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DECEMBER 29, 2003
Why The Folks At ETS Flunked The Course A tech-savvy rival service will soon be giving B-school applicants their GMATs Educational Testing Service has been at the top of its class for decades: The Princeton (N.J.) company administers the Scholastic Assessment Test (SAT), the Graduate Record Exam (GRE), and, since 1954, the Graduate Management Admission Test (GMAT). But now, the testing giant's grades are slipping. On Dec. 12, the Graduate Management Admission Council (GMAC), the outfit that oversees the internationally accepted B-school entrance exam, said it was severing its ties with ETS. Instead, the GMAC awarded a $200 million, seven-year contract to administer, score, and develop the test to Pearson VUE, a subsidiary of global media giant Pearson PLC, and its subcontractor ACT Inc. Why dump ETS? GMAC President David A. Wilson says Pearson simply has better technology, broader global reach, and lower prices. What Wilson doesn't mention is that ETS has been plagued by technical errors and security glitches that have led to incorrect scores and cheating. Says John S. Katzman, CEO and founder of Princeton Review Inc.: "It has got to give [educators] pause when ETS's oldest and biggest clients are leaving." It's not as though ETS's shortcomings are new. But because ETS had a stranglehold on the higher-ed testing market, nothing much happened. In the past two years, however, Pearson and others have been ramping up in the $1.5-billion-plus testing market. That's partly why, when the contract for the GMAT came up for review in '02, the GMAC started shopping around -- and paying closer attention to ETS's performance. It wasn't hard to spot problems. In 2002, thanks to a software glitch, ETS incorrectly scored nearly 1,000 students' GMATs, potentially affecting the chances of wannabe MBAs getting into top-tier schools. CAMERA MONITORS. Pearson won the GMAT contract largely because it has more sophisticated technology. It's better designed to catch software errors and uses fingerprint-recognition technology to identify test-takers. Digital cameras record every person sitting the exam. Such systems help stem cheating, which has been a major ets woe. Finally, Pearson has a presence in 55 countries, while ETS isn't expanding into areas where the GMAC needs new testing centers. Clearly, losing the GMAT is a big blow to ETS. While the test generated just 6% of ETS's $620 million in annual revenues, it was one of the company's most high-profile contracts. ETS President Kurt M. Landgraf says he "does not intend to exit this marketplace." ETS, he says, might offer an alternative to the GMAT using elements from the GRE -- a test it owns -- or might create a whole new test for B-school admissions. ETS also aims to expand further into K-12 testing. And it is keeping the lucrative SAT. Still, with Pearson and others gaining fast, ETS is facing its biggest test of all.  By Jennifer Merritt in New York
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