Of all global organizations, the U.S. Department of Defense boasts the highest number of people on its payroll, with around 3.2 million employees. Close behind are China’s Army (2.3 million) and Walmart (2.1 million). With nearly 100,000 public schools and an estimated 49 million students, the K-12 public education system, however, far surpasses all three combined.

The most recent census data shows that schools spend on average $10,500 per student over the life of his K-12 career. Granted, state and local districts foot the bulk of the cost, but the U.S. Department of Education‘s (ED) current $68.1 billion budget operates programs that serve public and private schools, from pre-school through university.

According to ED’s website, the department “works hard to get a big bang for its taxpayer-provided bucks by targeting its funds where they can do the most good.” Through its Ed Tech State Program, ED provides technology grants to elementary and secondary schools with the intention of helping students become technologically literate. But what about technology-based instruction?

There’s a lot more venture capital money going into the education space right now.”

Michael Horn, founder of the Innosight Institute and co-author of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns, said e-learning is one of the best ways to turn the traditional model on its head. He said that while early models of computer-based learning were monolithic and clunky, it’s only a matter of time before online learning becomes standard practice.

“Schools have gotten better about having some connectivity in them,” said Horn. “Right now there are some learning models with about three students to one computer, which is a plenty good ratio to do learning models.” Horn predicts that by 2020, 50% of students will do most of their learning online; however, he said one of the biggest obstacles is access to modern technology. “The infrastructures in schools are not robust to do what they need to do,” said Horn.

Many school buildings, particularly in urban areas, do not even have working phone lines in every classroom, let alone T1 lines and adequate bandwidth. While federal grants like Title I enable low-income districts to spend money on improvements, districts often have to find creative ways to get things done. “All of the regulations around Title I make it difficult to do what people would like to do,” Horn said.

Horn said while software vendors are not clamoring to get involved, interest is increasing. “There’s a lot more venture capital money going into the education space right now, which hopefully will cause more top notch engineers to say, hey, that’s a cool problem, I’d like to solve that.”

Henry Eyring
, author and professor at BYU-Idaho, predicts that the open source community will have the biggest impact on software solutions for e-learning. “You see small companies, entrepreneurial companies that really have kind of almost a Software as a Service model where they’re going to try to play to this decentralization of the faculty.” Providing online tools for educators to use with their students, he said, will likely be the bridge between textbooks and technology.

“Online learning technology is a long lever, especially as you hybridize,” said Eyring. He said he doesn’t want to see the collegiate experience disappear, but by reducing the need for additional facilities, full-time faculty and health benefits, campuses can focus on education, not financial strain.

“Higher education is a huge industry, but it doesn’t make centralized purchases the way Fortune 500 companies do,” said Eyring. He said the model of autonomy in the post-secondary system can be a barrier to trying new methods, coupled with the fact that many faculty have been marred by experiences with early versions of online learning. The threat of job loss and additional technology training adds to the resistance, despite the potential for long-term savings, he said.

But unlike the lucrative goliath textbook publishing industry, open source and e-learning are not exactly cash cows. The Khan Academy offers free instruction on YouTube. Udacity, a bourgeoning online resource founded by three roboticists, offers free university level courses. Apple is rapidly expanding its iTunesU catalogue. There is clearly money to be saved, but is there money to be made?

Said Eyring: “Apple will probably find a way to make money out of it, 99 cents at a time.”

Michael Horn and Henry Eyring will be guests on ‘Federal Spending,’ a live webcast dedicated to following the federal money trail, on Thursday, March 22 @ Noon ET. Karen Trebon, Deputy Program Manager of Challenge.gov, will also be on the show to discuss how the GSA’s public challenge program leads to greater citizen involvement and awareness while saving taxpayer dollars.