12 Inc.’s Earnings Call Says, No More Outsourcing to India

by David Safier

Today, K12 Inc. released its F4Q08 Earnings Call for the quarter ending 6/30/08. (The transcript I’ve linked to is courtesy of Seeking Alpha.) In the first third of the ten page transcript is this statement:

With K12’s rapid growth and continued desire for innovation we sometimes have growing pains or initiate pilots that do not provide the desired results. Recently concerns were raised in internet blogs about our outsourcing and essay reviews to a corporation in India. K12 did initiate such a pilot but we have discontinued this teacher-assistance program and it is no longer offered at any of the virtual public schools we serve.

This essay review service was not outsourcing designed to replace teachers but an extra cost K12 incurred to allow students to have more frequent feedback on their essay drafts and thus become better writers.

Despite occasional glitches like this we will continue to innovate and experiment through various pilots as a means for improving the student learning experience.

An interesting statement on a number of levels. The very fact that the for profit corporation felt the need to apologize for this “glitch” shows it knows it screwed up. “Glitch” apparently wasn’t enough of an apology, though, because the short passage also referrs to the outsourcing as an example of “growing pains” and says the project did “not provide the desired results.”

Such a mistake K12 admits it made! Except that, as recently as August 7 when I spoke to Mary Gifford, a regional vice president for K12, she told me the corporation was still entertaining the possibility of using outside graders without any concern for where they lived. A month and two days later, K12 tells its stockholders the program was a glitch, little more than growing pains of an expanding business.

Could it be that the outsourcing was dropped because all the publicity on this blog, television, newspaper and now a national education magazine was making them look bad?

Oh, but according to the passage, the issue was only raised “in internet blogs.” I guess I should be flattered by the attention, but K12 knows full well that other news media covered the story, because everyone called with questions. But it sounds better to make it sound like it was just the internets. “You know what those blog people are like, just a bunch of twenty-somethings sitting around in their pajamas and living with their mothers!”

The passage also claims that the outsourcing of student papers to India was “an extra cost.” It really says something when a corporation brags to its shareholders that it spent more money than it had to. The reason is, the allegation that K12 was outsourcing student paper grading to save money looks pretty bad. But as I wrote in an earlier post, when you have a 50-to-1 student-teacher ratio, it’s not surprising that teachers can’t find time to grade all their students’ papers. K12 had the choice of cutting down on the number of papers assigned, hiring more teachers at U.S. salaries or outsourcing the grading to a country where labor is cheap by U.S standards. Outsourcing was a savings, not “an extra cost.”